What do you want to learn?
Running an ecommerce business involves a lot of responsibilities. You need to create a product that solves a problem, manufacture it, find people who will pay for it, build a website and brand, ship orders to customers, provide customer support, and manage a plethora of other business functions.
With so much to do, you need to do the most with your time. One common blocker that gets in the way of other very important tasks is order fulfillment. It’s something that is manageable early on but will take up more of your time as additional orders come in.
What is self-fulfillment in ecommerce?
Self-fulfillment is when an ecommerce business chooses to keep inventory storage and processes like packing boxes and shipping orders in-house. Self-fulfillment is something you do when:
- You’re first starting out in ecommerce and will fulfill orders from home.
- Your ecommerce business is so big that you can invest in a world-class warehouse and fulfillment operation.
An alternative to self-fulfillment includes outsourced fulfillment, where a third-party logistics (3PL) fulfills orders for your ecommerce business. You may also have store-specific fulfillment options and requirements (for example, using FBA, where Amazon stores your inventory in their facilities and fulfills orders on your behalf).
“I’ve talked to people who think they save money by fulfilling themselves. Their first question is always ‘is a 3PL worth the extra expense?’ We see outsourcing fulfillment as a cost-savings and believe it will save you money in the long run. 3PLs negotiate rates, give you back all the time you’d spend stuffing mailers, and reduce the errors you’d make messing up addresses.”
Gerard Ecker, Founder & CEO of Ocean & Co.
Starting from square one: fulfilling orders yourself
The typical starting point for launching an online store is to have the business owner fulfill orders themselves when sales are still slow and it only takes a few hours each week. Self-fulfillment can save money when you’re new to ecommerce.
How to manage order fulfillment yourself
Once you decide how and where you will store and manage inventory, you’ll need a system to begin the retail fulfillment process. Here is what the process entails.
1. Process the order
You’ll need a way to get notified each time a customer purchases from you. This should be a timely trigger so that there aren’t any delays in when your customer can expect to receive their delivery. When you fulfill orders yourself, you’ll need an order management strategy to ensure order accuracy and timeliness. If you’re not prepared to ship orders each day, don’t expect customers to s.
2. Pick the right packing materials
Using the right packing materials prevents you from making common packing mistakes such as using the wrong sized box, damaging the items, or overpaying for shipping. Outside of a protective box or poly mailer (and having various box sizes depending on common order combinations), you’ll potentially need packing peanuts, bubble wrap, crinkle paper, or some other form of dunnage to protect the items in the box. If you want custom branded boxes or eco-friendly packaging, you’ll want to make sure you have that lined up outside of your traditional packaging supplies.
3. Package your order
When you fulfill orders from home, you’ll need to retrieve the items, verify they are the correct products that were ordered, place all items into the box, add any supplementary packing materials, inserts, or packing slips, and tape the box or poly mailer shut. Packaging each order should help present the unboxing experience you want to offer to customers. However, it’s important to note that the more customization you apply to each order, the longer it will take to fulfill your orders.
4. Label and ship your order
When you’re running a small business, you will likely make daily trips to the post office or local UPS Store to send out the boxes you just packed. This will often require you having a car, printer, ink, and shipping account to purchase and print shipping labels. Once your business is larger, you can schedule pickups with carriers at an additional cos. When carriers get orders from you, you’re not waiting in line with hundreds of orders to ship at a time or spending time and money on transportation.
5. Track the package to its final destination
Your job isn’t done once you drop the package off at the post office. The final step of self-fulfillment is ensuring you’re providing ecommerce order tracking information to your customers including estimated arrival dates and updates if anything changes. If you don’t, expect a lot of inquiries from customers. You’ll also want to be prepared to handle online returns.
Logistical challenges with self-fulfillment
Ecommerce fulfillment is not the easiest part of running a business — especially if you’re fulfilling orders at home. Here are some of the top issues you should be prepared to face.
Scaling is difficult
If you’re running a successful ecommerce business, your order volume will increase. Your ability to handle these spikes will make or break your ability to reach the next level of business growth. In order to scale, especially as you ramp up for the holidays or if you’re a seasonal business, you will need to make some changes to be able to manage peak. Otherwise, be prepared for no walking space and a house full of inventory, angry customers, out-of-stock orders, and zero time for anything but packing boxes.
“Since partnering with ShipBob, we’ve been able to scale our business from $300,000 in sales per year to over $1.1 million due to infrastructure, technology, and scalability improvements.”
Ryan Casas, COO of iloveplum
Tracking orders is complex
Ecommerce shipping isn’t a perfect process. Shipments get stolen, packages lost, and delays happen due to weather and other external factors. While that’s part of life, your customers aren’t always so forgiving especially if they don’t have insight into these issues themselves. The more customers you acquire, the more questions you’ll get on the delivery status. Providing shipment tracking for customers means they can monitor it themselves. Even then, still be prepared to communicate the order status to customers who lost it in their email at any time.
Costly way of shipping
Small business shipping can be costly. Carriers use shipping zones, which measure the distance between a package’s point of origin and its destination, to calculate shipping rates. The higher the shipping zone, the more expensive a package will be to ship.
If you’re shipping to customers all over the country (or shipping internationally), you may be stuck with high costs. Self-fulfillment, unlike 3PLs that reduce shipping costs with multiple facilities and bulk discounts from working with major carriers to ship a high volume of orders daily, can be more expensive in the long-term. For example, ShipBob has locations all over the US, Canada, and the EU to offer more domestic shipping and reduce costs.
“Speeding up deliveries and keeping them affordable for customers is a top concern for us. With ShipBob, we can comfortably assign a shipping cost to each order by pinpointing the product weight and destination zip code. In comparison to shipping products to the US from Canada, which can be extremely variable in cost, fulfillment by ShipBob is much easier to estimate because we know the true fulfillment cost.”
