Your Guide to Understanding the Retail Order Fulfillment Process
July 8, 2020
What do you want to learn?
Ecommerce sales continue to earn a larger slice of the overall retail pie, but nothing escalated the growth of online shopping quite like the onset of a global pandemic. COVID-19 caused ecommerce sales to skyrocket in 2020, largely due to merchants closing their doors and scrambling to create an online store in order to sustain any revenue.
Many of these businesses quickly realized how different it is to deliver items to online shoppers rather than rely on them coming in to shop. These steps, known together as the retail order fulfillment process, require the following for each order that’s placed on an online store:
- Picking items from available inventory
- Packing boxes and adding a shipping label to the shipment
- Running to the post office or having a carrier pick up packages to be shipped to a customer
On top of that, there are retail fulfillment costs to familiarize yourself with and other pieces of the puzzle including managing inventory, trying to compete with Amazon, tracking a shipment’s status for a customer, and more.
Direct-to-consumer (DTC) brands must have a sound retail order fulfillment process to ensure customer satisfaction. Unlike traditional retail distribution, where a customer has to go to a brick-and-mortar retail location to purchase an item, the goal of retail fulfillment is to ship orders as efficiently as possible from a store, home, or fulfillment center to the customer’s doorstep.
For omnichannel businesses that want to improve the retail fulfillment process, there are key steps they can take, from using the right technology to making supply chain optimizations. Even better, they can work with a third-party logistics service provider, also known as a professional fulfillment company, to outsource supply chain management.
This may all sound like a lot, but we’ll explain your options for managing the retail fulfillment process. Below, we explore the specifics of retail order fulfillment for ecommerce brands as well as strategies to improve the customer experience.
What is retail fulfillment?
Retail fulfillment is the process of assembling and shipping a customer order. Unlike having customers come to a physical retail store to select and purchase items themselves, an ecommerce merchant is responsible for packing the shipment with the correct products and getting the package in transit after a customer places an order online.
Why is retail fulfillment important for your online store?
Ecommerce businesses make it a priority to optimize the retail fulfillment process because it has a significant impact on customer satisfaction and profits as a whole. When you manage the retail fulfillment process yourself, there are packaging costs, shipping costs, and other hidden costs. Additionally, if ecommerce merchants are unable to deliver customer orders in a timely manner, customers will seek out a business that can.
A successful retail fulfillment process is needed to help your business grow. With an effective order fulfillment process, your business can manage customer orders with greater efficiency. Moreover, you will be able to scale as your order volume picks up, thus increasing your profits.
“It’s a pain to pick, pack, and print the labels, and manage the storage. It would be a huge stress for us to do it ourselves, but the fact that ShipBob takes care of it all, both the savings in costs and time, is invaluable to our business.”
Nikolai Paloni, Co-Founder of Ombraz
6 steps in the retail fulfillment process
The retail fulfillment process is a key part of supply chain management in making sure that orders are delivered on time. The retail fulfillment process involves the following steps that are necessary to maintain both operations and customer satisfaction.
1. Receiving new inventory
As you sell products, you’ll need to order more inventory. With ecommerce, there are more potential customers to sell to than just local shoppers. Managing reorder quantities for retail fulfillment requires a deeper understanding of inventory forecasting and working closely with your manufacturer(s).
New inventory must be sent to your fulfillment center to be stored. Each SKU will need its own storage location (bin, shelf, or pallet). Once inventory arrives at a fulfillment center, you must process, organize, document, and stow it.
If you take on retail fulfillment yourself, you’ll need a warehouse management strategy that encompasses organization, infrastructure, software, and processes to track inventory with stations dedicated to each retail fulfillment process.
Once inventory storage is complete, you will be able to use those products to fulfill customer orders. You’ll need to keep a close eye on stock levels and set reorder points so that you order more inventory once it drops to a certain level to prevent stockouts.
Note: The location of where you store and ship items from will have a big impact on your shipping costs (i.e., the farther away the shipping destination, the more expensive the delivery will typically be).
3. Picking items
Once a customer places an order, the order is processed in your queue and a picking list is generated. Your team can begin retrieving the products needed to fulfill the order. Items from a single order must be kept separate from other orders.
4. Packing orders
Once all products from an order are picked, you can pack them. You’ll want to choose boxes, poly mailers, and packaging materials that will both protect your products and add up to the lowest practical dimensional weight to help you save on shipping costs.
