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3 eCommerce Fulfillment Options: Which One is Right for Your Business?

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This post is part of a series called Fundamentals of eCommerce .
How to Choose an eCommerce Payment Gateway
How to Set Up Your eCommerce Store with Bigcommerce

In a world where you can set up an online store in just a few clicks, anyone can become an eCommerce trader.

But even though setting up shop is easy, you've still got to source products that you can sell, find a way to take credit card payments, market your store to bring in customers, and ship orders out to customers in an efficient manner.

This article gives an overview of the range of options for fulfilling orders. Fulfillment is the process of getting products from a warehouse (either yours, or somebody else's) into the hands of your customers. In other words, fulfillment involves packing, shipping and delivering products to customers.

This article isn't only relevant for traders already selling products. It can be helpful to know about the range of fulfillment options available to you before you launch your store. That's because knowing how you'll ship products can influence what you decide to stock in your store.

You might be surprised at the options available.

1. Self-Fulfillment

When it comes to eCommerce, self-fulfillment isn't about embracing your desires. Nor is it a state of enlightenment or a higher way of being.

Instead, it's about taking the packing and shipping of products into your own hands. Typically, in self-fulfillment, delivery to customers is outsourced to a courier or postal service.

Pros of Self-Fulfillment

Fulfilling orders yourself has four key advantages:

  • Anyone can do it. As long as you've got somewhere to store products, you can print address labels, stuff packages and stand in line at the post office, then you can fulfill orders yourself. You don't need any special contacts to make it happen.
  • It's low-cost. You only pay shipping costs, making it the most cost-effective option, especially for eCommerce traders who are just starting out.
  • Trust. You know how products are packaged and when they've been shipped, because you did it yourself.
  • Strong branding. You choose how the packaging is branded, to reinforce your own brand.

Cons of Self-Fulfillment

The advantages of self-fulfillment should be balanced against some significant disadvantages.

  • It's time-consuming. No matter how efficient you get at packing up products, once the orders start rolling in you'll find it takes up much of your day. Eventually, you'll have to hire help, which removes the cost-advantage of self-fulfillment.
  • You need a warehouse. Sure you can hold a small amount of stock in a spare bedroom. If you do, you should check with your insurer on whether your home is insured for holding business stock.
  • You limit your product range. You can only sell products that you can purchase yourself and store in the facilities you have available.

Shipping Options for Self-Fulfillment

Ask the Average Joe (or Joan) on the street about how to ship a product, and they'll probably direct you to the nearest post office. Here, you can buy packaging and ship items anywhere in the world.

Packaging items yourself and using the postal service to ship them is the most obvious and accessible way of fulfilling orders. It's ideal for eCommerce traders who are just dipping their toe in the water on Amazon or eBay, selling a few products in their spare time. For one-off packages weighing less than two pounds, USPS is always the cheapest option.

But for serious eCommerce traders, it's worth investigating other delivery options to see if they'd provide better value, especially if you set up an account with them.

Apple, for example, typically uses FedEx to handle its eCommerce shipments, while Amazon prefers UPS.

2. Outsourced Fulfillment

With outsourced fulfillment, you hand over control of the whole fulfillment process to another company. They store your products in a warehouse on your behalf, and they package and ship products for you. All you do is send them order details, and they handle the rest.

Pros of Outsourced Fulfillment

Outsourcing fulfillment has two significant advantages:

  • Saves Time. By outsourcing fulfillment, you save yourself a ton of time which you can use to focus on growing your business.
  • Low hassle. Outsourced fulfillment means no more headaches of discovering your packaging supplier is out of stock, or the post office is closed.

