Retail distribution is the process of moving products from manufacturers or producers to the final customers for consumption or use.

Distribution in retail involves different individuals and organizations, including producers, retailers, and wholesalers. Many entities join hands to deliver goods to the end consumers efficiently using suitable distribution strategies.

Depending on your role in the supply chain, you can utilize an array of distribution channels to extend the reach of your products and increase sales. Let’s take a look at the most common ones below.

Direct to consumer

Manufacturers or producers can sell their products directly to the final buyers via brick-and-mortar or eCommerce stores. Without any intermediaries involved, this channel gives producers complete control of their distribution activities and customer experience. Besides, it enables businesses to lower costs for higher profits and increase customer trust.

Directly distributing products to customers also means companies must build and run their own sales teams, online facilities, and consumer marketing infrastructure to market and sell the products. This retail distribution channel also makes it more difficult for businesses to widen their reach across geographical areas and market segments.

Uniqlo, a popular clothing brand from Japan, is a typical case study for the use of direct-to-consumer channels. The company manufactures their clothes and sells them directly to customers via their online websites and offline stores in different countries like the U.S., Canada, Australia, France, and Vietnam.

Retailers

Outside of directly selling to customers, companies can establish relationships with other retail stores to sell their items. Retailers like supermarkets, department stores, or specialty stores can purchase products from manufacturers or other intermediaries and deliver them to the end consumers through their physical shops and websites.

Producers or manufacturers can avail themselves of the retailers’ large customer base to generate brand awareness for new product lines. They also often team up with retailers to implement effective marketing strategies, from product placement to sales promotions to appeal to more customers, thus boosting sales.

Speaking of retailers, Walmart is one of the most prominent names. Founded in 1962, the U.S. retailer operates chains of supercenters, department and discount stores to offer the customers a wide variety of products from abundant brands in grocery, electronics, home furniture, appliances, clothing, accessories, and more like Reynolds, Samsung, Reebok, and GAP Home.

Wholesalers

Wholesalers act as a conduit between manufacturers and retailers. They mostly buy goods from manufacturers or distributors, then typically resell them to retail stores in large quantities at lower prices to earn a profit. In some cases, wholesalers sell directly to the masses through their warehouses and online stores.

As a popular retail distribution channel, wholesalers significantly benefit both manufacturers and customers. This channel helps manufacturing companies reach more customers without additional costs for lease or payroll, reduce warehousing fees, and update market information. Besides, wholesalers also offer product assortments that suit customers’ needs and help them save considerably.

Sysco is a famous American company that wholesales products like fresh produce, seafood, meat, and imported foods, together with food service equipment and supplies. The company purchases products from their network of growers, ranchers, and producers, and distributes them to restaurants, educational or healthcare facilities, and other establishments.

Distributors

Retail distributors represent businesses authorized to sell a manufacturer’s products to wholesalers or retailers. Taking on the role of sales representatives, distributors focus on executing promotional activities to boost sales and managing distribution logistics on behalf of the manufacturer.

A manufacturer can partner with distributors in different locations and leverage their existing retail networks to expand the market coverage to potential customers. Moreover, having a retail distribution center near your target customers accelerates delivery and decreases transportation costs. These supply chain entities also minimize the storing fees of the manufacturer as they often store products themselves.

MSC Industrial Supply is a distributor specializing in providing their customers with a wide range of metalworking and industrial products like saw blades, threading, safety glasses, and hand tools. MSC sources their products from leading manufacturers for resale and offers additional services, including on-site support and vendor-managed inventory.

Choosing distribution channels for your business matters as they affect different aspects of your business like pricing and promotions. Whatever channels you choose, it’s worth looking into the following factors beforehand.

Target markets

It’s critical to define your target markets with details like preferences, behaviors, and locations before choosing the retail channels of distribution. By understanding clearly how and where your target customers prefer to purchase, you can choose the best channels that allow you to access your target segments easily and serve them well.

For instance, if you just want to zero in on a small segment of consumers who concentrate on specific locations, focused and direct channels should be your choice. In contrast, a large and diverse customer base market requires distribution channels that can access more varied consumers across multiple locations like wholesalers or retailers.

Product types

The characteristics of your products like perishability, size, weight, and fragility determine which store distribution channels you should take.

For example, fresh produce like vegetables and meat needs to reach customers quickly, so direct channels are the way to go as they reduce delays and handling while ensuring product quality and freshness. In the same way, it’s also better to use a short distribution channel to transport bulky and fragile items to minimize damage.

On the other hand, merchandise like apparel and clothing might better employ retailers as these often provide broader product assortments for customers with extra services, thus increasing sales opportunities.

Warehouse and logistics capabilities

Your internal capabilities to store inventory, fulfill orders, and manage your supply chain help you define which tasks to process in house and those that need support from external parties. On that basis, you can evaluate what values different retail marketing channels might bring to your business.

For example, adopting direct-to-customer channels means you have to handle the logistics of distribution yourself, from stocking sufficient inventory to managing the transportation of products to customers. On the contrary, channels such as retailers can share the storage burden with your business while assisting you with fast delivery to customers.

There are 3 types of distribution strategies at your disposal, which are intensive, selective, and exclusive distribution.

Intensive distribution

The intensive distribution strategy prioritizes the maximum exposure of your products to every potential customer wherever they want them. This approach aims to engulf the market with your products using all available retail channels, which means displaying them in as many retail locations as possible, thus improving brand awareness and attracting new customers.

This retail distribution strategy is ideal for inexpensive and frequently purchased products like soap, toothpaste, toilet paper, or other consumer goods. With these products, buyers possibly don’t mind trying a new brand in case their preferred items are not available.

For example, the Coca-Cola Company uses intensive distribution to sell Cokes in many outlets, like supermarkets, vending machines, or convenience stores. This strategy makes Cokes present almost everywhere and customers can easily buy them whenever they need.

Selective distribution

Businesses using a selective distribution strategy only pick a handful of distributors and retailers to sell their products based on pre-set criteria like locations and service capabilities. Selective distribution works best for products targeting specific customer segments who have no trouble shopping around to get their preferred items.

Selective distribution in retail enables you to work closely with your distributors to better manage customer experience, improve selling efforts, and enhance your brand image. Some brands in consumer electronics, furniture, and home appliances are using this strategy to access more customers for improved sales.

For instance, Sony puts their TVs on sale in several specialty outlets like Walmart, Best Buy, and Circuit City. If a person wants to buy a Sony TV, he or she’ll need to reach these stores to get their desired item.

Exclusive distribution

Exclusive distribution is dominant in the luxury sector where brands wish to maintain a sense of exclusivity for their high-end products. This strategy limits the number of distribution channels involved in delivering their products to the customers. Only a few distributors or retailers can exclusively sell these products in certain areas or these items are only accessible in the suppliers’ own physical or online stores.

The exclusive distribution strategy attempts to reach customers who are willing to pay high prices to get upscale items. Using this store distribution method allows you to closely supervise the sales process to ensure top-notch customer services and increase revenue margins while maintaining your distinctive positioning.

A case in point of exclusive distribution is how Chanel distributes their products. Chanel’s products are exclusively sold in their boutiques and high-end stores in large cities like New York, Boston, or Tokyo.

Opting for a workable distribution strategy is of decisive importance as it can help you attain your business goals and get ahead of your competitors. Therefore, make sure you make the following considerations before choosing the one that best suits your business needs.

Consider your products

Each product type suits a different distribution strategy. You should consider the consumption frequency and prices of your products to pick the most suitable approach.

In particular, if your products have low prices and are purchased routinely by most users, then intensive distribution should work well. For more specialized products with moderate prices that need additional consideration before purchasing like shoes or appliances, selective distribution is the most suitable method. The best solution to high-priced products that need lots of thought and comparison before buying like cars or luxurious bags is the exclusive distribution strategy, which ensures your customers get the best customer services and consultancy.

Define your target customers

Understanding who your target customers are and how they regularly shop for your products is crucial in determining the best retail distribution strategy.

If you target the masses who buy your products anywhere at their convenience, you should go with intensive distribution. This strategy enhances your brand reach by leveraging the large customer base of intermediaries like retailers. If aiming at a narrower segment that often seeks prestigious places to purchase their desired items, your best bet is to utilize selective distribution to increase your brand credibility. Exclusive distribution will be the best option if you want to approach affluent customers who wish to possess upmarket products.

Analyze your business goals

What your business needs at present or in the near future is another factor worth considering. You’d better base your choice of retail distribution strategies on your goals so that the methods and channels you use can go a long way towards your final objectives. Defining clearly whether you’re trying to strengthen your brand awareness, increase profit margins, acquire new customers, or bolster customer loyalty sheds light on the method you should take.

For instance, while intensive distribution allows you to spread your name to a larger audience, selective distribution gives you more control over your sales process, and brand values, thus elevating customer experience and winning their loyalty.

Below we suggest the most feasible ways to help you improve your retail distribution for greater efficiency and revenue. Let’s dive in!

Build strong relationships with suppliers and distributors

Developing good relationships with suppliers and distributors facilitates productive collaboration among distribution entities to deliver great value to the end buyers. Maintaining strong connections with suppliers is beneficial as it ensures an undisrupted supply of merchandise at favorable prices. That said, the procurement process becomes much easier, especially when you need to timely restock inventory or look for new products for more revenue.

Meanwhile, a network of distributors not only helps you carry your products but also supports marketing activities to attract customers and encourage sales. Close partnerships with distributors keep all sides informed of important changes and follow the shared guidelines to preserve brand values and deliver consistent customer experience.

Inventory and supply chain management

Having appropriate technologies in place to track orders, manage inventory, and oversee the distribution process helps optimize your strategy. At its core, the more effectively you manage your supply chain, the more successfully your retail distribution runs.

It’s ideal to choose the tech solutions that give you real-time updates on your product quantity across retail distribution centers and set up low-stock thresholds to inform timely replenishments. Besides, efficient tools can generate purchase orders based on demand forecasts and closely monitor all of your suppliers and purchasing activities centrally. Choosing suitable retail software helps streamline many processes and reduce manual work, thus improving distribution efficiency.