5. Shipping orders
Now it’s time to ship your orders. Note: You’ll want to pay attention to the ship date and promised delivery date or estimated timeline. If your online store’s shipping policy is to ship orders the same day (e.g., for all orders placed before noon your time), then you’ll want to make sure you honor those promises.
6. Returns processing
Customers will likely return ecommerce orders from time to time, and you need to be ready for that. A well-designed returns management process can reduce costs and headaches associated with returns or exchanges.
“If I was going to grow, I had to let go of things that were preventing me from my own success. To say that switching to ShipBob has been life-changing is an understatement. Thinking big picture, it was an incremental cost for me to ultimately sell a lot more. My business has tripled and I got my life back. I can see orders come in while backpacking, and I don’t have to rush home to frantically stuff envelopes.”
Anastasia Allison, founder of Kula Cloth
Optimizing your retail fulfillment process
Major retailers and ecommerce merchants take numerous measures to optimize the retail fulfillment process. Let’s take a closer look at what this involves and how your business can benefit. (Hint: it’s not as complicated or expensive as you think!)
Choose the right fulfillment center location
Choosing a well-located fulfillment center can go a long way in improving the customer experience. A strategic location near your customers will ensure that orders are delivered on time and reduce shipping costs due to the way that shipping zones work.
3PL services from a fulfillment company such as ShipBob offer you the ability to split inventory across multiple fulfillment centers all over the US (and world) to cater to a larger pool of consumers with greater efficiency. Rather than pay for a single warehouse (or multiple), you can benefit from the fulfillment company’s infrastructure and economies of scale due to helping thousands of customers.
“ShipBob’s multiple locations really allow us to scale in ways that a company of our size would not be able to if we tried to own and operate the logistics and shipping components ourselves.”
Francesca Cavallo, Co-Author of Rebel Girls
Opt for integrated fulfillment software
For smaller ecommerce merchants, you need software that takes care of inventory management, order tracking, and integrates with your online store. A fulfillment provider like ShipBob will not only perform retail fulfillment services for you but provide integrated fulfillment software at no extra cost.
“ShipBob’s integration with my online store is great. The fact that I don’t have to think about my shipping integration, do anything when someone orders from me, or worry that something might not get to them makes it more hassle-free.”
Tracey Wallace, Founder of Doris Sleep
Fast shipping times
Thanks to Amazon, 2-day shipping is the expectation. Online shoppers want their ecommerce orders shipped quickly. Having strategically-located distribution centers significantly reduces both delivery times and shipping costs. The time between order placement and the shipment arriving at your customer’s doorstep can be significantly reduced without you paying for expedited costs.
“It’s paramount for people to feel confident that they will receive their products in the shortest amount of time possible. We’d hate to see our customers go somewhere else because we don’t offer 2-day shipping, so we use multiple ShipBob fulfillment centers.”
Francesca Cavallo, Co-Author of Rebel Girls
Retail order fulfillment models: which is best?
There are three main ecommerce fulfillment models, each with its own set of advantages and disadvantages. Let’s see what each model has to offer to improve the retail fulfillment process and at what cost(s).
In this model, ecommerce merchants outsource fulfillment to a 3PL partner. The fulfillment company stores inventory and handles the entire retail order filling process so the merchant has time to focus on other tasks.
- Experience and specialization: 3PL services are created with the specific goal of providing businesses with inbound and outbound logistics expertise and support. Their staff is skilled at optimizing the retail fulfillment process with years of experience in the field.
- Better technology and supply chain insights: A tech-enabled fulfillment provider can pave the way for automating parts of your fulfillment process. Services like ShipBob offer a retail order fulfillment process that provides features such as order management, turnkey integrations, data analytics, and more.
- Scale and grow faster: Using a fulfillment provider will speed up your retail fulfillment process and enable you to focus on the tasks that only you can do. With a retail fulfillment partner managing picking, packing, and delivery, you don’t have to worry if there is a sudden spike in consumer demand as they can scale up without sacrificing your customer experience.
- Vast fulfillment network: With many locations in various regions, you can optimize retail fulfillment and not be limited to staying in one local spot — from growing into a second location to utilizing their international fulfillment network.
