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Fulfillment for e-commerce. When is it worth running an online shop without a warehouse?
Fulfillment for an online shop means outsourcing logistics and taking over the warehouse from an external partner. This partner then processes orders, handles returns, negotiates contracts with couriers and is responsible for packaging the goods. Thanks to this you can save time and money which you invest in maintaining your own warehouse. Check what are the advantages of fulfillment and for whom it will be the best solution.
Is it worth outsourcing logistics?
One of the most difficult and time-consuming tasks in an online shop is order logistics. Handling the warehouse, packing goods, managing returns, buying packaging - all this is not only time-consuming, but also requires a considerable amount of money. Fulfillment seems to be the answer to many problems, but is it recommended for every seller? First of all, you need to count the costs and constantly monitor them.
When is the best time to decide to use fulfillment? E.g. if your shop has sudden spikes in sales that you can't handle on time, or if your business is growing and the cost of expanding your own warehouse space is too high.
If you are considering using fulfillment, analyze the offerings of fulfillment companies for several factors:
- What is the cost of order processing? What is offered as part of this service?
- What is the cost of handling returns?
- What is the company's margin on its orders, and are the above costs within that margin?
- Does the margin on orders cover the cost of handling returns? What is the percentage of returns in the shop? (Handling returns can be expensive as it requires special handling and knowledge of the retailer's product range).
- Are additional surcharges applied for goods that do not sell (e.g. Amazon applies surcharges for goods that "do not rotate" i.e. are long in stock)?
The most important benefits of fulfillment
Warehouse space, insurance, warehouse equipment, employee salaries, health and safety costs (e.g. sanitary equipment) - these are all costs you have to bear every month if you decide to run logistics on your own. Without a doubt, the great benefit of fulfillment is that you delegate the work of the entire warehouse, without having to invest in your own storage space.
Of course, when you outsource logistics, you do not get rid of the costs completely, but only turn the fixed charges into variable ones. For example, when you rent warehouse space, you only pay for the space you actually use. In addition, the logistics operator often makes sure that its use is as efficient as possible.
See the five most important advantages of fulfillment
- You do not have to invest money in professional warehouse facilities. Additionally, you do not waste time looking for space and you do not have to worry whether its size will be appropriate.
- You will save a lot of time, because you will not have to complete and send orders by yourself.
- The warehouses of fulfillment companies are open until late hours. This means that orders that come into your shop in the evening will be shipped the very next morning.
- You can grow without worrying that over time you won't have anywhere to store your product range. If your sales increase, you can simply rent more space in the warehouse
- Don't worry about sudden sales spikes (like Black Friday, Cyber Monday, New Year's sales). You don't need to plan for additional staffing for an unforeseen spike in shop traffic, and there are costs not only for salaries, but also for recruitment or staffing agencies. Fulfillment warehouses are prepared for this.
Fulfillment also means challenges for the online shop. For some shops, this solution will not pay off. Check out the top three challenges that come with outsourcing logistics to an external partner.
- You do not have full control over the logistics process and you have no influence over possible shipping problems.
- Outsourcing logistics tasks means additional costs for your business.
- Using fulfillment requires you to find a trusted company that you entrust to perform activities that have a direct impact on the quality of customer service.
For whom self-storage, for whom fulfillment
With IdoSell shops, you have two options to choose from: self-storage or fulfillment. Find out which option is better for you and your online shop and what you gain by choosing one of them.
Self-storage is most often chosen by small and medium-sized shops. They have a small assortment that can be handled independently. The benefits of self-storage are flexibility (you choose your own scenario tailored to your needs), convenience and automation, i.e. constant control over inventory and always up-to-date stock is a sense of security and builds trust with your customers.
Fulfillment is most often chosen by:
- larger online shops and those with plans for growth and development
- business owners who do not want to employ staff to handle orders on their own
- shops with limited storage space
Fulfillment trends in 2022
How will fulfillment evolve in 2022? Our experts notice a trend towards the emergence of companies that deal with "grouping" subcontractors providing fulfillment services, such as Frisbo or Linker. These become a facade for vendors for fulfillment services, under which a whole group of "subcontractors" is hidden.
This approach means that vendors don't have to negotiate separate contracts with each fulfillment company, and gives standardised rates for order processing. This also creates the opportunity to fulfill cross-border orders, also cheaper and with a uniform rate.
Fulfillment in IdoSell
At IdoSell, we offer ready-made integrations with the best companies that specialize in fulfillment for e-commerce. Our partners have a good understanding of the specifics of the e-commerce industry, they guarantee high quality of service and their warehouses are prepared for any type of assortment.
IdoSell has integrations with five companies that provide fulfillment services: Omnipack, Oex E-Business, Inpost Fulfillment, Frisbo, Amazon FBA.
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