A comprehensive retail management software can become your right-hand man in operating an effective supply chain. It centralizes inventory, warehouse, and supplier management in one place. The tool helps you track your stocks in real time, oversee the entire inventory movement, from purchasing to sales, and manage all suppliers easily.

Data-driven decision making

It’s necessary to constantly audit and adjust your distribution strategy to keep up with market changes. Any decision to improve your plans should be grounded on up-to-date data from multiple sources. To facilitate the decision-making process, you can gather internal data from your functional POS systems or do some market research to define what needs altering.

For example, your POS can provide detailed information about your inventory, including what products sell well, what sits still in the warehouse, and the stock levels to guide inventory planning and restocking. In addition, you can track sales from different channels and shops to see where most revenue comes from and which channel needs more investment.

The POS data also gives you deep insights into customers’ buying habits and preferences. On that basis, you can tweak your distribution strategy and marketing activities to get more customers.

What is a retail distributor?

A retail distributor is an entity that helps promote and distribute a manufacturer’s products to wholesalers and retailers in specific locations.

What is the retailer method of distribution?

The retailer method of distribution uses retailers as a distribution channel to reach potential customers for revenue increase.

What is an example of retailer distribution?

Gilette, a famous brand of personal care products for men like razors, shave gel, and deodorants, sells their products through retailers like convenience stores, supermarkets, and health care stores. Some major retailers selling Gilette’s items are Walmart, Walgreens, and Amazon, to name a few.

What do retailers do in distribution?

Retailers buy products from manufacturers or distributors and then resell them to the end consumers for profit. Moreover, retailers can also collaborate with producers to promote their products and provide additional services for shoppers.

What are the retail distribution levels?

Retail distribution levels are the number of intermediaries engaged in retail distribution channels to bring goods from manufacturers closer to the end customers. With that said, one-level retail distribution means the goods move from producers to the end customers only through retailers.

Fulfillment costs are the sum of all expenses for receiving merchandise, storing inventory, processing, and shipping orders. The costs also involve fees for handling returns and exchanges. If you employ a 3rd-party logistics service provider (3PL), you’ll get the fulfillment prices which include onboarding and account management fees.

Fulfillment costs vary by order numbers, product types, packing materials, fulfillment locations, and shipping costs. The costs can change based on whether you do self-fulfillment or entrust another company with the tasks.

A fulfillment cost comprises different components. To help you get a clearer view of how much you might have to pay for processing orders, here we break down the costs for 2 major fulfillment strategies: doing self-fulfillment and using a 3rd-party logistics provider. 

In-house fulfillment costs

Below are the fees incurred if you execute fulfillment in house.

Inbound shipping costs

Transporting goods from your suppliers to your fulfillment locations is an expense you should take into account. Inbound shipping fee depends on whether your stock is shipped via air, sea, or freight with any import-export taxes.

Inventory storage costs

Another substantial order fulfillment cost is the storage fees. Businesses that do self-fulfillment often make use of their available store space to stock inventory. However, when the demands increase and entail the need to stock more products, retailers need to rent a storage unit or warehouse whose costs rely on the preferred locations and spatial needs.

Labor costs

If you can’t dedicate much of your time to fulfilling orders in house, you might need to hire extra staff to help you manage merchandise, track, and fulfill orders. Depending on the scale of your operation and the quantity of products you’re selling, this labor can present a significant expense.

Packaging costs

Your packing needs and product types determine the cost of packaging. Packing small and lightweight goods won’t cost much. On the contrary, large or fragile items in need of more specialty or customized packaging will drive up the order fulfillment cost.

Outbound shipping costs

Shipping costs constitute the largest share of fulfillment costs. The type of products you sell, the package size, weight, distance to destination, and delivery speed can decide how much you need to pay. You can deliver orders yourself or forward this part to a shipping service provider.

Software and tools

To streamline your in-house fulfillment operations, you need to invest in appropriate software systems and tools that can automate many repetitive tasks and reduce errors. For example, an inventory management system will help you manage inventory in real time while order management enables you to oversee all order fulfillment processes.

3PL fulfillment fee

3PL fulfillment pricing varies by providers, order volumes, pricing models, and other additional services. Normally, the outsourced fulfillment costs often consist of the following.

Onboarding costs

To start using a 3rd-party fulfillment service, you may need to pay an amount of onboarding fee. The 3PL will set up your account and integrate their technologies with your systems to track and fulfill orders. This initial setup fee is often a one-time payment or charged based on your business type, order quantity, or inventory categories.

Inbound shipping costs

Inbound shipping is an incurred cost for shipping products from your warehouses or suppliers to the 3PL’s fulfillment centers, which depends on whether the suppliers transport your goods by air, sea, or freight.

Receiving costs

You also have to pay receiving costs for 3PLs to process your inventory shipped to their facility. 3PL providers will receive, inspect your merchandise for damages, check the quantity, and scan your products to their inventory software before storing. Most of these fulfillment fees get charged by the hour, per item, or per unit.

Inventory storage costs

The storage expenses are often calculated based on the space your products occupy. If your products need special storage techniques or equipment like refrigeration or longer-term storage, you’re supposed to pay extra fees. 3PL companies can charge fees per pallet or based on the total area your inventory takes up.

Pick and pack fees

Once 3PLs receive your customers’ orders, their staff will collect the items from their storage locations, and pack them for shipment. Some fulfillment companies charge per item while others may offer bulk rates.

Box and packaging fees

3PL providers package your products safely and appropriately using items like shipping labels, tape, and boxes. 3PL companies often set the fees for packaging materials based on the dimensions and weight of the package. Custom-branded packaging materials also cost more than standard packaging offered by the provider.

Custom labeling and order insert fees

Another cost of fulfillment services is for inserting additional documents such as promotional brochures into each package. Besides, if you want some customizations for your orders like gift wrapping, you’ll need to pay higher fees.

Kitting fees

Order fulfillment pricing also includes the fees for bundling many products to sell or attaching free items to each order. You also have to bear this cost if 3PLs assemble items before shipment. The cost can be charged per hour or by the item.

Outbound shipping costs

The fees for shipping orders to your customers are an indispensable part of any eCommerce fulfillment pricing. The outbound shipping cost varies based on the size and weight of the package, the shipping speed, such as two-day delivery, freight or air, and other factors. Many 3PLs help save a great deal as they can get bulk discounts from shipping carriers.

Returns processing and restocking fees

Processing returns adds another fee to the total fulfillment center pricing. A 3PL company can assist you in handling return requests. The service providers examine the returned items for damage and decide whether to restock or dispose of the item.

Account management costs

Account management fees are another component of fulfillment center costs as 3PL assists your business with overall operations and account management. This expense covers the administrative costs of managing your account, including handling customer service calls and other incidentals.

Comparison of 3PL order fulfillment pricing models

Each 3PL comes with their own fulfillment services pricing. The table below displays the most common pricing models used by the service providers.

There are 3 common methods to calculate the fulfillment fee for your business, including cost per order, cost per box, and cost as a percentage of sales. All of these measurements use total order expenses to estimate the cost. The total order expenses are the sum of all the fees you have to pay for order fulfillment in a given period of time.

If you outsource the fulfillment, you should refer to your preferred 3PL companies and use their fulfillment rates for more accurate calculations. Some 3PLs provide their fulfillment cost calculator to help with the fee estimations.
For your convenience, we’ve summarized the costs of 3PL fulfillment and self-fulfillment as below.

Cost per order

Cost per order is one of the most common ways to measure how much you spend on every order. To get the average fulfillment cost per order, you need to collect data on total order expenses and order volume in a given period of time, and then apply this formula.

Cost per order = total order expenses/ total orders received

Cost per box

You can examine fulfillment spending in a more detailed way with cost per box. After collecting the order expenses and the number of boxes in a specific time frame, you can use the following formula to get the cost per box. This method is extremely useful for businesses that dispatch orders with multiple boxes at once.

Cost per box = total order expenses/ total boxes sent

Cost as a percentage of sales

Cost as a percentage of sales gives you a look into how much of total revenues fulfillment costs account for. The fulfillment expenses vary considerably by your business size and net sales over a specific period. The fulfillment cost as a percentage of sales can be calculated by using the below formula.

Cost as a percentage of sales = (total order expenses/ net sales) x 100

Minimizing fulfillment costs is critical to your business regardless of your fulfillment strategies. To find out what works for your retailing, let’s look at the below recommendations for fulfillment cost savings.

Cut down self-fulfillment costs

The main principle for cutting down on self-fulfillment costs is minimizing errors and improving fulfillment efficiency.

It’s critical to employ cutting-edge technologies that assist you in managing inventory and orders effectively. In this way, you can track inventory for timely restocks, and reduce the number of errors and inaccuracies during the fulfillment process, which can dissatisfy your customers and generate extra expenses for handling. Suitable software and tools also automate many processes, thus lowering labor costs.

To boost fulfillment efficiency, you’d better train your staff to effectively perform different fulfillment tasks, from overseeing products to picking, packing, and shipping. In addition, the storage facility layout should ease fulfillment activities like picking and packing orders and other internal processes, which can help decrease pick and pack fulfillment costs.

Offering your customers omnichannel fulfillment options like click and collect or curbside pickup is a feasible way to save fulfillment expenses. For example, allowing your customers to pick up their orders in store eliminates the delivery costs. Moreover, with store pickup, your customers can choose a preferred time to collect their items, thus increasing their satisfaction with your business.

4 Factors to consider to choose 3PL fulfillment for lower costs

If you want to partner with a 3PL to process orders, consider the following factors to choose the most suitable one.

Software integration

You should check whether a 3PL’s technologies easily integrate with your existing systems, including order and inventory management, online marketplaces, and other systems. The easy and smooth integration removes technology conflicts and facilitates the synchronization of order and inventory data across systems. Therefore, 3PL companies can ensure on-time and accurate order delivery and keep you informed of inventory levels, which potentially saves you a significant amount of money that might be needed to handle order delays and errors.

