The days of reckless ad spending and haphazard investment are soon to be over as e-commerce pioneers such as CDNow struggle to stay alive and flashy plays such as Boo.com outright die. Reality is sinking in: e-commerce is not just about front-end glitter and glory. It's also about streamlined back-end processes as well. The most important of these is order fulfillment -- the ability to move a product from the warehouse to the customer's house in the cheapest, fastest way possible.
Many companies are beginning to recognize the huge demand for products and services that enable sites to deliver their goods successfully, and are rushing to fill the gap. At the moment, the majority of quality third-party fulfillment services are focusing on high-volume e-tailers, leaving small e-businesses in the lurch. But with current market demands, the situation is about to change.
The Importance of Order Fulfillment
The failure of many e-companies to deliver products when they promise has played a large role in deterring potential customers from shopping online. As reported in a recent Boston Consulting Group study, 23% of consumers who experienced a failed purchase attempt (resulting in part from delivery problems after the sale) stopped shopping at the site in question, and 28% stopped shopping online altogether. Another AMR study revealed that only seven out of 10 e-commerce customers were satisfied with their deliveries when they had to pay for shipping, meaning a whopping 30% of those customers surveyed did not have satisfying delivery experiences.
According to analyst David Schatsky of Jupiter Communications, "Fulfillment is the weak link. It was the top source of dissatisfaction from customers [ during last year's holiday season] ." The frequent and much-publicized failure of even the most successful of e-tailers to deliver goods on time has served as a wake-up call to the industry: Fulfill as promised or lose customers for good.
Giving Small E-Tailers What They Deserve
There's a reason e-tailers are having such a hard time getting their delivery act together: Successful order fulfillment is not an easy task. Larger e-companies, such as Garden.com and Groceryworks.com, have the capital to develop expensive order-fulfillment systems that are customized to their needs. But smaller businesses with enough volume to require the outsourcing of fulfillment, yet not enough capital to build their own systems, are often forced to rely on delivery services that are not yet up to par.
The majority of top-quality fulfillment service providers currently caters exclusively to high-volume e-tailers. In fact, smaller e-companies often find themselves in the uncomfortable position of being evaluated by fulfillment houses instead of the other way around. But as demand for quality order fulfillment continues to grow and competition for the business of high-volume e-tailers increases, more and more established fulfillment houses are starting to target the small e-business sector. Some examples include iFulfill.com and Connextions.net.
Until the supply of quality fulfillment houses catches up with the demand, small e-businesses would do well to evaluate potential fulfillment partners carefully. Many of the new fulfillment vendors making a play for e-commerce business are transportation, warehousing, and IT consulting firms that have only recently expanded to provide full end-to-end delivery services. While these new vendors may be experienced at one aspect of the process, they are still in the experimental phase of offering solutions that take over from the point where the customer hits the "Buy" button and end by dropping the product at the customer's front door.
The Necessary Elements
If you're considering outsourcing to a third-party fulfillment house, make sure your vendor has a tested supply chain management system that handles the following issues:
Inventory management. The fulfillment provider's inventory tracking system should provide real-time information to the site indicating whether or not the product in question is in stock and, if not, when more will be in. This enables the site to then accurately provide the customer with information as to the appropriate shipping options available and how long it will take for the product to arrive.
Order processing. Upon the customer's input of payment information and selection of the product and shipping method, the fulfillment service should receive the order and send confirmation of its receipt either to the site or directly to the customer via e-mail. The process of picking, packing, and shipping the product should then immediately be set in motion.
Package tracking. Information on the status of the order should be provided for posting to the site, as the product makes its way to the customer. By providing step-by-step updates on the location of a package, sites empower their customers and assure them that their purchases have not been lost in the shuffle.
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