Your Guide to Understanding the Retail Order Fulfilment Process

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Ecommerce sales continue to earn a larger slice of the overall retail pie, but nothing escalated the growth of online shopping quite like the onset of a global pandemic. COVID-19 caused ecommerce sales to skyrocket in 2020, largely due to merchants closing their doors and scrambling to create an online store in order to sustain any revenue.

Many of these businesses quickly realized how different it is to deliver items to online shoppers rather than rely on them coming in to shop. These steps, known together as the retail order fulfilment process, require the following for each order that’s placed on an online store:

• Picking items from available inventory
• Packing boxes and adding a shipping label to the shipment
• Running to the post office or having a courier pick up packages to be shipped to a customer

On top of that, there are retail fulfilment costs to familiarize yourself with and other pieces of the puzzle including managing inventory, trying to compete with Amazon, tracking a shipment’s status for a customer, and more.

Direct-to-consumer (DTC) brands must have a sound retail order fulfilment process to ensure customer satisfaction. Unlike traditional B2B or retail distribution, where a customer has to go to a brick-and-mortar retail location to purchase an item, the goal of retail fulfilment is to ship orders as efficiently as possible from a store, home, or fulfilment centre to the customer’s doorstep.

For omnichannel businesses that want to improve the retail fulfilment process, there are key steps they can take, from using the right technology to making supply chain optimizations. Even better, they can work with a third-party logistics service provider, also known as a professional fulfilment company, to outsource supply chain management.

This may all sound like a lot, but we’ll explain your options for managing the retail fulfilment process. Below, we explore the specifics of retail order fulfilment for ecommerce brands as well as strategies to improve the customer experience.

What is retail fulfilment?

Retail fulfilment is the process of assembling and shipping a customer order. Unlike having customers come to a physical retail store to select and purchase items themselves, an ecommerce merchant is responsible for packing the shipment with the correct products and getting the package in transit after a customer places an order online.

Why is retail fulfilment important for your online store?

Ecommerce businesses make it a priority to optimise the retail fulfilment process because it has a significant impact on customer satisfaction and profits as a whole. When you manage the retail fulfilment process yourself, there are packaging costs, shipping costs, and other hidden costs. Additionally, if ecommerce merchants are unable to deliver customer orders in a timely manner, customers will seek out a business that can.

A successful retail fulfilment process is needed to help your business grow. With an effective order fulfilment process, your business can manage customer orders with greater efficiency. Moreover, you will be able to scale as your order volume picks up, thus increasing your profits.

“It’s a pain to pick, pack, and print the labels, and manage the storage. It would be a huge stress for us to do it ourselves, but the fact that ShipBob takes care of it all, both the savings in costs and time, is invaluable to our business.”

Nikolai Paloni, Co-Founder of Ombraz

6 steps in the retail fulfilment process

The retail fulfilment process is a key part of supply chain management in making sure that orders are delivered on time. The retail fulfilment process involves the following steps that are necessary to maintain both operations and customer satisfaction.

1. Receiving new inventory

As you sell products, you’ll need to order more inventory. With ecommerce, there are more potential customers to sell to than just local shoppers. Managing reorder quantities for retail fulfilment requires a deeper understanding of inventory forecasting and working closely with your manufacturer(s).

New inventory must be sent to your fulfilment centre to be stored. Each SKU will need its own storage location (bin, shelf, or pallet). Once inventory arrives at a fulfilment centre, you must process, organise, document, and stow it.

If you take on retail fulfilment yourself, you’ll need a warehouse management strategy that encompasses organisation, infrastructure, software, and processes to track inventory with stations dedicated to each retail fulfilment process.

2. Warehousing

Once inventory storage is complete, you will be able to use those products to fulfil customer orders. You’ll need to keep a close eye on stock levels and set reorder points so that you order more inventory once it drops to a certain level to prevent stockouts.

Note: The location of where you store and ship items from will have a big impact on your shipping costs (i.e., the farther away the shipping destination, the more expensive the delivery will typically be).