It’s also worth looking at the scalability of the 3PLs’ systems. A scalable system can adapt to the rising demands and future business growth, thus helping save the time and costs spent on finding a new 3PL partner.

Strategic location

Choosing a 3rd-party provider with locations strategically placed near your target customers brings down the total fulfillment expense. With fulfillment centers close to the shipping destinations, 3PL companies shorten the distance your products need to reach your customers. As a result, the delivery speed increases, and the transportation costs diminish.

Besides, if your business covers a wide area or plans to expand in the future, it’s beneficial to opt for a 3PL with an extensive network of distribution centers or warehouses. Not only does it help decrease shipping time and expenses but also minimizes the potential costs for establishing a partnership with a new service provider.

Industry expertise

A 3PL with insights and expertise in your business industry can provide excellent services and additional cost savings. These service providers accumulate both knowledge and hands-on experience in your industry, so they have a good grasp of the best practices, opportunities, and challenges your business faces regarding fulfilling customer orders. On that basis, they can help deal with the difficulties effectively and accommodate to market changes and trends.

In addition, 3PLs with deep industry expertise know very well how to store, pick, pack, and ship your products optimally and properly to avoid damages to the maximum and minimize fulfillment fees.

Negotiating power

What makes a 3PL a good choice for your business is their relationships with numerous shipping carriers. If you want to keep your fulfillment costs down even when the order quantity mounts, it’s best to look for a service provider that can negotiate favorable rates for shipping like volume discounts. Besides, a 3PL partnering with numerous shipping services also gives you more freedom to pick the most suitable and cost-effective delivery options to optimize fulfillment costs.

Fulfilling orders in house is a good way to help retailers save costs in the face of market ups and downs. With a good understanding of the challenges and difficulties facing retailers, Magestore develops an array of solutions to optimize in-house fulfillment operations for efficiency and accuracy, thus enabling considerable cost savings.

Magestore offers a retail management PWA that puts complete control of order fulfillment activities into your hands with many noticeable features.

• Centralize online and offline orders in a single system
• Check stocks across locations to effectively route orders for fulfillment
• Sync inventory and orders between the back office, eCommerce website, marketplaces, and POS in real time
• Track stock levels and supervise the whole process of inventory movement
• Inform stock replenishment by setting up a low-stock threshold
• Forecast demands to create purchase orders
• Accelerate order processing with a simple pick-pack-ship workflow
• Integrate well with 3rd-party shipping carriers like UPS, USPS, FedEx, and DHL

Using Magestore POS at your offline stores allows you to offer your customers more fulfillment options with store pickup, shipping from store, buying in store and shipping to home, or buying online and paying in-store. All order data will be synced and centralized in one system for your easy tracking. Magestore’s solutions also support dropshipping and return management.

The best way to know how Magestore can simplify your self-fulfillment operations, discuss with our experts now to devise the best solution to your business requirements.

What is the fulfillment expense ratio?

The fulfillment expense ratio, also known as the fulfillment costs as a percentage of sales, indicates the proportion of net sales that the fulfillment costs make up. This metric shows you how much of your revenue you spend on fulfilling orders to make suitable adjustments. You can use the following formula to calculate the fulfillment expense ratio:

Cost as a percentage of sales = (total order expenses/ net sales) x 100

How much do fulfillment services cost?

Fulfillment center pricing varies by company. Fulfillment service providers charge different rates for receiving products, storing inventory, picking, packing, shipping, and handling returns. The actual expenses depend on some factors, including the inventory types and levels, order volumes, and order processing speed.

What is a fulfillment and service fee?

Fulfillment and service fees are charges and expenses you pay to 3rd-party logistics companies so they can take care of order fulfillment activities on your behalf. This fee often includes receiving, storing, picking, packing, and shipping costs.

A dark shop, also called a dark supermarket or a dotcom center is a physical retail distribution space or warehouse that exclusively caters to online order fulfillment. Unlike traditional stores that intend to attract walk-in consumers, dark shops are closed to the public and only address customers’ online orders generated from websites, mobile apps, third-party aggregators, or other online channels. They serve as distribution hubs for product inventory, package, picking, shipping, and everything dedicated explicitly to online order fulfillment.

In a simple explanation, the dark store model operates like a warehouse concept, featuring layouts optimized for picking, packing, and delivering. 

When a customer places items online, the order will proceed to dark store staff, and the fulfillment will occur in the dark shop. Based on the incoming requirements, the store pickers, available around the clock in the dark shop, will pick and pack the curated items. The order will then be directly delivered to the customer’s address. Customers can also select and buy things online and arrive in-store for pickup.

The first-ever dark shop was launched in 2009 by Tesco, a supermarket chain in the U.K. This innovative retail model quickly spread worldwide as it required low costs to set up and fulfill online orders to leverage the power of online purchase. 

The surge in online shopping during the COVID-19 pandemic has fueled the significant presence of the model, encouraging more retailers of all sizes to jump onto the bandwagon. Dark grocery stores and dark clothing stores are some examples of dark store models.

The key reason why the dark supermarkets stay popular today is the rapid growth of eCommerce. By 2027, 23% of total retail sales will happen online. The rise of online shopping is significantly shaping customer shopping habits with the preference for ease, flexibility, and prompt delivery. As a result, building a dark shop is necessary for retailers to better prepare for the future.

One more reason for the model’s popularity is that establishing a dark shop is not a headache for retailers and saves them effort and costs compared to building a fulfillment center. Retailers can easily repurpose existing retail space or physical stores with low foot traffic to create new dark shops for fulfillment.

Dark store delivery helps enhance customer experience. 

41% of consumers expect their online orders to be delivered within 24 hours. Dark stores can accelerate the delivery speed because:

• They are equipped with automation technologies for order handling. Therefore, it takes only minutes to prepare items and hand them over to shippers.
• They are located near the end customers. Thus, you can deliver items to your customers on the same day.
• They are set aside for fulfilling online orders which allow customers to choose their preferred pickup time to avoid waiting lines and speed up the checkout process.

In today’s competitive eCommerce landscape, fast delivery is crucial for your success. 

Reduce costs 

Retailers can minimize operating costs since they don’t have to pay for aesthetic elements, inventory display and fixtures, in-store marketing, and other expenses related to operating physical shops. There’s no need to invest in an appealing or large-spacing storefront to attract customers. Moreover, running dark stores can save you 23% on delivery costs.

Improve inventory management 

Dark retail stores apply sophisticated inventory management systems that ensure fast speed and accuracy in real-time tracking, sorting, and picking processes. Thus, they enhance inventory management efficiency and reduce errors throughout the order fulfillment process. 

Flexibility and scalability 

Concepts like dark stores equip retailers with the agility and flexibility to quickly adapt to customer demands, market trends, and seasonal fluctuations. Without the constraints of physical stores, retailers can update more products, offering more options while managing their inventory easily. 

Along with numerous benefits, there are some challenges to take into account when establishing a dark store strategy and operating it successfully. 

Initial setup costs 

Setting up a dark shop requires significant initial investment in some aspects, including infrastructure, facilities, advanced technology, and staff training. Retailers should carefully elaborate on the cost-benefit analysis when creating a dark store strategy to ensure a return on investment. 

Operational complexity 

A dark shop “wears many hats” to address a vast number of online orders meticulously, from inventory management to order fulfillment and shipping. A dark store can’t handle these multitasks with simple infrastructure that lacks digitization and automation.

Workforce management 

Besides technology solutions, skillful employees are the backbone of a dark shop. However, it’s challenging to train and manage a workforce that’s capable of handling various tasks, including picking, packing, tracking, shipping, etc. This poses challenges on how to ensure their productivity and satisfaction to adapt to such a huge order volume.  

Dark store fulfillment, from when an order is placed online until it’s ready to deliver, may occur in minutes, following a smooth and automatic dark store management process.

• Order receiving: Once an order is placed through a website, app, or online platform, it’s recorded in the centralized management system and then electronically assigned to the staff. 
• Order picking: The pickers will collect the items based on the order details. Unlike traditional stores, where pickers have to collect items around the aisles with trolleys, the dark store has pickup areas designed for optimal picking. Items are segregated by order and have barcodes for the pickers to scan. The pickers, equipped with handheld devices or wearable technology, will gather the items from the picking areas for packing.
• Order packing: Once the items are gathered, they’re packed and sellotaped in suitable packing materials to ensure a secure and presentable package, especially for delicate or fragile goods. Each package is labeled with the order details, including the receiver’s address, phone number, or any relevant information, and ready for dispatch.
• Delivery or pickup: The packed orders are then dispatched for shipping through the in-house delivery team or logistics partners. The standard delivery channels include courier companies, postal services, and fleets. 

Store-to-door delivery is the most common method customers prefer as it’s fast, convenient, and contactless. The order is directly shipped to customers’ doorsteps. 

Customers also have the option to pick up items themselves at the dedicated pickup points, usually near or inside the store. Another service is curbside pickup. This way, pickers will bring out the ordered items for customers waiting at dedicated parking areas. 

Here, we break down several key factors that significantly contribute to the success of dark store management. They help retailers operate every stage smoothly and productively while meeting customer demands and generating benefits. 

Leverage advanced technology and automation 

Almost all stages of the dotcom center operation require technology application to streamline processes and enhance efficiency. Take order management, for example. This system should integrate with software or advanced platforms that facilitate efficient real-time tracking, picking, packing, and delivery. This way, the retailers can ensure order fulfillment and timely delivery to their customers. 

The more dark stores become automotive, the more operations are productive with fewer human errors. Some cutting-edge technologies for dark shops include automated sorting systems, robotics for picking up, conveyor systems, etc.

Invest in inventory management

The inventory management system plays a core role in the operation of dark retail stores. It’s crucial to apply advanced inventory solutions to ensure real-time monitoring and accurate stock tracking. Consider using barcode scanning, RFID tags, inventory databases, real-time updates, analytics and reporting systems, etc. These technology-driven solutions reduce human errors and the risk of out-of-stock situations, thus improving accuracy for better business decision-making.

