Customers' demands on e-commerce fulfillment have been increasing for years. Shipping times within 24 hours, smoothly functioning returns management and delivery reliability – young brands have to consider all this and more. In a guest article, Michael Held-Hernandez from Warehousing1 shows the five most important questions that e-commerce startups should ask themselves about their fulfillment.
Especially in the beginning, many e-commerce startups handle fulfillment themselves. If only a few dozen shipments are sent each month, it's a good solution to simply pack the parcels yourself. It saves money and at the same time, new founders learn a thing or two about the demands of fulfillment. But as your success grows, so do the number of shipments, and eventually the parcels pile up. By then, at the latest, a different solution is needed. Expenses for warehouses and e-commerce fulfillment cost retailers an average of 8.3 percent of their revenue (Händlerbund, 2018). The decision about the right setup is therefore a strategic one that you should not postpone for too long.
We've collected five questions that fast-growing brands should be asking themselves about their e-commerce fulfillment right now:
It makes sense to handle e-commerce fulfillment yourself in the beginning. But your goal is, of course, that a few orders will soon become many. Therefore, you should think early about what capacities you can provide for e-commerce fulfillment. Is a room in your office enough to function as a small logistics warehouse or should you think bigger? The options here are to run a fulfillment site yourself or turn to an outside service provider. On Black Friday and before Christmas, when your products are in high demand, you should also make sure that your fulfillment setup has enough headroom to handle capacity spikes.
Infographic: Brands can organize their fulfillment with their own warehouse or an external service provider
Returns are a nuisance for young e-commerce startups – and also for more established retailers. On the one hand, they mean additional effort, and on the other hand, they cost money. Bitkom recently found out in a survey that every seventh online order is returned (Bitkom, 2021). Nevertheless, retailers should make the returns process as easy as possible for customers. After all, customer satisfaction and loyalty are significantly influenced by the returns experience (ParcelLabs, 2021). You should make the return policy easy for your customers to understand. Automation will also save you time and improve your inventory management by allowing the system to directly account for the status of returns.
Sustainability has never been so important. Of course, when many think of sustainability in e-commerce, they rightly think of sustainable packaging and labels. But there is also a lot of potential in e-commerce fulfillment for startups to improve the ecological footprint of a brand. More efficient processes, shorter delivery routes through decentralized storage or the operation of a CO2-neutral logistics facility are levers that lead to a better carbon footprint in fulfillment for smaller online shops.
Founders of an e-commerce startup have to dance at many weddings. Each area of the business requires full attention. Fulfillment is a complicated area for smaller businesses as it requires expertise and eats up a lot of time accordingly. This is where an external service provider can help free your back. Instead of worrying about various aspects of fulfillment, you can focus on your core business.
Infographic: Advantages and disadvantages of an external fulfillment service provider
This is perhaps the most difficult question in this blog article. E-commerce fulfillment solutions are as varied as the products being shipped. Depending on the additional services, prices vary widely. E-commerce startups that handle fulfillment themselves face high investment costs and large capital commitments. These are not necessary when choosing an external service provider. Generally, retailers save 5 to 15 percent by outsourcing their fulfillment – there are even easy-to-use fulfillment cost calculators with which you can calculate what your own outsourced fulfillment would cost.
E-commerce fulfillment is a key driver of customer satisfaction in online retail. Therefore, it makes sense to regularly question your own fulfillment setup and put it to the test. This way, you can ensure that you not only stand out from the competition with your product and yourindividual packaging, but also score points with your perfectly functioning fulfillment.
About the author
Michael Held-Hernandez is PR & Communications Lead at Warehousing1, a Berlin-based logistics startup that is one of the largest warehousing and fulfillment networks in Europe with over 850 locations. Warehousing1 helps startups and scaleups find suitable warehouse logistics solutions at any location, manage them digitally and optimize processes.