The fulfillment center is one of the most vital components when running an online retail business. It’s where you will receive inventory for your business and ship orders to customers. If you don’t have a solution to handle this efficiently and cost-effectively, your business can quickly spiral out of control.
Online sales accounted for approximately 14% of the total retail sales in the US in 2020. However, it is anticipated to reach 22% by 2025. Traditional offline stores have also started catching up with their online counterparts, with Target, Walmart and Costco ranked as the fastest-growing online retail businesses in recent times.
While everyone is eyeing to be online, having a strong fulfillment strategy is necessary for every retail business to stand alongside its competition and grow. Here are a few reasons why fulfillment centers are considered the backbone of every online retail business:
It’s the Place Where Your Merchandise Is Stored
Your fulfillment center is where your inventory is stored. It’s a place your customers can’t see, but you need it to store products when they’re in stock and ship them out when an order comes in.
You can use it to store products that you sell online. On the contrary, some fulfillment centers offer drop-shipping services if you don’t want inventory sitting around waiting for orders to come in. Instead, they take care of storing and shipping the product from their warehouses directly to your customer.
Every Online Business Needs Inventory Management
With the rise of e-commerce and dropshipping, inventory management has become increasingly necessary. If you’re unfamiliar with inventory, it’s simply the product you have in stock. When your store sells out of a product, or if you need to restock it due to high demand, you’ll need to know how much inventory you have on hand.
There are many reasons why every online business needs inventory management:
- It allows you to measure your success.
- It helps you improve your sales funnel.
- It lets you plan for future growth or shrinkage.
- It keeps track of all your sales channels in one place to see where most of your traffic is coming from and adjusts accordingly.
When you have an inventory management system, you can track the exact number of items in stock and how many are waiting to be shipped out. It helps you keep up with your sales and plan what products will sell next.
An ideal fulfillment center ensures your inventory management system is working correctly. It should also allow users to change their orders as needed. Thus, if a customer wants to change their order from a red shirt to a blue shirt, they can do so at any time before receiving their package. It saves both time and money for both parties involved.
A Fulfillment Center Takes Care of Logistics, Shipping, and Returns
Logistics refers to the process of moving goods from one place to another. For example, fulfillment centers help retailers ship their products through an efficient process that includes scanning and packaging items in a warehouse before they are sent out to customers.
Shipping refers to getting goods from a warehouse or storage building where they’re stored before being sold via e-commerce platforms. Then, they are delivered back to consumers’ hands who bought them online using those platforms.
Returns are when customers send items back because they’re unhappy with them. For example, they bought something too small after looking at its measurements online but didn’t realize how small it would be until after receiving it.
According to Statista, 49% of online retail customers in the US have returned at least one product they have purchased online in the last 12 months. Hence, it is important to ensure that your fulfillment center has an ideal return policy to cater to these high returns.
Order Fulfillment is a Time-Sensitive Process That Requires Accuracy
The order fulfillment process is complex and involves multiple steps, from the initial processing of an order to its delivery to your customer’s door. Therefore, your business will need a fulfillment center that can handle the complexity of this process, as well as its volume.
In addition to being able to handle all aspects of order fulfillment, your chosen warehouse must have ample space for storing the inventory needed for fulfilling orders. It should also have sufficient manpower in place so that shipping times are not slowed down by a lack of personnel needed for packing or sorting packages outbound for delivery.
Fulfillment Software Streamlines the Process
The software you use to manage your inventory, orders, returns, and logistics can also be used to streamline the way you handle customer service. The best fulfillment centers will use software that lets you:
- Manage inventory and product information so that it’s always up-to-date.
- Track inventory levels in real-time so you never run out of stock.
- Automatically order new stock when an item runs low regularly, for example, every week. It is called automatic reordering.
- Estimate shipping times for each product based on current demand and historical data about shipping rates for similar items to arrive at the most accurate estimate possible.
A Good Fulfillment Center Will Increase Sales While Reducing Costs
Outsourcing fulfillment is the best way to maximize your online retail business’s efficiency and profitability. Here are just a few ways that a good fulfillment center can help:
- Reduce costs by outsourcing warehouse management tasks and operations to an experienced third party. Fulfillment centers can reduce your cost per unit by automating many of the manual processes involved with managing inventory, shipping, returns management, customer service, and more.
- Increase sales through fast order processing, accurate data capture, and streamlined shipping options. A good fulfillment center will streamline all aspects of picking orders, putting them into boxes or envelopes, and labeling them correctly for easy identification. They do this to ensure that it reaches customers in as little time as possible after placing an order.
- Fast and hassle-free delivery to customers. A recent study shows that 33% of customers expect their deliveries to be fast, while 42% of online shoppers expect their purchases to reach them within two days. These figures are making e-retail businesses work hard to make their supply chain fast to satisfy their customer’s faster delivery expectations.
Every Retail Business Needs a Fulfillment Center
Your e-commerce business needs a fulfillment center to manage inventory, ship orders, and handle returns promptly and efficiently.
A fulfillment center is a necessity for e-commerce businesses. They’re where your merchandise is stored until it’s ready to be shipped out to customers or returned. A fulfillment center takes care of logistics, shipping, and returns so you can focus on doing what you do best: selling products.
Even if you’re not a retailer but instead sell digital goods through your website or app, there are still advantages to using a fulfillment center. First, it helps run efficiently with real-time tracking updates and inventory management. It lets you know when products will arrive at their destination or back into stock.
If you’re considering starting an online retail business, it’s important to consider the fulfillment process. A fulfillment center will help ensure that your inventory is stored and shipped promptly and reduce costs for your business.
You should also consider using software designed specifically for e-commerce order management or logistics automation. This system streamlines all aspects of order fulfillment, ensuring that nothing falls through the cracks.