Develop effective marketing to drive online sales

Dark stores are exclusively used for handling online purchases. To make use of them, apparently, you’ll need onlines orders. And to boost online sales, you should ensure that your brand, products, and services can reach more potential customers.

You can invest in marketing campaigns to increase customer awareness, drive traffic to your online channels to convert sales. Some effective marketing channels include emails, websites, social media platforms, marketplaces, or you can go omnichannel to sell on multiple platforms while centralizing and syncing all sales data in one place for better control.

In addition, you should strategically offer special discounts, upselling, cross-selling, or other marketing techniques to trigger customer needs. 

Hire and train staff

Staff members ensure smooth operations in collaboration with machines and technology. Retailers should invest heavily in training staff specialized for each stage to promote accuracy and productivity. 

Also, building a solid working culture can inspire and motivate them at work.

The dark store is not a one-size-fits-all solution since each business needs specific strategies tailored to their range of products, target customers, and markets.

It should be noted that this model is beneficial for retailers who heavily invest in eCommerce and online order fulfillment.  

For small-sized businesses that have a limited online presence and lower online order volume, the dark shop might not be a good fit as setting up it might overcast their budget and, therefore, make it difficult to generate benefits in return. 

Though offering numerous benefits, dark shops might not fit some retailers well. We recommend some alternative options that can be considered in terms of business needs and circumstances.

• Micro-fulfillment centers: Micro-fulfillment centers are used explicitly by eCommerce businesses to handle online orders. They are small-sized, highly automated, and located near existing stores to reduce logistics costs. There are only some slight differences between dark stores and micro-fulfillment centers. Dark shops are often used by larger retailers and can consume more space than a micro fulfillment center. Micro-fulfillment centers, on the other hand, are smaller, more compact facilities designed to tackle a smaller volume of products or categories. The latter is also preferred by retailers operating in areas whose property costs are high and focusing on same-day deliveries.
• Third-party logistics providers: Partnering with 3PL providers is an approach for retailers needing more means to create and operate a dark shop themselves. These providers offer solutions covering setting up infrastructure, order fulfillment, storage, delivery, etc., that take care of overall shady shop operations on behalf of retailers and enable them to focus on their core competencies.
• Store-to-door delivery: Store-to-door service allows customers to shop in-store, then the purchased products will be delivered directly from the stores to their addresses, typically their home or office.

The dark store model is expected to continue scaling and evolving to meet customer demands. The global market size is forecasted to grow by 38% from 2023 to 2033. 

As technology is the backbone of dark shops, key trends that shape the future of this retail model include the leverage of technology to enhance operations. The years ahead are likely to witness technological advancements deployed in inventory management, order tracking, shipping, and other stages of retail fulfillment. Automation, robotics, and AI-powered chatbots are among them.

As sustainable development and green energy are a necessity, delivery solutions will be more eco-friendly, such as using bikes and electrical vehicles for delivery.

If you’re looking for a killer, technology-driven solution to leverage dark store management and operations to stay ahead of the retailing game, Magestore comes in with all-in-one weapons to level up your business to new heights, especially with order management. 

Smart inventory management

Once you integrate the Magestore shop management software in dark stores, you’ll be empowered with the best inventory management to track real-time inventory levels and monitor all inventory movement. 

The powerful inventory tool will give you a comprehensive look at in-stock, incoming, threshold, etc., to avoid stockouts and make informed decisions. The Magestore barcode management helps you quickly scan items and track stock status accurately without sweats.

Comprehensive reports 

By syncing and centralizing data across channels in real time, Magestore retail POS can generate reports covering orders, sales, and inventory. This gives you profound insights and live view into your business performance for accurate forecasts and business strategies. 

Staff performance

Magestore solutions can track daily, monthly, and yearly sales, thus reflecting on staff productivity. The system enables to set different permission levels for managers and staff, thereby streamlining operations. 

Flexible shipping methods

You can use in-built shipping methods such as DHL, FedEx, UPS, USPS on Magestore POS and retail software or integrate the POS with other shipping carriers to facilitate delivery. 

You can also incorporate the BOPIS model (buy online, pick up in-store) into your dark supermarket or provide curbside pickup on Magestore POS. 

Magestore solutions can be effortlessly installed in your dark stores. To save you time and effort on research, please contact Magestore experts. Our specialists will offer a 1-on-1 consultation and guide you step-by-step to seamlessly set up the system in your stores.

Why is it called a dark store?

The term “dark store” refers to a “ghost” store which is not open to the public. A dark store is not used to attract walk-in customers but solely to fulfill online orders. The dark store’s functions involve storing, picking, packing, and delivering.  

What do dark stores in logistics mean?

As a part of the supply chain network, dark shops in logistics refer to handling online orders to optimize the workflow and facilitate deliveries. 

What is the benefit of dark stores for a traditional store?

Dark stores can help speed up the checkout process at traditional stores in several ways.

• As built exclusively for fulfilling online orders, you can separate the online orders by shipping duration for better fulfillment. For example, orders with same-day delivery will be picked up at the dark stores, while orders with 2-day delivery will be handled at traditional stores.
• As often located in urban areas to be nearer to customers, dark stores can stimulate more customers to buy online and pick up items in store. That can help you reduce the shipping costs.

What are the key differences between a dark store and a warehouse?

A dark store is designed solely for online order fulfillment, including inventory handling, picking, packing, and delivering. 

On the other hand, a warehouse wears more hats, including retail distribution or manufacturing. 

Cash flow is the amount of money going in and out of your business. Cash inflows come from customer purchases while cash outflows happen when business expenses incurred such as inventory replenishment, operating bills, staff salaries, etc. 

Cash flow management refers to all activities involving receiving, collecting, analyzing, monitoring, and managing cash inflows and outflows. 

When it comes to in-store cash flow management, the managing scope focuses on retail physical stores as its name suggests. A realistic plan for managing cash flow requires business owners to fully realize and understand the sources of cash flow in their stores.

Cash flow is the backbone or lifeblood of business. According to Investopedia, the top common reason a small business fails is financial hurdles which are mainly about poor cash flow management. Whether you are running a small or big business, you should never give careless consideration to it. As managing cash flow in offline stores is a part of managing cash flow as a whole, we’d like to first summarize the key reasons why cash flow management matters.

You need enough cash to cover business costs.

As business owners, you need to ensure to have money available at your disposal to pay for expenses when they are due. You should know that even lucrative businesses can break down if they fail to manage cash flow properly. If you don’t have enough money to pay for suppliers or employees, suppliers will stop supplying you with products and employees will leave you.

You need cash to grow your business.

Let’s take a typical example in the retail business. The holiday season is just around the corner and you want to increase sales by providing customers with the newest items or investing more in marketing activities.

However, your operation bills are due soon and you don’t have enough money left. In this case, effective cash flow management is more than ensuring you have money to balance the cash inflows and outflows. The effectiveness is about having idle cash for future purposes as well.

You need cash to survive in crisis situations.

COVID 19 pandemic is a harsh test on the global economy which sped up the classification of strong and weak businesses. No one can anticipate exactly when such severe situations could happen. As business owners, you should always be aware of the future and also have plans for crises. In other words, you need money to survive and then thrive in your business.

Besides the central importance above, you should pay attention to other benefits the good in-store cash flow management can bring to your business.

You can ensure there are no or least cash differences between the system and reality.

If you see any cash differences, you can right away check the cash you have in stores with the system to spot the problem. Sometimes, your staff uses cash to pay for electricity bills and forgets to record the transaction in the system. That causes the cash differences. As your staff in physical stores works closely with the POS system, you can make use of the POS to record such transactions.

It helps you anticipate the cash flow trends in your stores.

In physical stores, you should look at the cash flow on day-to-day basics. For example, if you see that customers are more likely to visit your stores during lunchtime or late afternoon. You should assign more staff to those working shifts. Another example is, you’re going to have a negative cash flow at the end of the month. You want to figure out the root cause of it. And you find that it’s poor inventory management that you have a lot of old inventory unsold. You then need to immediately seek an on the spot solution.

You don’t have to always purchase goods on credits.

When sales seasons come, you want to replenish inventory with new items but lack money. Then you have to pay on credits. If you rarely encounter this situation, then congratulations, you are managing your cash flow properly. But if this case sounds often to you, you should give thoughtful consideration to in-store cash flow management.

Managing cash flow is not an easy task. You can imagine that you are holding a scale with one side of cash inflows and the other side of cash outflows. As business owners, you prefer the inflow side to incline, don’t you? In this part, we would share with you tips to monitor cash flow in physical stores appropriately.

Review your current cash flow management

Before applying anything new, you’d better review your current managing tasks to see any possible issues. Let’s go through your sales reports, operating activities, financing activities, investing activities. Then pay attention to these vital components: cash, inventory, debt. Some questions you should ask yourself when reviewing are:

• How much money are you having? How long can you finance your business with such an amount?
• How much of your capital is laid in inventory? How long can you free up all inventory? What can you do to speed up inventory sales?
• How many of your debts are about to be due? Can you pay all that with your equity?

Increase cash inflows

It is obvious, isn’t it? After knowing how your in-store cash flow management is going, it’s now time to find ways to improve the cash flow. Cash inflows come from the customer’s purchases. Thus, the very first thing you can do is to generate more sales. You can induce your existing customers to re-engage and buy from you. In this case, a customer loyalty program can help you a lot. Or you can invest in the promotion to attract new customers. In fact, you should do both activities.

One thing you should notice is that your in-store service and decoration also helps boost customer shopping experience. The more you care about your customers, the more chances you can win their hearts.

Another notice is you should always follow the retail changes to better predict the sales trend. You’re about to have more sales in physical stores, meaning you’ll have more customers visiting your stores. You can consider assigning more staff to your stores to better serve customers.

Decrease cash outflows

Minimizing cash outflows is an inseparable part of in-store cash flow management. Let’s see how to handle it. 