Cons of Outsourced Fulfillment

The advantages of outsourced fulfillment should be weighed against the disadvantages:

  • Cost. Outsourced fulfillment doesn't come cheap, and it will dent your profit margins.
  • Weak branding. With outsourced fulfillment, the packaging will often be branded by the company doing the fulfillment. This company may be one of your eCommerce competitors.
  • No control. How products are stored and packaged is out of your hands, so you've got to trust the company you've outsourced to is doing a job that's good enough for your customers.
  • Overstocking costs. As you're renting space in someone else's warehouse, having too much inventory not only means you've got cash locked away in stock, it also means you're paying more than you need to.

Options for Outsourced Fulfillment

The two best known outsourced fulfillment options are Shipwire and Fulfilled by Amazon (FBA).

Both Shipwire and FBA integrate with the leading eCommerce platforms, and both have an international network of warehouses.

However, for most traders, Shipwire represents better value, and gives you more control over your customer relationships and your inventory.

In addition, with FBA, your deliveries will be branded with the Amazon logo, undermining your own brand. What's more, Amazon tracks which products you sell and uses this for market research purposes.

It's also worth investigating smaller fulfillment companies. For small eCommerce traders running a microbusiness, these smaller fulfillment providers can offer tailored fulfillment services at a reasonable price. Examples include Webgistix, Fulfillrite, and JMF.

3. Dropshipping

Dropshipping is where products are shipped direct from the manufacturer or wholesaler to your customer's doorstep. When someone orders from your website, you buzz the order through to the wholesaler, and you both take a cut of the profits. With dropshipping, you don't have any excess stock, because you only buy stock when a customer places an order.

Pros of Dropshipping

Dropshipping has three major advantages:

  • Low hassle. You've no need to get stuck in a mess of packing tape. The dropshipper does all the hard work of packaging and shipping products on your behalf.
  • Boost your product range. Dropshipping gives you the option to stock and sell products you might never dreamed were possible to have in your store.
  • Low risk. Because you only pay for what you sell, you'll never have cash flow problems because you've bought too much stock.

Cons of Dropshipping

However, dropshipping isn't for everyone. Here's why:

  • Low margins. Because dropshippers are shouldering the risk on your behalf, and because they're handling the shipping for you, they'll expect a significant cut of your profits. For this reason, dropshipping works best with high volume or high margin products.
  • You need the right contacts. You can find dropshipping suppliers with an in-depth Google search, but finding the right products at the right price is time-consuming. Having industry contacts is a big help.
  • The chicken or egg problem. Dropshippers will want to know you can move their products, so chances are you'll need to impress potential suppliers with past sales stats, or at least a stunning website. If you're just starting out, you've probably got neither of these.
  • Shipping is out of your hands. If you've got a broad range of dropshipping suppliers, they may all charge different rates for shipping, and have differing standards on how quickly orders should be fulfilled. This can be confusing for your customers, many of whom will assume all your products are stored in a single warehouse.

Digital Fulfillment

While the focus of this article is on shipping physical products, it's worth briefly mentioning fulfillment options for digital products, such as music or ebooks.

  • Manual fulfillment. This involves sending out the files yourself, attached to an email. It's time-consuming, and is rarely the best choice.
  • Selling on a digital marketplace. For example, in Amazon's Kindle store, or iTunes. The marketplace takes a cut of your profits, but handles everything for you.
  • Automated fulfillment. Here, you sell in your own store, but set up an automated system for digital delivery. Popular eCommerce platforms such as Shopify and BigCommerce provide options for this.

Mixed Fulfillment

Mixed fulfillment involves using a range of fulfillment options to get products to the doorsteps of your customers. For eCommerce traders, this can provide the best of all worlds. A good combination is to:

  • Use self-fulfillment or outsourced fulfillment for low-margin, high volume items.
  • Use Dropshipping for high margin products, and to bulk out your store with items you couldn't stock yourself, but that draw a crowd.
  • Use self-fulfillment to try out new products. When you know how many you'll sell, you can transfer them over to outsourced fulfillment.

What Fulfillment Option Will You Choose?

If you're planning on setting up a microbusiness, which fulfillment option are you planning to use? Did reading this article make you reconsider what you might sell? If so, how?

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