3. Picking items

Once a customer places an order, the order is processed in your queue and a picking list is generated. Your team can begin retrieving the products needed to fulfil the order. Items from a single order must be kept separate from other orders.

4. Packing orders

Once all products from an order are picked, you can pack them. You’ll want to choose boxes, poly mailers, and packaging materials that will both protect your products and add up to the lowest practical dimensional weight to help you save on shipping costs.

5. Shipping orders

Now it’s time to ship your orders. Note: You’ll want to pay attention to the ship date and promised delivery date or estimated timeline. If your online store’s shipping policy is to ship orders the same day (e.g., for all orders placed before [insert cutoff time]), then you’ll want to make sure you honor those promises.

6. Returns processing

Customers will likely return ecommerce orders from time to time, and you need to be ready for that. A well-designed returns management process can reduce costs and headaches associated with returns or exchanges.

“If I was going to grow, I had to let go of things that were preventing me from my own success. To say that switching to ShipBob has been life-changing is an understatement. Thinking big picture, it was an incremental cost for me to ultimately sell a lot more. My business has tripled and I got my life back. I can see orders come in while backpacking, and I don’t have to rush home to frantically stuff envelopes.”

Anastasia Allison, founder of Kula Cloth

Optimising your retail fulfilment process

Major retailers and ecommerce merchants take numerous measures to optimise the retail fulfilment process. Let’s take a closer look at what this involves and how your business can benefit. (Hint: it’s not as complicated or expensive as you think!)

Choose the right fulfilment centre location

Choosing a well-located fulfilment centre can go a long way in improving the customer experience. A strategic location near your customers will ensure that orders are delivered on time and reduce shipping costs due to the way that shipping zones work.

3PL services from a fulfilment company such as ShipBob offer you the ability to split inventory across multiple fulfilment centres all over the US (and world) to cater to a larger pool of consumers with greater efficiency. Rather than pay for a single retail warehouse (or multiple), you can benefit from the fulfilment company’s infrastructure and economies of scale due to helping thousands of customers.

Opt for integrated fulfilment software

Retail fulfilment is a complex process. Large brands typically rely on ERP systems that account for all aspects of fulfilment and multichannel inventory management.

For smaller ecommerce merchants, you need software that takes care of inventory management, order tracking, and integrates with your online store. A fulfilment provider like ShipBob will not only perform retail fulfilment services for you but provide integrated fulfilment software at no extra cost.

“ShipBob’s integration with my online store is great. The fact that I don’t have to think about my shipping integration, do anything when someone orders from me, or worry that something might not get to them makes it more hassle-free.”

Tracey Wallace, Founder of Doris Sleep

Fast shipping times

Thanks to Amazon, 2-day shipping is the expectation. Online shoppers want their ecommerce orders shipped quickly. Having strategically-located distribution centres significantly reduces both delivery times and shipping costs. The time between order placement and the shipment arriving at your customer’s doorstep can be significantly reduced without you paying for expedited costs.

Retail order fulfilment models: which is best?

There are three main ecommerce fulfilment models, each with its own set of advantages and disadvantages. Let’s see what each model has to offer to improve the retail fulfilment process and at what cost(s).

Third-party fulfilment (3PL) model

In this model, ecommerce merchants outsource fulfilment to a 3PL partner. The fulfilment company stores inventory and handles the entire retail order filling process so the merchant has time to focus on other tasks.

The perks

1. Experience and specialization: 3PL services are created with the specific goal of providing businesses with inbound and outbound logistics expertise and support. Their staff is skilled at optimising the retail fulfilment process with years of experience in the field.
2. Better technology and supply chain insights: A tech-enabled fulfilment provider can pave the way for automating parts of your fulfilment process. Services like ShipBob offer a retail order fulfilment process that provides features such as order management, turnkey integrations, data analytics, and more.
3. Scale and grow faster: Using a fulfilment provider will speed up your retail fulfilment process and enable you to focus on the tasks that only you can do. With a retail fulfilment partner managing picking, packing, and delivery, you don’t have to worry if there is a sudden spike in consumer demand as they can scale up without sacrificing your customer experience.
4. Vast fulfilment network: With many locations in various regions, you can optimise retail fulfilment and not be limited to staying in one local spot — from growing into a second location to utilising their international fulfilment network.