Carefully manage inventory: do you want to import new products just to store in your warehouses or pile up your inventory? Of course not, right? But if you don’t have a clever inventory management plan, you are doing that without notice. Noticeably, poorly managing inventory can breed you to the verge of debt. Remember to always keep an eye on your inventory on a daily basis.

Reduce fixed and variable costs: internet, phone, rent, staff salaries are some of the fixed costs incurred during the year. Besides, you also have to pay for variable expenses like shipping fees. 

As your daily operations seem to tie closely with a POS system, you can surely take advantage of your powerful POS to manage inventory and staff performance. A POS system allows you to record and track inventory in real-time, separate staff log-in to measure each staff’s performance is a good fit for your business.

Make use of your unused assets

Let’s go around your stores to see if you have any unused or unneeded assets. If there is any, you can sell it out to make space for inventory storage and collect some free cash.

In-store cash flow management reminds you of reviewing, analyzing your current cash flow activities to adjust and have a better managing plan for your retail business. The earlier you start working on the more comfortable you feel when operating a business. If you need further discussion on how to design a good-fit plan for managing cash flow in your physical stores, our dedicated experts are always willing to help.

Store fulfillment is an omnichannel fulfillment strategy that leverages established brick-and-mortar stores to fulfill and ship online orders. In other words, business owners can stock inventory in their physical stores, and then designate the nearest store to the customers to fulfill their online orders. 

What underlies in-store fulfillment is the idea of transforming a brick-and-mortar store into a micro-fulfillment center or distribution point and making stores an integral part of the supply chain. This strategy facilitates diversified store fulfillment models, such as buy online, pick up in store (BOPIS), curbside pickup, and ship from store to deliver a more flexible and convenient shopping experience to customers.

What are store fulfillment examples?

Many well-known brands like Walmart have incorporated store fulfillment into their omnichannel retail strategy.

Walmart has turned their 4,700 stores scattered across the U.S. into fulfillment centers to accelerate order processing and delivery. The retail giant gives shoppers a view of offline and online inventory, lets them place orders online, and then choose to pick up their items in a local store or get them delivered. Walmart also makes the return process easy and convenient by allowing customers to return their purchases in 4 ways: return at Walmart stores, schedule for pickup, return by mail, and drop off at FedEx locations. 

Many omnichannel retailers adopt in store fulfillment as it generates enormous benefits in terms of cost reduction, resource optimization, customer satisfaction, and sales improvement. 

Reducing costs

Online store fulfillment allows shipping products to customers from a nearby store rather than a faraway fulfillment center, thus lowering transportation costs. With the BOPIS, sellers can even eliminate shipping expenses since customers come to the store to pick up their purchases. Besides, by utilizing the space available in physical locations, shop fulfillment removes the need to build or hire more warehouses to stock inventory for order fulfillment, which helps save a considerable amount of money.  

Maximizing business resources

Store fulfillment is one of the best ways to help retailers capitalize on their current resources. Order fulfillment at stores enables sellers to utilize the storage capabilities of offline stores for stocking inventory, especially the ones with low in-store sales volumes. Besides, the strategy also optimizes the labor force at physical stores. You can assign new fulfillment responsibilities to your store staff, thus improving store efficiency and employee productivity during low seasons.

Improving customer satisfaction

Transporting online orders from the store close to customers increases delivery speed so that shoppers will receive their desired products as fast as possible. Buyers also have the option to collect their purchases by reaching the nearby store to get instant gratification. In 2023, 68% of U.K. customers favor the click and collect delivery method because of its great convenience. 

With a store online order fulfillment strategy, retailers can display a wider range of products to customers regardless of the stocking locations, thus giving them more product choices while reducing stockouts. 

Increasing sales and margins

The BOPIS fulfillment option drives more traffic and sales to physical stores as customers can browse and discover other items when picking up their orders. As shown by invespcro.com, 49% of buyers make additional purchases while collecting their products in store. 

Store fulfillment enables retailers to sell slow-moving products in stock by displaying them at the checkouts, entrances, and other noticeable positions in their brick-and-mortar locations. 

Besides boosting sales for idle inventory, in store fulfillment helps improve profit margins. Allowing customers to shop for any products on hand reduces the risk of having too much stock and limits the possibility of markdowns when the season ends. 

Before implementing store fulfillment, you should look into the following aspects of your business.

Store capacity

Understanding the capacity of your store network helps you decide which one should join the store fulfillment initiative. What needs considering is whether a specific store has enough space available for stocking inventory and whether the store location and human resources can assist in fulfilling online orders without taking a toll on in-store sales. 

Product availability

Taking your product range into consideration can do you a great favor if you don’t want to carry out store fulfillment at the expense of offline sales. You’d better think about which types of products are on eCommerce storefront only, which are exclusive to physical locations, and which are available both online and in store. The choice of products for each channel may depend on certain factors as follows. 

• Sales channels: Assess on which channel a specific kind of product often sells most
• Product type: Consider whether the product is easily damaged or costly to transport, which affects the shipping costs and return rates.  
• Profit margin: Calculate the expenses to sell a product type on different channels to see which channel brings you the best margins

Order volume

To avoid stressing out your employees and decreasing fulfillment efficiency, especially during the peak season, you should consider the total number of orders, the order volume of each store, and the number of store employees available. On that basis, you can decide which store you should set apart for fulfillment or how many orders each store should fulfill. It’s reasonable to choose stores with sufficient labor availability and low in-store sales to handle online orders. 

Inventory stocking

How much inventory to stock in distribution centers and physical stores at different periods also counts. To reduce stockouts and maintain appropriate stock levels across channels and locations, you should consider the amount of inventory to stockpile and the stock replenishment strategy. An inventory and purchasing system which can update stock levels in real time and notify you when and how much to replenish will simplify your procuring and stock control operations. 

The implementation of store fulfillment faces numerous challenges. Here we list the most common obstacles business owners must overcome to launch the strategy. 

Lack of inventory visibility and accuracy

Lack of inventory accuracy can cause serious harm to your business. The stock mismatch between online and offline storefronts and the inability to track in-store inventory might lead to frequent stockouts and unexpected delays in order fulfillment.

As a result, the most pivotal challenge is gaining accurate visibility of your inventory across channels and locations in real time. With instant updates of inventory levels, sellers can easily route the orders to the store with the required stock for fulfillment.

Inappropriate inventory allocation 

Serious consequences can ensue the inadequate inventory allocation, for example, the shortage of merchandise where there’s high demand or having to ship products that customers require from further locations. Therefore, it’s beneficial to maintain the right stock levels at the right locations. 

How to allocate inventory for each channel and each store is not an easy task. You need to forecast demands during the seasons across channels and then assign a proper stock volume to each location. 

Inefficient fulfillment processes

Store order fulfillment might be more challenging than it seems to be since it requires a smooth coordination between physical and digital processes. If not implemented correctly, it can result in damaged products, stockouts, and inefficiencies. 

Unlike dark store fulfillment which involves locations dedicated exclusively to shipping and picking, brick-and-mortar retail stores are not designed specifically for fulfilling both online and offline orders. Store employees are also not trained to efficiently perform fulfillment tasks such as picking, packing, and shipping. This might make order fulfillment more time-consuming and labor-intensive or lead to confusion when dealing with product returns and exchanges. 

Then the challenge is how to optimize in-store operation to improve efficiency and speed across locations and sales channels. 

Legacy retail systems

To enable omnichannel store fulfillment, integrating disparate retail systems is a must, but this will be highly unlikely if you’re using legacy retail systems that can’t connect with other apps and software. Your store POS, ERP, and eCommerce platforms should work well together so that you can get a comprehensive view of your business across channels to better manage your orders, fulfillment processes, and more. 

By consulting our experts and researching the best practices of many big brands like Walmart, we now come up with the 4 key principles to follow for the effective adoption of online store fulfillment.

1. Invest in the right technologies

The top principle for implementing shop fulfillment is investing in the right technology stack. It’s best to have store fulfillment software that can assist you in managing inventory and order processing across sales channels. Consider your needs carefully to pick the most suitable ones.

Besides, modern retail systems that can integrate well with each other can support seamless workflows and facilitate automated in-store fulfillment, which boosts efficiency and cost-effectiveness. It’s also advantageous if your tech stack can be flexible and adaptable enough to accommodate the ever-changing needs of your business. 

2. Provide adequate training for your store staff

Your store employees, who contribute to delivering a consistent shopping experience to customers and boosting repeat purchases, play a crucial role in executing the in-store fulfillment strategy. Make sure to provide your staff with adequate training so that they can harness the technologies available and perform additional tasks of fulfilling online orders like picking and packing with ease. 

The training should equip your store associates with the necessary skills and knowledge to meet various customer expectations and suggest a way to handle increasing order volumes effectively to avoid being overwhelmed. The training checklist should include the following. 

• Picking: How to pick products for online orders effectively without affecting in-store customers
• Packing: How to pack products properly to avoid damages, delays or loss
• Shipping: Develop a shipping process and ensure that your staff follow it correctly
• Tech stack: Instruct your staff to use relevant tools to reduce manual work and accelerate the fulfillment

3. Offer clear and easy-to-follow return policies

Processing multichannel orders may be demanding, yet it should not cause any hassle for customers who wish to return their purchases. Most shoppers expect an easy and convenient return process, like allowing customers to buy online and return in store. Needless to say, you should determine your return policies for orders fulfilled in store and communicate clearly with your customers to avoid any future friction. 

4. Stay customer-centric

No matter which retail fulfillment strategies you’re implementing, customers should always be at the heart of your operations. In the end, what matters is that you make a sale and satisfy customers so they may come back for more purchases in the future. Therefore, whether they buy online or in store, you should ensure they get the best customer service and convenience as expected. 

Keeping close tabs on your customers’ expectations does more good than harm. Observing their buying patterns can give you a good understanding of their need to offer them their preferred fulfillment options. You can also learn from other big retailers to optimize your omnichannel strategy to customers’ demands. Some exemplary retail giants are Target, Best Buy, and Macy’s.

