Fulfilment services refer to the businesses that act as a retailer’s warehouse on their behalf. Rather than the e-commerce service having a physical warehouse, they outsource this to the third-party fulfillment service, generally to save on costs and be more efficient in operations.
It’s also the fulfillment business that fulfills the order by shipping directly from their warehouse to the address of the buyer. What the e-commerce business does is facilitate the sale by posting the products on their websites, and posting the order with the fulfillment service.
This kind of set-up is getting more popular nowadays for the following reasons:
Reduces Operating Costs Of Businesses
When an e-commerce business chooses to go for a third-party fulfillment service, they’re able to save up on their operating costs. This includes wages, infrastructure, and logistics costs.
It does so in the following ways:
- As to wages, the e-commerce business no longer has to employ the workforce responsible for manning and maintaining the warehouse, packing the products for delivery, and preparing the items for shipping.
- As to infrastructure, the business doesn’t need to maintain and operate a warehouse. This means a reduced need to pay for rent. There’s also a reduction in utility bills, such as electricity.
Another advantage in this regard is that there are lesser chances of inventory errors, such as overstocking or understocking; the e-commerce business no longer even has to take care of the inventory by themselves.
- As to logistics, the business also no longer has to fulfill the shipping process themselves. Although this cost is generally passed on to the buyer through the shipping fee, there are still other costs involved, such as the packaging and salaries of the team involved in the logistics process.
Plus, the business no longer needs to have its own delivery truck and services.
To start with, get in touch with a customer representative of a fulfillment service here. They can help enlighten you as to other possible areas of expenses that you can save in your business and so many more other concerns.
Avoids The Need To Hire Seasonal Employees
There are peak seasons in businesses that sell products. This usually happens during special occasions, such as Thanksgiving, Valentine’s Day, Christmas, the opening of the school year, and the like. During these times, orders for various products are expected to rise.
If the e-commerce business does everything by themselves, they’ll need to hire and train temporary or seasonal employees. Apart from the hassle of doing so, this can also be costly.
With a fulfillment service, however, there’s no longer a need for the fulfillment business to go through this tedious and expensive process. Because the company takes care of the shipping and delivery process on their behalf, the problem of hiring seasonal employees falls on the fulfillment company.
Lower Shipping Costs
It works to the advantage of e-commerce businesses when they’re able to offer the lowest shipping costs to their buyers. This makes them more attractive since, naturally, buyers are also looking for the best ways to save. When they shop online, the shipping fee is always their top concern – when it’s too high, they choose to buy from a physical store instead.
Through fulfillment services, e-commerce businesses can offer competitive and low shipping fees to their buyers. This is possible because of the contracts and relationships that fulfillment services have with domestic and international couriers. Because they’re shipping in bulk for many other businesses as well, they’re able to fight for lower bulk prices.
Easier To Grow New Markets
Just like any other business, e-commerce businesses are also very much concerned about growing their businesses. As they go about with their daily operations, their marketing team is also working so hard for them to find ways to penetrate a new market. For instance, have you long been meaning to ship to the Asia & Pacific Region? This is possible through a fulfillment service.
With this, the only work that e-commerce businesses have to do from their end is to enable their website to be accessible by the region that they’re trying to penetrate. This includes posting price options in the local currency of that market.
Everything else, the e-commerce business no longer has to worry about. It’s the fulfillment service that takes care of enabling shipping to this new market in the lowest possible cost, and also have a warehouse or a partner supplier around that region.
This advantage, therefore, makes it easier for e-commerce businesses to grow.
In essence, the fulfillment service prepares and ships the orders on behalf of the e-commerce business. This is a well-loved option by companies that don’t want to deal with having a warehouse and doing the shipping process themselves. Perhaps, they don’t even have the workforce and resources yet to do so.
For these businesses, a fulfillment service is their best recourse. They get to achieve that, and so many more advantages, as enumerated above.
Related article: “What is a Warehouse?“