“We knew we’d be doubling and then quickly tripling our order volume, so we wanted to get help on the front-end to ensure a long-term relationship with a lot of room for scalability. We were managing shipping and logistics ourselves but didn’t understand just how massive and difficult fulfilment was. It also prevented us from focusing on our core products. After a thorough search of companies that could give us something akin to Amazon and its delivery capabilities, we chose ShipBob.”

Andrew Hardy, COO of Nature’s Ultra

The drawbacks

• Costs: Hiring a fulfilment provider to manage your retail fulfilment can be costly. However, finding a retail fulfilment partner that is the right fit for your business can boost profits. Just be sure you are aware of all potential fees before getting started.
• Less control: Giving up control of stock and packing orders can be a hard decision to make. You’ll want to find a partner you can trust and that resolves any issues that arise.

In-house (self-fulfilment) model

With in-house fulfilment, a business does everything themselves. It’s best suited for small or new merchants with a low order volume, being able to handle packing a few orders a day. Some retailers have even gone this route with in-store fulfilment if they don’t have an ecommerce warehouse, though a retail store is set up very differently from a fulfilment centre.

The benefits

1. Fewer direct costs: If you handle retail fulfilment yourself, you don’t have to hire people to pack boxes. Of course, there is an opportunity cost of spending your time working on retail fulfilment rather than growing your business.
2. Maintain control over customer experience: Businesses following the self-fulfilment model have complete control over their operations, ensuring every order is packed exactly as they want and with as much customisation as they want. They also always have direct eyesight on their inventory.
3. Brand image: An in-house fulfilment model leaves room for you to use customised delivery packages to promote your brand’s identity. Cultivating an attractive image for your brand is important to maintain customer loyalty and to grow your customer base. Though some 3PLs can also ship packages with your custom packaging.

“It felt like all I did was eat, sleep, and pack orders. We couldn’t fit another person in my garage. I had to make a transition in order to scale. Since working with ShipBob, we’ve grown 115% and experienced 2.5 times more order volume. It was kind of like magic — my orders were imported into ShipBob from my online store and started getting fulfilled right away. I didn’t have to do anything.”

Noel Churchill, Owner and CEO of Rainbow OPTX

The risks

1. Less efficient: A self-fulfilment model may cause customer orders to be processed more slowly since it is time-consuming. You are also stuck in one location, causing longer transit times for the majority of orders.
2. Limited growth potential: Ecommerce businesses that manage retail fulfilment by themselves must spend a significant amount of time and resources doing so. This can make growing your business challenging since you’re reacting to customer orders coming in rather than figuring out how you can bring new customers in.
3. It becomes your life: When you’re managing retail fulfilment yourself, you will spend more and more time on the process. Say goodbye to days off, vacations, and free time.
4. Less storage space: When fulfilling retail orders in-house, you may store products in your home. Your apartment, garage, and/or basement will be taken over by your inventory (as will your car most likely). Most of the time, it’s a business owners’ living quarters that are directly impacted by retail fulfilment in this model.

“We looked into opening our own warehouses and hiring employees, but couldn’t come close with what 3PLs charge for picking, packing, and shipping. We’d also be worried about scheduling fulfilment shifts, ordering boxes and shipping labels, and dealing with the extra headaches of running logistics.

Most of all, those are hours we’d spend on tasks that are not scaling our business when we could be using those resources for growth. You should spend time doing what you do best, and fulfilment is an easy task to take off your plate.”

Gerard Ecker, Founder & CEO of Ocean & Co.

Dropshipping model

The dropshipping model is the most hands-off, as a business does not hold any inventory themselves. Instead, after a customer places an order, the manufacturer that created the product ships the product to the customer.