• Best Buy provides diverse order pickup options, including store pickup, curbside pickup, and pickup at UPS and FedEx stores, CVS Pharmacy, Walgreens, or any of their pickup locations. 
• Target enables customers to order items on the website or app, then collect the products at Target stores or have them brought to their cars in the parking space at a Target store. It also supports curbside returns.
• Macy’s: Macy’s offers BOPIS, curbside pickup, and ship-to-store order fulfillment options. Besides, it allows users to exchange and return the products purchased online at stores or by mail.

The key to effective store fulfillment is to manage all of your retail data in a single place. Magestore provides you with a comprehensive retail management PWA to streamline your store operations across online and offline channels with highlight features as below. 

• Sync inventory and order data between eCommerce website, POS, and back office in real time
• Track product quantity and locations with stock on-hand reports
• Oversee entire inventory movement, from purchasing to sales
• Allow setting up low-stock threshold to inform stock replenishment
• Generate purchase orders based on demand forecast
• Manage order processing across channels in real time
• Speed up order processing with simple pick-pack-ship workflow
• Customizable to integrate with 3rd-party shipping services 

At physical stores, Magestore POS helps retailers handle many fulfillment solutions, such as buy online and pick up in store, buy in store and ship to home, or buy online and pay in store with the store pickup feature. Besides, Magestore supports dropshipping and return management. Thus, you can offer your shoppers a flexible and pleasant experience to encourage their repeat purchases. 

Getting consultancy based on your unique business needs is a good way to save your time and money. Talk to our experts now to find out the most optimal solution for your case! 

1. What is flow-through fulfillment?

Flow-through fulfillment is a process of gathering products from different locations into the distribution center. The products are then re-sorted based on the delivery destinations and shipped out within the same day. 

For example, Walmart has 210 distribution centers across the U.S. Each distribution center supports 90–100 stores in a 150+ mile radius, to collect all product types, sorts the items, and transports them to specific store locations. 

2. What is the difference between warehouse fulfillment and store fulfillment?

While store fulfillment means fulfilling online orders from a physical store closest to the customers, warehouse fulfillment is an inventory fulfillment method that processes orders from warehouses rather than brick-and-mortar stores. 

3. What is direct store delivery?

Direct store delivery enables shipping products directly from manufacturers or suppliers to retail stores. This distribution method reduces the number of touchpoints, thus improving efficiency and lowering labor costs.

eCommerce order fulfillment is a journey of getting products from your virtual shelves to your customers’ doorstep once they’ve made a purchase. This involves a series of steps: 

• Managing and storing inventory
• Processing orders
• Picking the items
• Packing them securely
• Shipping the products
• Handling any returns or exchanges that might arise.

This process can be handled in-house by the eCommerce company themselves or outsourced to a 3rd-party logistics (3PL) provider. eCommerce order fulfillment is a flexible system that caters to both B2B orders, where large quantities head to big-box retailers, and B2C orders, where products are shipped directly to individual shoppers’ homes.

In the case of B2C orders, customers can place their orders either on the merchant’s website or through an online marketplace. Once the customer completes their purchase, that’s when the eCommerce order fulfillment process swings into action. 

=> You might like: What is awaiting fulfillment? Why should retailers care about it?

The way order fulfillment eCommerce unfolds varies based on the type of strategy you employ. For a quick overview, let’s break down the order fulfillment process commonly seen in eCommerce:

#Step 1 —  Receiving inventory: You get your stock from suppliers and keep it in a warehouse, stockroom, or storage facility.

#Step 2 — Customer places order: A customer places an order through your eCommerce store.

#Step 3 — Order details received: Your fulfillment team gets the order specifics.

#Step 4 — Picking and packing: The team selects and packs the order, complete with a shipping label and returns form.

#Step 5 — Shipping to customers: The parcel is shipped to the customer’s address.

#Step 6 — Handling returns: In case of a return, the customer uses the returns label to send the parcel back to the warehouse. Here, the fulfillment team inspects the product and processes a return if it meets the return policies.

While order fulfillment eCommerce might not grab the spotlight, it’s a function directly influencing an online merchant’s financial success. In fact, the impact of order fulfillment extends to customer satisfaction, loyalty, and retention, making it a linchpin for eCommerce triumph. 

To underscore this, let’s delve into some statistics highlighting the pivotal role and challenges of eCommerce fulfillment in today’s market:

• 24% of shoppers have canceled an order due to slow delivery speeds.
• 48% of shoppers will abandon their carts if they find shipping, taxes, or other fees too high.
• 69% of customers are likely to stop shopping from a retailer if the order doesn’t arrive within two days of the promised delivery date.
• 85% of shoppers decide never to return to a retailer after a poor delivery experience.

As you can see, these statistics underscore the considerable expectations and limited tolerance customers have for eCommerce fulfillment. Therefore, every business should select the right fulfillment strategy for their online store to maintain competitiveness and profitability in the eCommerce industry.

Still, choosing the best fulfillment strategy for your business is NOT an easy task. It really depends on various factors, such as your business size, product type, order volume, customer demand, budget, etc. You may need to consider different fulfillment options, which we’ll have an in-depth guide on below.

the grand scheme of the supply chain, eCommerce order fulfillment is a key player, as it holds a pivotal role in the entire process. eCommerce order fulfillment has 3 main types that every merchant should know: Self-fulfillment, Dropshipping, and Third-party logistics (3PL). 

These types cater to distinct business needs, each having its own set of advantages and drawbacks. Let’s take a closer look to paint a comprehensive picture of these fulfillment methods.

1. Self-fulfillment

Self-fulfillment is when an online seller manages the entire fulfillment process independently without relying on a third-party logistics (3PL) provider. This entails overseeing inventory, processing and picking orders, packing and shipping products, and handling returns and exchanges.

While self-fulfillment can be cost-effective and offer more control and flexibility to the seller, it demands additional time, space, and resources. Besides, eCommerce businesses often adopt this approach in their early stages or those with lower order volumes.

However, as the business expands and order volumes rise, self-fulfillment can become cumbersome and inefficient. Sellers may need to explore other fulfillment options to ensure continued growth and operational efficiency.

Pros and cons:

Self-fulfillment works well for:

• New or low-volume businesses aim to save costs and avoid extra fees.
• Businesses with unique products want more control over inventory and shipping.
• Brands prioritize quality and consistency in their fulfillment process.

2. Dropshipping

In eCommerce fulfillment, dropshipping is a method of selling products online without the hassle of storing, packing, or shipping them yourself. Instead, you collaborate with a supplier responsible for inventory and fulfillment. 

When a customer places an order, you relay the details to the supplier, who then ships the product directly to the customer. This eliminates concerns about managing an eCommerce warehouse fulfillment, packaging materials, or handling shipping costs. As a result, you can concentrate 100% on marketing and expanding your online store.

But for that all, these dropshipping eCommerce fulfillment companies aren’t the ideal choice if speedy delivery is crucial. Why? Because it provides minimal control over the supply process, hindering your ability to track orders or assist customers with their orders. Furthermore, the distance between merchants and delivery locations can impact the eCommerce order fulfillment cycle time.

Pros and cons:

Dropshipping is suitable for you to:

• Target a specific market effectively with clear marketing strategies
• Work with a trusted supplier for quality products, fast shipping, and good communication
• Possess a strong brand identity to attract loyal customers
• Adapt well to uncertainty, change, and risk

=> Read more: What is curbside pickup and how does it work?

3. Third-party logistics (3PL)

Third-party logistics (3PL) involves outsourcing some or all of your logistics and supply chain management tasks to an external service provider. A 3PL provider offers services like warehousing, transportation, inventory management, and order fulfillment tailored to your business needs. 

Not to mention, collaborating with 3PL eCommerce fulfillment providers lets you tap into their expertise, technology, network, and resources. Then, of course, you can focus on core aspects like product development, marketing, and customer service (similar to dropshipping in this regard).

Still, there are potential challenges and drawbacks to consider with 3PL. These include:

• Relinquishing control over operations, quality, and delivery time
• Navigating communication and coordination issues
• Encountering higher costs and fees, such as storage, pick and pack, shipping, and even returns
• Adhering to diverse regulations and standards

Therefore, a thorough evaluation of your business needs, goals, and expectations is crucial. Also, merchants need to carefully choose a 3PL provider aligned with requirements to facilitate the growth of their eCommerce business.

Pros and cons:

3PL is beneficial for:

• Large or high-volume businesses that want to save time and resources and focus on their core competencies.
• Businesses sell standard products without needing customization or quality control.
• Brands scaling and expanding into new markets for faster, cost-effective delivery.

On the sidelines: There might be some questions as to why we haven’t included “hybrid fulfillment” as a distinct option on our list. The reason is pretty straightforward — hybrid fulfillment is not a standalone category like the others. Instead, it’s a blend of various fulfillment methods. 

When we talk about hybrid fulfillment, we’re referring to a strategy that combines different approaches. In simpler terms, hybrid fulfillment is a flexible approach that lets online sellers mix and match to get the best results. 

For example, an online clothing store may use in-house fulfillment for their best-selling items, dropshipping for custom or made-to-order products, and 3PL for international orders to reduce shipping times and costs. The beauty of hybrid fulfillment lies in its ability to help sellers cut costs, be more adaptable, and enhance overall customer satisfaction.

When it comes to order fulfillment in eCommerce, it’s crucial to take a good look at what your business really needs before deciding on (or switching up) your fulfillment approach. Check out these six key areas — it’s not just about picking what works best right now but also about choosing something that can keep up with your business growth.

1. Business size

The number and frequency of your orders hinge on your business size. For a big online store with lots of products and high demand, handling orders at home might not work. You might need more staff, extra gear, or help from a third-party service. But if your online store is small, with a few products and not much demand, doing it yourself at home could be a good and cost-saving way to begin.

2. Product type

What you’re selling really matters when it comes to how you get things to your customers. Is it a raw material or a finished product? Can people order it right from you, or is it something you buy from suppliers and then sell to individuals? Figuring out these details helps you decide what kind of eCommerce warehouse fulfillment, timing, packing stuff, and particular setup you need to handle your orders.