Greg MacDonald, CEO & Founder of Bathorium
Takes time away from other company functions
When you fulfill orders from home, you have limited space, time, and resources to dedicate to other tasks. Your time is spent packing boxes, running to the post office, and organizing supplies — not on any activities that actually grow your business.
You’ll find you have less time to do the things that really only you can do like building partnerships, marketing your store, and improving your product line. You might be stuck at the order volume you’re at, because you’re just trying to keep up.
“ShipBob should be top of mind for ecommerce companies experiencing growth, so they can focus on brand and design instead of packing boxes.”
Carl Protsch, Co-Founder of FLEO Shorts
Ready to explore getting help from a professional fulfillment company? Check out ShipBob. Request a pricing quote below to speak with a fulfillment expert and see if we’re a good fit for your business.
When is it time to outsource fulfillment?
There is no one right time to outsource fulfillment, and the threshold and timing will vary company to company. You can always hire more people to pack boxes, lease a warehouse, and license a warehouse management system, but here’s why many people prefer to simplify their operation and work with a 3PL that’s a fulfillment expert.
1. Your company is expanding
As soon as your order volume increases, you are faced with a new pace of everything — you must replenish inventory more often, acquire a larger space to store it all, pack additional boxes, bring more shipments to the post office, as well as respond to more customers and deal with new responsibilities outside of logistics.
These changes often bring a new level of scalability that you likely can’t handle yourself. Partnering with a 3PL like ShipBob can provide the resources you need and even result in 291% growth year over year.
“We were already growing quickly when COVID began, then we completely sold out the first week of the pandemic. In three weeks, more than 34,000 customers were waitlisted on Touchland.com.
We even did pre-orders to try and meet demand. Between March and May 2020, we had up to 700 orders per day and sold 10,000 dispensers to industry-leading brands in those three months.
COVID changed the mentality of hand sanitation for most businesses, and this won’t go away after the pandemic.”
Andrea Lisbona, Founder & CEO of Touchland
2. Fulfillment is a big cost center
Calculating shipping costs can be very difficult and total fulfillment costs, very expensive. Between warehousing and purchasing equipment to hiring a workforce and paying for liability insurance, there are high operating and general logistics costs. In fact, logistics warehouse tenants can expect to see a 10% rate hike starting in 2021, due to a high demand for warehouse expansion and construction.
3PLs like ShipBob can help transform your fulfillment strategy into a revenue-driver for your business.
We’ve helped ecommerce brands reduce cart abandonment by 18%, increase AOV by 97%, and cut US shipping costs by 70%, all by enabling them to offer affordable 2-day shipping to compete with major retailers.
“The more fulfillment centers we have inventory in, the more potential shipping addresses we can offer this 2-day option to. And the more people that we offer the benefit of free 2-day shipping to, the more conversions we get. The cost of offering free 2-day shipping through ShipBob is more than covered and offset by all of the additional orders and revenue we’ve gotten as a result.”
Founder of My Calm Blanket
3. Inventory management is time-consuming
When you spend time on low dollar activities that aren’t generating revenue, such as counting, moving, and ordering inventory, you are losing money by not completing high dollar tasks. Moving away from self-fulfillment can free up your time and help you proactively replenish stock, provide real-time inventory tracking, and let you monitor changes in SKU performance over time so you can do the tasks that will grow your business.
For example, a 3PL automates inventory management processes and offers improved visibility, even when your products are in the 3PL’s fulfillment center. In fact, ShipBob helped an ecommerce brand save 120+ hours per week, much of which came from inventory-related tasks.
“One of the greatest features of ShipBob’s software is the inventory management functionality, which lets us track inventory change and velocity over time. Being able to monitor which styles are selling quickly helps us always keep our best sellers in stock. With Q4 madness for direct-to-consumer sales, we’ve been able to get through our heaviest seasons while staying ahead of production using ShipBob’s inventory forecasting tools — even as our order volume more than quadrupled in less than a year.”
Ryan Casas, COO of iloveplum
Self-fulfillment is often the most logical option for small ecommerce businesses before they hit an inflection point. The telltale sign you need to move away from self order fulfillment is that you can’t keep up with your order volume. When you’re at that point, it’s time to look into 3PLs.
Learn more about partnering with the right fulfillment partner in our free e-guide, “How to Choose a 3PL for Your Ecommerce Business.”
If your ecommerce store is powered by Shopify or Shopify Plus, you can use ShipBob to fulfill orders. Connect your store in a few clicks to sync inventory and orders, fulfill from multiple locations across the US, offer affordable 2-day shipping, have orders automatically sent to ShipBob to be fulfilled, and send shipping information back to customers. Learn why ShipBob’s fulfillment solution is the ideal fit for merchants that have a Shopify store.
There are several non-obvious costs that you’ll encounter when you fulfill orders yourself. These include forgoing bulk discounts that come with a high order volume, difficulties integrating with other systems, shipping from a single location, and the consequences of making your customers wait for non-competitive shipping. These small things add up and often go unaccounted for.
Once your business is so large that you are considering purchasing land, leasing a large ecommerce warehouse, or outsourcing fulfillment, there are a few things to think through. If you need to have complete control to offer a fully customizable experience, you may want to stick to self order fulfillment. However, a 3PL may be the right fit if:
- You don’t want to fund or plan for the necessary infrastructure and headcount.
- You want to leverage a professional’s expertise, partners, and volume.
- You need excellent IT capabilities.
- You prefer to take advantage of a large geographic footprint for affordable 2-day shipping.