The e-commerce fulfillment methods that you choose can make or break your business. Customers want their online orders to be fulfilled as quickly as possible, with frequent and clear status updates along the way. Failure to fulfill and ship orders in a timely manner or inform customers about issues or delays could cause you to lose customers to competitors who can better meet their needs. Delight them, however, and you’ve just earned yourself a loyal customer and maybe a word-of-mouth recommendation or two!
In short: e-commerce fulfillment is a crucial part of the buyer’s journey. Thus, it’s important to develop a strong fulfillment strategy that will keep your customers coming back for more. But to do that, it’s helpful to take a look at exactly what e-commerce fulfillment is.
What is e-commerce fulfillment?
E-commerce fulfillment is the series of steps an order goes through from the moment a customer places an order online until that order is delivered to its final destination. These steps include receiving, processing, selecting, packaging, and shipping (transporting) orders. Depending on the size of a business (among other factors), a business may choose to handle e-commerce fulfillment in-house or use a fulfillment center or provider.
But there’s a lot more to consider when developing an effective strategy for your business. Below we’ll delve more into why fulfillment is so important, along with navigating the entire order fulfillment process, combating challenges, and tips for improving your strategy.
Consider this your complete, step-by-step guide to e-commerce shipping and fulfillment.
Table of Contents
- Why E-commerce Shipping and Fulfillment Matters
- Factors That Go into Your E-commerce Shipping Decision Process
- How to Navigate E-commerce Fulfillment Providers
- How to Measure Order Fulfillment
- Order Fulfillment Challenges and How to Combat Them
- Strategies to Improve Order Fulfillment
- How to Turn E-commerce Shipping into Your Competitive Advantage
Why E-commerce Shipping and Fulfillment Matters
According to a 2020 market analysis report by Grand View Research, the global e-commerce fulfillment services market was worth $69.68 billion in 2019. By 2027, the market is expected to reach $113.59 billion. This projected increase in value is largely contributed to the number of speedy, convenient, and reliable e-commerce shipping and fulfillment options that delight and convert consumers into regular online shoppers.
Order fulfillment is one of the most important aspects of the customer experience. How and when a customer’s order arrives will make a big impression on whether they want to shop with a particular brand again. Once an order is placed, it’s on you to get it to the customer as seamlessly as possible, down to the last mile. Last mile delivery refers to the last leg of the shipment journey, when an order ships from a transportation hub to its final destination.
Seamless fulfillment involves not only choosing the right providers for the job but also keeping customers in the loop about their order’s real-time status or any hiccups. Because, let’s face it, hiccups are unavoidable: 11% of deliveries face delays or other issues. But that’s where your stellar customer service will come into play. A little transparency, effort, and understanding will go a long way to improving the post-purchase experience and ensuring brand loyalty.
Factors That Go into Your E-commerce Shipping Decision Process
There are a number of factors to consider when determining your shipping process. These factors include
- Product size and weight. Keeping an up-to-date list of your products’ measurements and weights will help you provide your customers with accurate pricing. It’ll also help you get a better idea of your total costs.
- Shipping rates and methods offered. Businesses can either choose to absorb shipping costs or pass them onto consumers. Free shipping is one of the most popular options for businesses, with 77% offering free shipping. Although customers like to see free or flat-rate shipping before making a purchase, they also like to be offered a variety of shipping options like same-day or two-day shipping. Beyond this, an online store also needs to consider the types of shipping methods it wants to use to get online orders to customers in a timely manner.
- Type of packaging. The right packaging matters. This ensures that items aren’t damaged during transit and that you don’t overpay for packaging. Worth noting: Carriers like USPS or UPS frequently offer free packaging.
- Level of service required. Another important factor to consider is the level of service you promise your customers. For example, a luxury retail business may choose to offer multiple same-day delivery options. Not only are customer expectations high for this type of high-end online business, but customers are also willing to pay more for exceptional service.
- Tracking. An important component of building a good customer experience is offering consumers transparency in order tracking. Tracking will also help you to identify and resolve any issues as quickly as possible.
- Returns. Many businesses offer free shipping for deliveries but pass on shipping costs or restocking fees to consumers for any returns.
Popular shipping speeds
More than half of consumers are willing to pay more for expedited shipping services such as overnight or same-day delivery. Offering consumers a variety of shipping options helps to increase the likelihood that they’ll purchase an item instead of letting it sit in their shopping cart. Some of the most popular shipping services are:
|Same-Day||Guaranteed same day|
|Overnight||By next business day|
|Two-Day||Within 2 business days|
|Expedited (General)||Any shipping method faster than ground|
|Standard Ground||Within 3-5 business days|
How to Navigate E-commerce Fulfillment Providers
Let’s explore how to choose e-commerce fulfillment providers.