For example:

• If you sell big, heavy, or delicate items like furniture, appliances, or glassware, you’ll likely need more space, equipment, and packaging. Shipping costs and times may also be higher. Then, merchants should consider using 3PL or hybrid fulfillment for these products. 
• For small, light, or durable items like books or clothing, handling them on your own might be more cost-effective. You can manage shipping more efficiently and offer faster, cheaper options. In such cases, self-fulfillment or dropshipping could be suitable for your businesses.

3. Sales channels

Your sales channels are the platforms or places where you sell products, such as your own website, online marketplaces, social media, or brick-and-mortar stores. Each of these channels might have different requirements and expectations from your delivery process, such as the speed, cost, tracking, and packaging of your orders. Therefore, when picking a fulfillment model, you need to consider the following factors:

• First, look at how many channels you’re on. Are you just online, offline, or both? Do you need to connect your inventory and orders across them?
• Then, think about the people buying from each place. Who are they? What do they want when it comes to shipping — is speed important, or is cost more of a big deal? Do they care about tracking and how the package looks?
• Lastly, check out what each channel can and can’t do. What are their rules? How does it affect your revenue, what you have in stock, and how happy your customers are? Can they grow with your business?

Once you figure all this out, you can pick a way to handle orders that work with your sales platforms. 

• Self-fulfillment: Good for small businesses with just one channel or not many orders
• Third-party fulfillment: This works if you use many channels or have lots of orders like using Fulfillment by Amazon.
• Dropshipping: If you sell unique or custom things or want to try new markets, this could be a good fit.

4. Supply level tracking

Now, let’s think about how often you want to update your inventory. You want an eCommerce fulfillment model that gives you real-time or nearly real-time info on what you have in stock across different channels and places.

• If you use 3PLs, make sure they can sync up with your platform. 
• If you do it yourself, invest in reliable inventory software that can sync and centralize all order data across sales channels and warehouses and let you implement eCommerce fulfillment automation for high efficiency.

How easy to access and view your data. We all want a model that lets us quickly check the quantity, location, status, and history of the products. This helps us make data-backed decisions about when to restock, where to put things, and how to enhance our inventory work. 

• In this case, if you use dropshipping, remember to keep things clear with your suppliers about what they have in stock and how long it takes. 
• If you leverage hybrid fulfillment, having a dashboard that shows your inventory levels in one place is a must.

How well can your inventory control adapt to your business development? Your model should handle shifts in your stock needs, like busy seasons, new products, promotions, and growth. This means you keep things moving and avoid having stuff sit around too long. 

• When using an eCommerce fulfillment center, confirm their capacity to manage your growing stock.
• For in-store order handling, make sure you have enough staff and equipment to process and ship orders effectively.

5. Shipping speeds

As Amazon’s two-day delivery becomes the norm in the industry, picking an eCommerce fulfillment service for your online business means finding one that can swiftly deliver your products to customers.

If your delivery takes too long, your customers might head to your competitors, and that’s not good for business. With everyone aiming for faster deliveries like next-day or same-day, you should take a serious look at this point to move at the speed of your customers.

6. Location

Where you choose to fulfill orders is a big deal. It decides if you can keep up with what your customers expect and ship stuff on time. Plus, it plays a vital role in how much shipping costs and if it’s doable for your customers. 

The smart move is to set up your fulfillment spot near your customers. Aim for a place where you can promise one- or two-day shipping to lots of city areas, where there are plenty of carriers and ways to get things around. If you don’t plan to operate a warehouse yourself, the 3PL method excels in such a case.

As we all know, order fulfillment in eCommerce is a crucial part of any retail business. It helps shape how customers view your service and impacts your bottom line. Not to mention, you also need to ensure that your products are delivered to your customers quickly, correctly, and cost-effectively. 

But let’s be honest: managing fulfillment can get tricky, especially when you have to deal with multiple sales channels, eCommerce fulfillment warehouses, and delivery services.

That’s why you need a reliable tool like Magestore Order Fulfillment to automate and streamline the whole process, making it faster and more accurate, from checking to shipping orders. 

This solution is all about making your life as an eCommerce merchant a whole lot easier! And thanks to Magestore, you can:

• Automate the fulfillment process in 5 easy-peasy steps: Verify, Fulfill, Pick, Pack, and Deliver 
• Keep tabs on your items with barcode scanning — accuracy, check!
• Filter orders by status, batch, and tag — finding stuff made simple
• View performance reports by staff and location anytime — data-driven decisions, anyone?
• Manage order fulfillment from one central hub — less chaos, more control
• Speedy order location with live view and visual charts — because time is money
• Optimize the process with 4 insightful reports — data is power
• Run all your daily fulfillment operations fast and conveniently with Retail Management PWA

At our core, Magestore order fulfillment helps you ensure the accuracy and speed of your order fulfillment, reduce human mistakes, save time and effort, and boost customer satisfaction. Moreover, if you’re a Magento merchant, you can rest assured that our top-notch Magento experts will greatly assist you throughout the project. Thus, Magestore’s solution is perfect for any small to large-sized warehouse.

In our Magento Order Management module, handling orders is a breeze. You can easily shoot out a fulfillment request to multiple warehouses for a single order. It’s a bit different in other order management systems, where the store manager can only ping one eCommerce fulfillment warehouse with one request each time.

This means if an order has items sitting in two different warehouses, you’d normally have to hit that send button twice. But with Magestore Order Management software, just one request does the trick.

Moreover, to save you some precious time, our software goes the extra mile by suggesting the best eCommerce warehouse fulfillment with the goods ready to roll for shipping. 

There have been more than 10,000 customers across the globe who trust and partner with Magestore to grow their business. The next successful merchant will be you.

Why is fulfillment important in eCommerce?

Order fulfillment in eCommerce is important for businesses because it makes sure customers get their orders quickly and as they expect. When orders are handled accurately and promptly, it boosts customer satisfaction and loyalty. This, in turn, results in repeat purchases and positive word of mouth.

What do eCommerce fulfillment services cost?

The cost of eCommerce fulfillment service depends on various factors, such as the type and volume of products, the number of orders, the location of the warehouses, the speed of delivery, and the level of service.

Here are the usual eCommerce fulfillment pricing lists you might face:

Receiving in the warehouse:

• Hourly: $20 – $50.
• Per-item: $5 – $15 per pallet or $0.25 per item

Storing and managing inventory:

• Pallet: $10 – $15 monthly
• Cubic foot: $0.45 – $0.55 monthly

Picking and packing:

• Per order: $2.50 – $5.00
• Per item: $0.20 – $1.00
• Per box: $0.50 – $1.50

Packaging:

• Standard: $0.75 – $1.00 per order
• Custom: Varies by design

eCommerce order fulfillment shipping:

• $5.00 – $10.00 per order, with carrier discounts possible

Handling returns:

• $3.00 – $5.00 per order

What is the difference between eCommerce and fulfillment?

The main difference between eCommerce and fulfillment is:

• eCommerce handles the frontend. This process involves selling through online platforms like websites or apps. 
• Fulfillment, on the other hand, manages the backend, which ensures the delivery of products or services to customers after they make online orders.

3PL  fulfillment or third-party logistics fulfillment means that you delegate some or all tasks of the order fulfillment process to an external service provider. You won’t have to manage the end-to-end fulfillment of your orders. Instead, your 3PL partner will handle warehousing, inventory management, picking and packing, shipping, and reverse logistics on your behalf.

1. 3PL integration

Once you’ve selected a reliable fulfillment 3PL, you’ll need to share essential inventory and order information to keep your 3PL partner in the loop about what products are in stock and what are ready for shipping. 

Many merchants allow 3PL partners to access and use necessary features in their inventory and order software for fulfillment. Others may let fulfillment companies connect and sync order information to their 3PL management system via APIs.

No matter which way you choose, make sure that both you and your 3PL companies are informed of every update or change in your stock. Hence, they can make timely adjustments and smoothly operate the end-to-end fulfillment for your business. 

2. Sending products to 3PL’s warehouses

The next step is to send your inventory to 3PL’s warehouses so that they can start fulfilling your orders. You should consider freight during the 3PL warehouse fulfillment process, especially when shipping large orders.

Full-truckload (FTL) and less-than-truckload (LTL) freight are two cost-saving freight services to streamline the product distribution to your customers. You can consider residential LTL freight if your products have big sizes like beds or motorbikes. 

To help you choose the proper type, 3PL companies will offer a comprehensive guide and even suggest the best freight deals with the suitable service for your needs. 

3. Warehousing and inventory management

3PL companies can design and operate an efficient, secure, and well-organized environment for your products with their innovative retail management software and strategic planning expertise. They’ll ensure each storage bin, aisle, rack, and shelf   inside the warehouse will be under close monitoring and efficient organization. As a result, you can expect to decrease costs while maximizing profits. 

4. Order picking

When your customers place orders, the 3PL warehouse staff will receive notifications for fulfillment requests and start picking orders by batch, zone, or wave.

Depending on the specific features of products and your requirements, the 3PL company decides on an appropriate approach to ensure excellent performance and cost-related advantages. 

Consequently, your outsourced logistics partner will update the order status in the management system. Therefore, you can monitor the process simultaneously and suggest timely adjustments if necessary. 

5. Packaging

Packaging means packing your products with essential information on the packages, such as your brand name, order codes, delivery information, and shipping labels. In case of lost orders, meticulous packaging can save time and effort in tracking and solving possible problems. 

Having your 3PL handle this process can help you save time researching optimal packing materials and shipping box sizes. Remember to ensure the order status is the same between your system and the 3PL’s to guarantee accuracy for delivery afterward. 

6. Weight measurement 

After packaging items, 3PL will conduct weight measurement to optimize the fulfillment system process of 3PL. This step means determining how much the product loads and its dimensions. 

The measurement includes weighing the product, its pallet, skid, wrap, strap, and anything else in shipment. 3PL measures length, width, and height for the load dimensions. 

