Your ecommerce traffic is picking up, and that's good news! In fact, ecommerce is booming around the nation. The industry saw $102.7 billion in fourth quarter sales in 2016, up 14.3 percent from the same time the previous year. Customers are increasingly opting to stay home and do their shopping from their screens, and more and more businesses are taking advantage and selling online.
To meet that demand, external fulfillment centers have been cropping up to help small and growing eCommerce businesses ship products to their customers, without having a huge warehouse. This is going to make it much easier for entrepreneurs to scale their businesses.
Recently, I've been receiving a lot of questions about how to use fulfillment centers, so I've had to do some digging and talk to a few expert folks. Here's what I've learned in my travels:
Fulfillment centers handle third party logistics (or 3PL for those attuned to catchy internet shorthand). This means that the whole behind-the-scenes inventory process gets outsourced to an external warehouse. It's an exciting prospect for a small retailer trying its best to grow. When you get a customer order, the 3PL handles the picking, packing, shipping, storage and returns, leaving you free to do what you're best at. Working on the next big idea, polishing your brand, and keeping the wheels of your company fine tuned and whirring. Here's how the 3PL process works:
First, you order from your wholesalers like normal. But instead of having your inventory shipped to you, you have them ship it to your fulfillment center's warehouse. Then when you get a customer order, it forwards to the 3PL at their warehouse. They go back into the shelves, pick the items for fulfillment from your inventory, pack and ship them with labels that you've provided, and send you the tracking info. Finally, your customer gets their order delivered to their doorstep and leaves you a glowing review. In the event of a return, your 3PL teammates handle that for you as well--some of them even offer field customer service for you.
At this point you're probably starting to see what an impact it will have on your business to outsource fulfillment. You'll finally be free! If you have a brick and mortar, you can transition primarily or entirely to online sales, taking an axe to your overhead. If you're exclusively online, you can grow your company to the point where you can afford to open up a physical store, with your 3PL doing half the work for you! Whatever your goal, your business just became scalable. But before you start building castles in the sky, let's look at the options you have and some of the differences between them.
Top 3PL Options
The most famous fulfillment option on the market right now comes from shipping giant Amazon. Their new service Fulfillment by Amazon (FBA) caters to the online retailer who wants to offer their customers the benefits of Amazon Prime, including 2-day shipping. If you're already selling on Amazon, this could be a good option. But your customers will have to sign up for Amazon Prime first to qualify for the full benefits of FBA. With Amazon, you can send them as much or as little of your inventory as you like, in case you want to keep some in reserve gathering dust before selling it online.
If you're selling independently (e.g. not on Amazon), consider using an independent 3PL. Using a company like Red Stag Fulfillment allows you to partner with a fully functioning, fully staffed warehouse that specializes in handling your orders. Red Stag claims to reach 97 percent of domestic customers in 1-2 days, and ships with an accuracy close to 100 percent.
If you need global shipping, Shipwire is the latest hotshot cloud-based company that offers "logistics as a web service." Their global shipping network coordinates with your retail locations for a seamless customer experience. They bounce back complex data in an accessible, digestible format that you can navigate from your dashboard. This gives you an overview of the whole operation from your desk.
Getting Down to Business
As I mentioned earlier, using an outside fulfillment center can certainly streamline your business and help you scale. When you don't have to deal with the day-to-day aspects of keeping your current customers serviced, you can actually focus on growing your company. A novel idea.