The advantages

1. Less investment: The dropshipping model requires less capital than other retail fulfilment models, because businesses will not have to pay the overhead for warehousing. Moreover, since you will purchase the product after the customer pays for it, no investment is required in this matter. You are essentially the marketer, not the full business owner.
2. Versatility and flexibility: Using a dropshipping model means that you can run your business from any location, go on vacation and not worry about retail fulfilment, and even introduce new products to your online store.
3. Good for proving out a product concept: The dropshipping model provides more room for testing. Companies can get an idea of what customers are looking for in particular by testing out different products and observing how consumers receive them. It’s often not a long-term solution but good for proving out an early concept.

The drawbacks

1. Lack of quality control: In the dropshipping model, your business doesn’t have any control over inventory or the customer experience. A manufacturer is not a retail fulfilment expert, so quality is often lacking.
2. Lower profit margins: While the dropshipping model requires minimal investment, ecommerce businesses also experience lower profit margins. You have to purchase the products from a third-party and have them delivered by a courier. It’s also incredibly competitive, often filled with thousands of people selling the same exact product as you.
3. Difficult to keep up with customer demand: If consumers order large quantities of products from different third parties, then you will have to make separate transactions to each business. To provide your customer with a satisfactory experience, you will have to organise the charges into a single receipt.
4. Very slow transit times: If your manufacturer is far from home and you’re dropshipping from overseas, your customers may have to wait a month or more to get their orders. Many sellers move off of the dropshipping model to work with a domestic fulfilment centre to cut back on expensive air shipping, delays at customs, and very long transit times.

“When we first got started, we were dropshipping. It was nice because we had no money tied up in inventory, but we also had no quality control. With no control over the customer experience and very poor shipping times, we quickly realized dropshipping was not a long-term solution. It was good for proving out an early concept, but we had to move to a professional fulfilment company.”

Gerard Ecker, Founder & CEO of Ocean & Co.

Retail fulfilment process: The challenges and solutions

Having a successful retail fulfilment process is highly beneficial for your business yet easier said than done. Let’s look at some of the challenges that your ecommerce business might face in this regard and how to overcome them.

A growing order volume

Managing and fulfilling a large number of orders can be difficult. If you are short on staff or doing it all yourself from a small space, having customer orders delivered on time can result in a suffering customer experience and a loss in customer loyalty due to shipping. If you turn to a retail fulfilment provider like ShipBob, you can outsource tedious tasks.

You’re not a logistics expert

Fulfilment involves a lot of complex retail supply chain facets that can leave you feeling overwhelmed. Partner with an experienced fulfilment provider like ShipBob who can take the stress of retail fulfilment while letting you utilise their knowledge, resources, scalability, bulk discounts, etc. — without you having to invest in retail fulfilment equipment, space, and infrastructure only to outgrow it all and start over again.

Retail fulfilment minus the headaches: ShipBob

ShipBob provides the leading retail fulfilment process that will improve the customer experience and let you focus on other areas of your business. Why put up with the trouble of inventory management, packaging items, and shipping orders to customers when we can do it all for you while providing best-in-class retail fulfilment technology and support?

If you run a fast-growing ecommerce business, our retail fulfilment services can save you valuable time and money. You can store your ecommerce inventory at any of our fulfilment centres of your choice, and we’ll even give you data to make the best decision to match the Amazon experience.

ShipBob helps fulfil not only website orders but also has a B2B Fulfilment Suite and EDI capabilities, enabling merchants to sell throughout the entire B2B ecosystem, powering retail dropshipping (fulfilling orders placed on big box retailers’ websites) and wholesale shipping (including brick-and-mortar stores), which can connect with all the major retailers.

“Other ecommerce companies approaching an inflection point will benefit from ShipBob because they allow entrepreneurs, like myself, do what we do best — create, sell, and grow! I’m proud to be a ShipBob partner. A lot of companies underestimate the cost-savings and power of choosing your entire supply chain and partner network wisely. These choices will make or break your business.”

Courtney Lee, founder of Prymal

Conclusion

Multichannel retailing and the retail order fulfilment process can be challenging, demanding a lot of time and resources. For these reasons, it’s best to let the experts take care of direct-to-consumer fulfilment. Contact the ShipBob team below to learn how you can focus on growing your business while we manage the retail fulfilment process for you.