“We knew we’d be doubling and then quickly tripling our order volume, so we wanted to get help on the front-end to ensure a long-term relationship with a lot of room for scalability. We were managing shipping and logistics ourselves but didn’t understand just how massive and difficult fulfillment was. It also prevented us from focusing on our core products. After a thorough search of companies that could give us something akin to Amazon and its delivery capabilities, we chose ShipBob.”
Andrew Hardy, COO of Nature’s Ultra
- Costs: Hiring a fulfillment provider to manage your retail fulfillment can be costly. However, finding a retail fulfillment partner that is the right fit for your business can boost profits. Just be sure you are aware of all potential fees before getting started.
- Less control: Giving up control of stock and packing orders can be a hard decision to make. You’ll want to find a partner you can trust and that resolves any issues that arise.
“We need to deliver quickly and inexpensively. Since switching to ShipBob from our previous 3PL, our fulfillment cost on comparable orders went down by 25%. We even experienced 4x our normal volume this past holiday season. There’s a certain level of distribution center competency you need to execute on this. If we handled fulfillment internally, it would be impossible to meet demand at our volume.”
Michael Peters, VP of E-Commerce Operations at TB12
With in-house fulfillment, a business does everything themselves. It’s best suited for small or new merchants with a low order volume, being able to handle packing a few orders a day. Some retailers have even gone this route with in-store fulfillment if they don’t have an ecommerce warehouse, though a retail store is set up very differently from a fulfillment center.
- Fewer direct costs: If you handle retail fulfillment yourself, you don’t have to hire people to pack boxes. Of course, there is an opportunity cost of spending your time working on retail fulfillment rather than growing your business.
- Maintain control over customer experience: Businesses following the self-fulfillment model have complete control over their operations, ensuring every order is packed exactly as they want and with as much customization as they want. They also always have direct eyesight on their inventory.
- Brand image: An in-house fulfillment model leaves room for you to use customized delivery packages to promote your brand’s identity. Cultivating an attractive image for your brand is important to maintain customer loyalty and to grow your customer base. Though some 3PLs can also ship packages with your custom packaging.
“It felt like all I did was eat, sleep, and pack orders. We couldn’t fit another person in my garage. I had to make a transition in order to scale. Since working with ShipBob, we’ve grown 115% and experienced 2.5 times more order volume. It was kind of like magic — my orders were imported into ShipBob from my online store and started getting fulfilled right away. I didn’t have to do anything.”
Noel Churchill, Owner and CEO of Rainbow OPTX
- Less efficient: A self-fulfillment model may cause customer orders to be processed more slowly since it is time-consuming. You are also stuck in one location, causing longer transit times for the majority of orders.
- Limited growth potential: Ecommerce businesses that manage retail fulfillment by themselves must spend a significant amount of time and resources doing so. This can make growing your business challenging since you’re reacting to customer orders coming in rather than figuring out how you can bring new customers in.
- It becomes your life: When you’re managing retail fulfillment yourself, you will spend more and more time on the process. Say goodbye to days off, vacations, and free time.
- Less storage space: When fulfilling retail orders in-house, you may store products in your home. Your apartment, garage, and/or basement will be taken over by your inventory (as will your car most likely). Most of the time, it’s a business owners’ living quarters that are directly impacted by retail fulfillment in this model.
“We looked into opening our own warehouses and hiring employees, but couldn’t come close with what 3PLs charge for picking, packing, and shipping. We’d also be worried about scheduling fulfillment shifts, ordering boxes and shipping labels, and dealing with the extra headaches of running logistics.
Most of all, those are hours we’d spend on tasks that are not scaling our business when we could be using those resources for growth. You should spend time doing what you do best, and fulfillment is an easy task to take off your plate.”
Gerard Ecker, Founder & CEO of Ocean & Co.
The dropshipping model is the most hands-off, as a business does not hold any inventory themselves. Instead, after a customer places an order, the manufacturer that created the product ships the product to the customer.
- Less investment: The dropshipping model requires less capital than other retail fulfillment models, because businesses will not have to pay the overhead for warehousing. Moreover, since you will purchase the product after the customer pays for it, no investment is required in this matter. You are essentially the marketer, not the full business owner.
- Versatility and flexibility: Using a dropshipping model means that you can run your business from any location, go on vacation and not worry about retail fulfillment, and even introduce new products to your online store.