Types of e-commerce fulfillment providers
Businesses that don’t handle fulfillment in-house need to consider outsourcing fulfillment. This is a worthwhile option if you’re shipping more than 5 to 10 packages per day. The two main types of fulfillment providers are:
- Third-party logistics. Third-party logistics (3PL) can be ideal for businesses that want to scale up. Many e-commerce businesses choose a third-party provider to handle most or all aspects of supply chain management and logistics.
- Fourth-party logistics. Businesses that need assistance with 3PLs can choose to hire fourth-party logistics (4PL) to manage a business’s supply chain end to end, including all 3PL services.
There are a lot of third-party providers that businesses can choose from to handle inventory management, distribution, warehousing, or fulfillment. Some major fulfillment providers include:
- Fulfillment by Amazon
- Ingram Micro Services
- FedEx Fulfillment
- Rakuten Super Logistics
- IDS (Integrated Distribution Services)
How to calculate the cost of order fulfillment
All of the components of e-commerce order fulfillment — receiving, processing, selecting, packaging, and shipping — must be considered when calculating the total cost of fulfillment. For a small business, one element of order fulfillment cost would be the time it takes for an employee to process, select, and package the order. After that, shipping costs need to be calculated. Shipping costs are based on:
- Package weight and size
- How far a package is traveling to reach its destination
- Tracking methods used
- Shipping insurance
- Time of season (costs and surcharges may arise around peak season)
Carriers offer shipping calculators on their websites so you can get an accurate idea of shipping costs in the U.S. or abroad. Take a look at major shipping carriers like USPS, FedEx, DHL, or UPS to see which option works best for you.
Other factors to consider when calculating total costs:
- Product costs
- Transaction fees
- Profit margin
- Customs/duties (for international shipping)
- Customer satisfaction
How to choose your e-commerce fulfillment provider
When choosing an e-commerce fulfillment provider, the three main factors to consider are cost, speed, and customer experience. Customers expect their orders to arrive as quickly as possible, but you also don’t want to greatly reduce your profit margin by absorbing over-the-top shipping costs. You also want to provide a good customer experience, and failing to do so could cost you lost customers. That’s why it’s crucial to find a happy medium between costs, speed, and customer expectations.
It’s worth noting that 52% of customers prioritize guaranteed delivery dates over free shipping. Delivery dates during COVID-19, however, are difficult to guarantee. As long as you’re using a tracking tool — informing customers of what the issue is and showing that you’re making an effort to resolve the issue — customers will understand.
How to Measure Order Fulfillment
Three key components to measure are:
- Customer satisfaction. A customer’s satisfaction depends on how a customer experiences your business from the time they are introduced to your business until their order is delivered. Customer satisfaction can be measured by compiling data on feedback, delivery exceptions, engagement, etc.
- Perfect order rate. This calculates how many orders are shipped without issues. Issues could be any type of delivery exception, such as damaged goods or late shipments.
- On-time delivery. This refers to the time window an order has for delivery. An “on time” delivery is typically any order that arrives early or by the guaranteed delivery date. So, if an order is guaranteed to arrive by December 23 and it arrives December 23 at 10 p.m., it is on time. If it arrives on December 24, it is late. Measuring on-time delivery involves compiling order data and calculating the percentage of on-time deliveries.
You can’t improve what you don’t measure. Download our e-book to learn more about how you can improve the delivery experience across the board.
Order Fulfillment Challenges and How to Address Them
No business owner wants to lose customers. Proactively tackling fulfillment challenges will improve customer experience, retain customers, and convert new buyers.
The top delivery exceptions are:Incorrect address. A package may be delayed or undeliverable if a delivery address is incorrect, incomplete, or unclear. In most cases, these issues are the customer’s fault, but occasionally a retailer may document a customer’s address incorrectly. Either error will lead to shipping issues.
Weather delays. Hurricanes, snowstorms, and other types of severe weather can lead to shipment delays regardless of the method of transit.
Peak season. This refers to either the peak holiday season or a peak season for retailers. Either one can lead to longer fulfillment or shipping times. For retailers, preparation can help enormously.
Returns. No e-commerce business wants to deal with returns, but returns are unfortunately a major part of online shopping. Your return policy should make sense for both your business needs and your customers. Although returns can be costly, your business could lose more in the long run — in the form of lost customers — by charging high fees or refusing to process reasonable returns.
Lost in transit. Packages are occasionally lost in warehouses or during transit. Often, this is due to a failure to properly track a package throughout the supply chain. If a package is unable to be located in a reasonable amount of time, the retailer must inform the customer. They may choose to refund the customer or else ship out a replacement product.
Missed drop-off. Depending on the price or nature of an order, a package may require a signature upon delivery. If no one is home to accept the order during the delivery window, the delivery cannot be completed. Good carriers will inform customers of this issue and the next step they should take, such as picking up the package at a carrier location or rescheduling the delivery. If no notice of the missed drop-off is provided, this issue is more likely to reflect badly on retailers than carriers because the retailer chose that specific carrier.
