When is it time to choose an e-Commerce fulfillment center?

Timing is essential for any business. Upscaling, transitioning online, the right partnerships should all occur at the most suitable time. And while business intuition may be a thing, being knowledgeable about modern trends and knowing when it’s the right time for outsourcing should be your top priority.

For online stores, one of the key points for successful upscaling is finding a fulfillment center that will handle all warehouse and shipping-connected affairs. So, what is the best time? Generally, the best time is now, and here’s why.

How fulfillment centers help upscale businesses?

The number of online shoppers is surging, according to 2020 statistics. If in 2014 there were only around 1.3 billion people who chose to buy online, last year, the number grew to 2.05 billion.

Retail e-commerce sales worldwide from 2014 to 2024 (in billion U.S. dollars)
Source: Statista.com

The increase in revenue is connected to three major reasons:

  • Increased trust in online stores due to familiarization with technology.
  • Improved comfort of digital shopping.
  • The raging coronavirus pandemic.

Even when the last reason becomes irrelevant (hopefully, soon), buyer’s habits won’t come back to what they were. So, upscaling your online shop is a good idea at any moment now.
A fulfillment center (also known as 3PL or third-party logistics) enables businesses to grow. It stores your products before shipping them, handles picking, packing, and cooperates with delivery services.
Off the top, here’s one example of great assistance from such a partnership. If you plan to sell a new type of product or create a line, such an outsourcing tactic will help the goods reach the market quicker. As a result, you’ll have a more immediate response to customer demands and your buyers will get their pre-ordered options faster.

But what is the best time for my online store to find a fulfillment center to partner with?

There’s no universal situation that indicates the need in 3PL. The cases vary business by business, depending on:

  • Strategy;
  • Scale;
  • Number of employees;
  • Number of products, etc.

Every merchant situation is unique and requires analysis prior to making a decision. However, there’s one reference point: expanding your company.
If you plan to enter a larger market, a fulfillment center will save a lot of money and time, because:

  • There are many things to focus on during the expansion.
    You have to think about marketing, promotion, optimizing performance, adding new products to the line, launching new projects, etc. By adding inventory concerns, you risk overloading.
  • Hiring a new team will be costly.
    Hiring a team for inventory management and renting a warehouse will result in large expenses.
  • The process is very time-consuming.
    You have to choose professionals to work with the inventory, which takes time. Establishing connections with shipping services, negotiating fees, etc. takes even more. Plus, you may not be ready for this volume of work or have limited experience in the field.
  • The pace goes up as you expand.
    With more attention to your shop, processing orders should be as quick as possible to gain buyers’ loyalty. Inventory replenishment becomes a more frequent process, picking and packing volume will need more hands and control. And losses in the quality of products, packaging, and customer experience are unacceptable at this point.

Basically, with 3PL, you’re buying someone’s time, experience, and effort to benefit your store.
To sum up, let’s say that as soon as your shop is prepared to jump to a new level, it’s time for a fulfillment center partnership.

How can a fulfillment center help my business?

There are many ways in which such a partner will help your store become bigger and enter new markets smoothly:

  • A fulfillment center has more authority than a single online store. Its representatives can negotiate cheaper rates from shipping companies. In the future, your business may offer free shipping to buyers, which will improve loyalty and bring more sales.
  • The partner makes it easier to manage returns. Some market niches like fashion have high return rates. And instead of processing every operation yourself, the order is shipped back to the warehouse. The main responsibility of the store, in this case, is to arrange a refund as quickly as possible.

Large e-commerce platforms like Shopify offer a Fulfillment Network for all stores run on the service. The Network offers lower shipping fees, quick deliveries, and applications that allow for streamlining your business.
An open-source Adobe-powered e-commerce platform called Magento offers tools for successful inventory management, partnering with experienced providers.
Another example of such cooperation is the WooCommerce WordPress plugin. It’s one of the easiest-to-use add-ons for your WordPress-based store, which offers order fulfillment assistance to businesses located in the United States.

Will my business upscale successfully with the first partnership?

At least 63% of eventual sales take origin on the Internet, according to Think with Google. This statistic alone should be a large enough hint. Look at all business sites and business blogs where professionals write about the importance of outsourcing. And as you find a fulfillment center to partner with, focus on your online presence. Be there when a potential buyer looks for the products you have in your arsenal.
In this case, you should succeed. But remember that your partnership will only be successful if you find a proper center.

What should I look for in fulfillment center partnerships?

There are 5 things to consider when looking for a 3PL service:

  1. Flexibility.
    This feature should be expressed in monthly payments and the ability to accommodate the growth of your store. If it’s a seasonal line that is relevant during the Christmas holidays, you don’t want to pay the same fee in July only for a warehouse as you do in December for the full range of services.
  2. Storage terms.
    There has to be a clear set of storage rules and fines you may have to pay. Throwing a bunch of goods in rubbish isn’t an option. But it’s also not beneficial to pay a large fee for “overstaying your visit”. The terms should be suitable for both parties.
  3. Tech match.
    The center should be able to integrate with your software and automation methods. Gladly, many companies approach every business individually, which makes outsourcing smooth and speedy.
  4. Experience.
    Both the center and staff handling your inventory must be experienced and dependable. It’s easy to check using independent review platforms online. People are eager to post full reviews if something went wrong. It’s also wise to ask for information on certifications of the warehouses, staff, representatives, etc. Some organizations that should provide helpful information are the International Warehouse Logistics Association (IWLA) and United Kingdom Warehousing Association (UKWA).
  5. Contracts.
    You can find an organization that doesn’t lock their clients with lengthy contracts in the best case. You should be able to withdraw anytime without having to pay fines or going to court. Working without contacts is a sign of the 3PL service’s credibility and reputation.
You can add more specific criteria depending on the store’s type, what products you sell, and what additional services you may require.

Conclusion

Fulfillment centers are an essential partnership opportunity for online stores. They handle everything connected to warehouses and shipping. This gives you more free time to focus on business strategy, marketing analysis, promotion, etc.
There are multiple benefits to such cooperation, including fast, cheap shipping, professional handling of your inventory, and processing returns. But you have to be sure the company is suitable for your business in terms of software, speed, and policies.
According to statistics and obvious proof we see outside, the pandemic caused a huge impact on brick-and-mortar shops. It’s time for online businesses to take over, as more than 25% of people on the planet buy on the Web now. The situation creates a highly competitive yet pleasant environment for growth.

 

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Author

David Dorr, Head of eCommerce

David is the Head of e-Commerce at CodeCoda where he is responsible to lead several teams of eCommerce specialists. In his previous role as a data scientist for London Metropolitan Police, he was developing deep learning NLP algorithms as part of the Crime Prediction initiative. He then switched over to combine AI with e-Commerce.
He received a B.Sc in Physics from the University of Surrey, Guildford in 1996. With this scientific background, he switched relatively early in his life towards Neural Networks and e-Commerce and has ever since been fascinated with what AI and Machine Learning can do for Online Commerce.