- Good for proving out a product concept: The dropshipping model provides more room for testing. Companies can get an idea of what customers are looking for in particular by testing out different products and observing how consumers receive them. It’s often not a long-term solution but good for proving out an early concept.
- Lack of quality control: In the dropshipping model, your business doesn’t have any control over inventory or the customer experience. A manufacturer is not a retail fulfillment expert, so quality is often lacking.
- Lower profit margins: While the dropshipping model requires minimal investment, ecommerce businesses also experience lower profit margins. You have to purchase the products from a third-party and have them delivered by a carrier. It’s also incredibly competitive, often filled with thousands of people selling the same exact product as you.
- Difficult to keep up with customer demand: If consumers order large quantities of products from different third parties, then you will have to make separate transactions to each business. To provide your customer with a satisfactory experience, you will have to organize the charges into a single receipt.
- Very slow transit times: If your manufacturer is far from home and you’re dropshipping from overseas, your customers may have to wait a month or more to get their orders. Many sellers move off of the dropshipping model to work with a domestic fulfillment center to cut back on expensive air shipping, delays at customs, and very long transit times.
“When we first got started, we were dropshipping. It was nice because we had no money tied up in inventory, but we also had no quality control. With no control over the customer experience and very poor shipping times, we quickly realized dropshipping was not a long-term solution. It was good for proving out an early concept, but we had to move to a professional fulfillment company.”
Gerard Ecker, Founder & CEO of Ocean & Co.
Retail fulfillment process: The challenges and solutions
Having a successful retail fulfillment process is highly beneficial for your business yet easier said than done. Let’s look at some of the challenges that your ecommerce business might face in this regard and how to overcome them.
A growing order volume
Managing and fulfilling a large number of orders can be difficult. If you are short on staff or doing it all yourself from a small space, having customer orders delivered on time can result in a suffering customer experience and a loss in customer loyalty due to shipping. If you turn to a retail fulfillment provider like ShipBob, you can outsource tedious tasks.
“After working with ShipBob and seeing the initial 20,000 – 30,000 units go out the door, it allowed me to sleep better at night. We weren’t having to spend a lot of time processing orders, and we were very relieved that we were being taken care of. As we’ve grown internationally and in our general order volume, we’ve seen satisfaction go up. ShipBob was a key player and significant partner in helping manage what became unmanageable when we were shipping orders out ourselves.”
Matt Dryfhout, Founder & CEO of BAKblade
You’re not a logistics expert
Fulfillment involves a lot of complex retail supply chain facets that can leave you feeling overwhelmed. Partner with an experienced fulfillment provider like ShipBob who can take the stress of retail fulfillment while letting you utilize their knowledge, resources, scalability, bulk discounts, etc. — without you having to invest in retail fulfillment equipment, space, and infrastructure only to outgrow it all and start over again.
“We never wanted to be a logistics company, so we found a really good partner in ShipBob to offer the fulfillment services, technology, and other tools needed to stay competitive. With everything that ShipBob does for us, we can focus on the brand itself, develop content, evolve our existing products, and expand our product lines.”
Matt Dryfhout, Founder & CEO of BAKblade
Retail fulfillment minus the headaches: ShipBob
ShipBob provides the leading retail fulfillment process that will improve the customer experience and let you focus on other areas of your business. Why put up with the trouble of inventory management, packaging items, and shipping orders to customers when we can do it all for you while providing best-in-class retail fulfillment technology and support?
If you run a fast-growing ecommerce business, our retail fulfillment services can save you valuable time and money. You can store your ecommerce inventory at any of our fulfillment centers of your choice, and we’ll even give you data to make the best decision to match the Amazon experience.
“Other ecommerce companies approaching an inflection point will benefit from ShipBob because they allow entrepreneurs, like myself, do what we do best — create, sell, and grow! I’m proud to be a ShipBob partner. A lot of companies underestimate the cost-savings and power of choosing your entire supply chain and partner network wisely. These choices will make or break your business.”
Courtney Lee, founder of Prymal
Multichannel retailing and the retail order fulfillment process can be challenging, demanding a lot of time and resources. For these reasons, it’s best to let the experts take care of direct-to-consumer fulfillment. Contact the ShipBob team below to learn how you can focus on growing your business while we manage the retail fulfillment process for you.