Damaged package. An order will be delayed if a shipping label, package, or product is damaged. In many cases, the order may need to be canceled and reshipped.
COVID-19 challenges. Online orders are currently taking longer to process, ship, and arrive, which means delivery issues or delays have become more common. If the reasons for delays are unreasonable, it may be time to consider a change in fulfillment providers or shipping methods. Otherwise, there’s not much retailers can do besides tracking orders better, spotting disruptions, and informing customers. But some transparency goes a long way: Retailers are opting to put COVID-19 notices wherever applicable on their websites, such as homepages, shopping carts, shipping pages, and product pages. This, along with listing a conspicuous COVID-19 estimated delivery date (EDD) for orders, encourages 75.1% of shoppers to go ahead with a purchase.
How to address fulfillment challenges
For combating the issues listed above, it all comes down to sharing real-time updates with customers. Customers are generally understanding when it comes to delivery delays or issues — as long as they’re informed. Failure to communicate issues to customers could cost them to go elsewhere: 69.7% of shoppers said they’d be less likely to shop with a retailer who fails to inform customers of delays or issues. And 12.5% would never shop with that retailer again.
Symptoms of bad order fulfillment include:
- WISMO, aka “Where is my order?”
- Order arrives late or damaged.
- Increase in customer complaints and negative reviews.
- Lost customers.
Strategies to Improve Order Fulfillment
It’s not enough to know about fulfillment challenges or the symptoms of bad order fulfillment — businesses also need to make an effort to find order fulfillment solutions.
Delivery Experience Management
The best way to improve order fulfillment, particularly during the last mile, is by using a delivery experience management (DEM) platform like Convey Engage, a tool that helps retailers stay on top of the post-purchase delivery experience. This tool helps retailers to provide customers with real-time, total order transparency that shows them where their order is, if there are any issues, and what happens next.
Total order transparency can reduce WISMO calls by more than 25%. Even better? Optimal supply chains have 15% lower costs than those that don’t optimize.
Consider, for example, our case study on Bodybuilding.com, an online retailer that was struggling with WISMO calls and late and damaged orders. To get on top of these issues, it deployed Convey Engage to improve customer experience at a scalable cost. This tool helped the retailer to:
- Reduce WISMO calls by 27%
- Increase customer tracking engagement by 48%
- Improve on-time delivery by 4.5%
- Resolve delivery exceptions within 24 hours
How to Turn E-commerce Shipping Into Your Competitive Advantage
Let’s get competitive. A variety of automation tools can help you put yourself ahead of the game and manage the delivery experience. And unless you’re Amazon, that’s the only way to stay competitive in the e-commerce world. You need a solution for each of these steps in the e-commerce shipping process:
- Discover. Discover supply chain issues with this business analytics tool. It provides you with real-time delivery network data to improve visibility and streamline the delivery experience.
- Convert. Convert online consumers by providing AI-assisted accurate delivery expectations early in a buyer’s journey to encourage them to go ahead with their purchase.
- Initiate. Initiate the best shipping method for an order with this last-mile TMS that automatically chooses the best carrier for the job.
- Engage. Engage customers with real-time order tracking updates that will improve the post-purchase experience.
- Recover. Recover time, money, and effort by identifying and resolving shipment issues with carriers in real time.
- Extend. Extend the value of your delivery data by collecting the data that really matters and improving access to that data. You’ll be rewarded with everything from improved customer experiences to reduced costs and effort.
In addition to these technology tools, consider using one of our logistics shipping partners to improve your competitive advantage:
The future of order fulfillment isn’t Amazon — it’s great customer experience
Amazon has completely changed online shipping and delivery expectations. Customers now expect free two-day delivery to be the standard norm rather than the previous standard of three- to five-day delivery. (And if you’re shipping times are longer than that? Good luck getting customers to place an order.) They now offer one-day and same-day delivery options, making it even harder for businesses that don’t use Amazon fulfillment to compete.
So, how is an e-commerce business to compete in this environment?
The only way to stay ahead of the competition is by offering a great customer experience. That’s what delights customers, converts them, and retains them. The key is to use a delivery experience management platform that will guarantee perfect orders during the last mile. That’s a bold claim, but DEM technology is up to the task. And it’s not something you can afford to skip out on. For the last mile of delivery, stakes are high: 84% of consumers will refuse to do business with an e-commerce company after just one poor delivery experience.
Adopting DEM will help you to collect and analyze the right data, optimize shipping and fulfillment, and provide your customers with the best possible delivery experience. In sum: You’ll remain competitive in a world overrun by Amazon.
Your customers deserve the best
Learn more about how Convey can improve the delivery experience for your customers.