Modern ecommerce brands selling products grapple with intricate decisions in overseeing order fulfillment operations. Every decision made holds consequences for customer loyalty, repeat sales, and overall ecommerce profitability. Have you fine-tuned your ecommerce fulfillment strategy?
This guide navigates essential decisions concerning shipping strategy, order cycle time, shipping speed, technology, and the pivotal choice between insourcing or outsourcing your order fulfillment operation.
Streamline Your Shipping Approach
Should you opt for a flat rate or a calculated shipping rate strategy? Utilizing a flat rate, where shipping costs are determined by the box size (rather than dimensional weight), simplifies the process and ensures predictable costs. According to Practical Ecommerce, flat-rate shipping “encourages larger orders and frequently translates into lower shipping costs for customers,” as customers may add items to reach a perceived value.
Consider the prospect of offering free shipping, which, while cutting into profits, may attract more customers and boost sales. Retail Dive reports that 96% of online retailers currently provide free shipping options. Another consideration is implementing a free shipping threshold, a practice embraced by almost half of ecommerce retailers, according to Digital Commerce 360. Strategies for this approach may vary based on the product niche.
Practical Ecommerce emphasizes that consumers now expect free shipping for online purchases, and merchants not offering it may be at a disadvantage. They suggest tactics such as raising the free shipping threshold, making free shipping a membership perk, or offering it as a time-limited special to boost revenues.
To offset shipping costs, how can you increase order size and potentially enhance inventory turnover? One powerful strategy is bundling or creating kits, which not only builds perceived value for consumers but also provides long-term revenue advantages. As explained in the blog “Product Bundling & Kitting Services Grow Ecommerce Revenue,” bundling items together is an effective way to encourage customers to try new products.
Control the Duration of Order Processing
Cycle time denotes the duration from when a customer places an order to the receipt of the product or service. It is crucial to establish the desired order cycle time for your business. Consider factors such as your competitors’ practices and your customers’ expectations. Ask yourself if cycle time can serve as a distinguishing factor for your brand; Retail Dive notes that “speed of delivery is now the decisive factor behind over one-quarter of abandoned carts.”
Bear in mind that order cycle time encompasses more than just the transit time from the warehouse to the customer. Evaluate the time taken to transfer the order from the shopping cart to your fulfillment software or warehouse management system, the duration for physical picking and packing of the order, cut-off times, and shipping or transit time. Each of these components contributes significantly to cycle time, and it can be engineered to be as fast or slow as needed.
Leveraging appropriate technologies can provide a competitive advantage in managing cycle time, as highlighted in the blog “Ecommerce: Technology Connects the Dots for Order Cycle Time.” To determine the optimal order cycle time for your brand, consider your customers, their expectations, and the competitive landscape for your products.
Determine the Optimal Shipping Velocity
The surge in ecommerce is driven by the consumer desire to “buy what they want, when they want it–and often at a far more competitive price,” as articulated in the Nielsen IQ report, “E-commerce success in 2023 and beyond.”
While cost and speed are typically the primary considerations for both consumers and brands, reliability closely follows. While you may promote a short cycle time to your customers, the reliability of your brand becomes a critical differentiator and a key element of the overall customer experience. It is essential that all your processes align seamlessly for your brand promise to thrive.
How dependable are your processes? Your technology, integrations, fulfillment capabilities, and shipping must all be meticulously calibrated to ensure reliability. Consumers may be willing to pay more for a shorter cycle time, counting on their orders to arrive promptly. Equally vital is order accuracy; meeting the promised deadline loses its value if the items promised are not delivered as expected.
Harness Technology and E-commerce Integrations
Is your website, shopping cart application, order fulfillment technologies, and integrations sufficiently robust to adapt to changing market and consumer demands? Are they positioned to support rapid growth, including the management of multiple fulfillment center locations?
For instance, integrations with Shopify are designed to scale according to your needs, ensuring seamless and satisfying customer experiences. Essential technologies include ecommerce integration, a robust warehouse management system, order accuracy controls, inventory management, and shipper integrations. These components are crucial for delivering on brand promises and maintaining profit margins. Given the significant cost of change, ensuring the right technologies and integrations are in place is paramount as you formulate your growth strategy.
Additionally, consider how you will provide customers with visibility into their orders and enable them to track order status. Customers engaged in ecommerce expect ongoing digital communications, a cornerstone of the post-purchase experience. According to Forbes, “Compared to typical marketing emails with open rates of 10% to 20%, tracking notifications can get open rates between 50% to 80%.” Proactively communicating order statuses can also alleviate the burden on customer service. Leveraging effective commerce integrations allows you to offer customers real-time tracking, nurturing the customer relationship and fostering loyalty.
Assessing the Pros and Cons of Insourcing versus Outsourcing Fulfillment
Deciding whether to handle order fulfillment internally or outsource it is a pivotal choice for many ecommerce retailers, and the optimal strategy may evolve as your business expands.
Starting with insourcing, you require resources such as warehouse space, trained labor, and in-house expertise. Order fulfillment encompasses numerous processes (refer to Outsourced Order Fulfillment: What’s Your ROI?). The decision revolves around whether to establish this system and invest in managing it in-house or seek assistance from a supply chain services provider. Smaller ecommerce merchants often opt for insourcing, finding it streamlines order fulfillment. However, this choice may entail trade-offs such as limited access to optimized shipping costs, growth constraints, and a lack of optimized technologies.
Outsourcing order fulfillment provides immediate access to extensive resources, including flexible warehouse space, shipping cost efficiencies, high-level expertise, a continuous improvement process, and advanced technologies. It also offers access to a fulfillment center network to support your business’s growth.
Both options have their merits and drawbacks, but engaging the services of a proven supply chain partner can provide a competitive advantage and foster the growth of your ecommerce business. A suitable partner can offer guidance on the right strategy for your business. If you’re navigating these decisions, we’re here to be your strategic partner in order fulfillment. Contact us today.