This step provides your 3PL partner with insights into optimizing shipping costs and ensuring compliance with carrier regulations. 

Precise weight measurement can also enhance the return process performance by showing whether the returned products are correctly accounted for in the inventory. So, you can rest assured of the accurate stock levels and avoid discrepancies in your records.

7. Shipping

Now your orders are ready for shipping. 3PL business fulfillment determines the most suitable carrier and shipping method for each order based on factors like package weight, destination, delivery speed, and cost consideration. Reputable 3PLs often work with multiple carriers to offer you and your customers flexible shipping choices.  

The system of your 3PL partner provides real-time tracking information to both you and your customers. As a result, you can always keep track of the package’s journey from the warehouse to the customer’s doorstep.

8. Return and refund

If your customer returns the ordered products and requests a refund, the returned items will arrive back at the 3PL warehouse. The 3PL team will inspect the products and process refunds according to your rules or inform you of refunds that’ll be processed on your end. 

Optimal warehousing costs 

Among the benefits of a 3PL for retail order fulfillment, reducing the overheads of warehouse renting for inventory storage is obvious. 

The bigger your business grows, the more warehousing space you’ll need for self-fulfillment, that’ll increase your operation costs. Meanwhile, partnering with a 3PL order fulfillment can help you cut down warehousing costs to support your fast-growing store.

3PL eCommerce fulfillment companies usually charge you the space to store your inventory in their warehouse, while in-house warehousing gets you to pay the full rent for a warehouse. If you keep the same number of items in the warehouse over time, you won’t have to deal with fluctuating warehousing expenses. 

	Per pallet	Per cubic foot	Per bin	Per square foot
3PL’s cost	$18.30	$.45–$.55	$3.20	$1.15

Besides, some 3PL order fulfillment also allows sharing lease obligations, such as rent, equipment, utilities, and other core operation costs with other retailers. For example, if 10 retailers are using 3PL facilities, the cost will be divided among these 10 retailers according to each retailer’s stock amount. 

Meanwhile, in-house warehousing costs include the cost of rental space, additional occupancy expenses (NNN/CAM charges), and operating overheads (manpower, electricity, water, facilities, etc.).

Inhouse warehousing costs = Rental space cost + NNN/CAM charges + Operating overheads.

The common in-house warehousing costs per square foot per month and square foot per year are $.67 and $8, respectively. Average NNN/CAM rates are $.33 per square foot per month and $4 per square foot per year. 

Reasonable shipping costs 

The large volume of orders for delivery can be an advantage in negotiating with courier companies. Your growing business might attract bulk orders, yet the number might still be far from persuading carriers to offer discounts for cheaper shipping. That’s why 3PL business fulfillment showcases one of their advantages — cost-effectiveness in shipping. 

A 3PL firm manages warehousing and order shipping for not one but many eCommerce companies simultaneously. Therefore, they can get a bargain deal from carriers with enormous amounts of awaiting delivery products.

Having experts to back your fulfillment process 

Outsourcing a 3PL for retail order fulfillment means that you have specialized teams take over the order fulfillment process, which guarantees smooth performance without complicating your structure. They’re well-versed in efficient warehousing and shipping to your customers, resulting from focus training and accumulated experiences. In such a way, not only can you cut down on the manpower cost but also streamline the workflow to save time for other tasks. 

Improving the effectiveness of your order fulfillment 

Enhancing the performance and reducing errors in your order fulfillment are other persuasive points explaining why eCommerce business owners love to use this practice. The magic comes from updated technology and comprehensive inventory management strategies. 

Every 3PL order fulfillment company invests in its logistics systems and constantly updates the software to minimize manual errors and enhance accuracy in the order tracking. 

The combination of systematic processes and state-of-the-art technology is a strength that sets 3PL apart. As a result, using 3PL for reduced error fulfillment rates saves you from high product return rates that can derail your ROI and positive reviews from customers. 

Scaling up your eCommerce business 

Optimizing order fulfillment with a 3PL is a ‘lifebuoy’ that saves you from overwhelming workloads of in-house fulfillment. One of the aforementioned advantages of 3PL is to have experts complete the task so that you can concentrate on growing your business amidst a highly competitive time.

All the great benefits above can convince you to outsource a 3PL fulfillment management. Yet, the article may not give a complete picture unless it also explores the possible drawbacks of outsourcing your eCommerce order fulfillment to a 3PL.

1. Costs of outsourcing a 3PL order fulfillment  

Investing in a partnership with a 3PL fulfillment might be costly. The key to a successful 3PL retail order fulfillment partnership is the advantages outweighing all the costs you might have to cover when working with a 3PL logistics company. 

What are the costs that you should notice when partnering with a 3PL? 

• Onboarding costs: Some 3PL companies charge you the fees of connecting your order fulfillment to their system, setting up accounts and access, etc. 
• Receiving costs: You have to pay for shipping your inventory to the 3PL warehouse. Depending on your fulfillment provider, the payment can be charged by hour, unit, carton, pallet, etc. 
• Order picking and packaging costs: The 3PL will pick and pack the ordered item for delivery. They can charge these costs per order. 
• Inventory storage costs: Charging fees based on the warehouse space usage is a common way for 3PLs. You’ll pay for pallet storage, individual bins, or shelf spaces, depending on the storage duration your products need and your inventory turnover rate. 
• Kitting costs: Order kitting refers to assembling individual items into a set or kit. These costs happen when you offer a promo or special deal for customers who buy two or more products in one order. 
• Shipping costs: You have to pay for shipping costs regardless of using 3PL services. You should compare the fees you directly pay for carriers with the ones you pay for 3PL to ship and deliver your products to your customers. 

2. Losing control over your order fulfillment process 

One of the biggest drawbacks that you should be aware of is the risk of losing control over warehousing, inventory management, and product delivery. Another factor to consider is the internal information leak or even database loss due to the integration or shared access with 3PL systems. 

Custom integrations can boost synchronized data transfers and real-time updates for better tracking, yet it includes the danger of being hacked. 

You don’t monitor the whole process in person, which is the beauty and downside of outsourcing 3PL logistics. So, you should work with a 3PL company with a secure system and ready solutions to possible issues. 

To minimize the risk, you should set clear permission for those who can access information and configure your system. Moreover, to reduce the system lagging, you can prioritize an order fulfillment PWA, which allows users to use it as a frontend app without logging into the backend. 

How do you know a 3PL eCommerce fulfillment company perfectly matches your eCommerce business? Which factors should you consider? 

Let’s go through some crucial tips for finding a 3PL partner that helps your business thrive! 

1. Determine your business scale and your needs 

It should start with your needs; whether your business needs to outsource logistics and warehousing partners is the foremost question you should ask yourself. 

If the growth pace of your online business needs a quick adaptation and the profits you get can cover the outsourcing fees, you can consider a 3PL. Otherwise, you’d better keep the process in-house. 

Check out the following signs to see whether your retail business needs a 3PL provider for order fulfillment. 

• Your business grows so rapidly that you can’t handle all necessary daily tasks. 
• The order fulfillment process becomes slow and has many errors.  
• You find the problem of manpower shortage in your business. 
• Employing more people makes your company structure complex and ineffective. 
• Shipping eats up most of your profits. 
• Database becomes too much to handle. 

If 3PL is a great option for your business after careful consideration, the next step is to determine what you need from an eCommerce fulfillment 3PL. Such insights can help you narrow down the list of 3PL companies and easily find a suitable partner. 

2. Pay attention to their capacities and transparency

When researching 3PL units, you should consider the following aspects: 

• Do they take over the whole process or just some of it? 
• How much do they charge for their services? 
• Can they customize their services according to your needs, such as warehousing, inventory management, and 3PL dropshipping?  
• What systems and technology have they used to operate and manage the order fulfillment process?   
• Can you get real-time order status updates through an integrated system? 
• Does their customer service offer insightful and responsive support? 
• What are the eCommerce businesses they’ve worked with? 

These questions guide you through some crucial aspects, such as their capacities, experiences, expenses, and flexibility for customization. The solid foundation or the ultimate benchmarks are still what your business needs and how much you’re willing to pay for 3PL services. 

Transparency is the top factor in finding a reliable 3PL partner, which saves you from over-priced services and the risk of leaking or losing internal information and databases. 

Here are some tips you can use to find a trustworthy 3PL partner for your retail business: 

• Determine your needs and budgets that you’re willing and able to pay. 
• Perform due diligence on 3PL services to see whether they well fit your needs. 
  • Check their certifications and testimonials that show 3PL can maintain the correct insurance, bonding, and safety standards. 
  • Ask them about filing insurance processes and freight claims. Professional 3PLs will present a robust and clear-cut program for insurance and claims to protect against any damage to your products. 
  • Inquire about and test their technology and software. When partnering with a 3PL, you’ll share your order fulfillment information with them; hence, it’s crucial that they have a state-of-the-art system to manage the database and guarantee order delivery. 
• After getting a shortlist of 3PL companies, you can contact them for a detailed discussion on services, fees, and other aspects. 

1. Standard 3PL providers

Living up to the name, standard 3PL providers take over the most basic logistics steps in the process, such as product storage and delivery. This type of 3PL company offers a budget-friendly option that allows you to control your order fulfillment process. 

2. 3PL service developers

3PL service developers can help you enhance the entire process thanks to their technology and expertise in IT infrastructure and management. Not only handling storage and shipping, but these companies also offer great security services, real-time delivery tracking, compliance management, package selection, and cross-docking. 

3. 3PL customer adapters

If your order fulfillment process eats up your time of business strategy development, you can consider delegating to a 3PL customer adapter. This type of 3PL company will be in charge of most logistics activities for your business, such as the a–z shipping management, negotiating with carriers, and providing rate maintenance. 

4. 3PL customer developers

Last but not least, we have 3PL customer developers taking over the entire logistics activities of your business. That’s why such a 3PL company is technically your logistics department. 

Due to the workload, manpower, responsibility, etc., these 3PL customer developers charge their services at high prices. In return, you’ll be set free from all the mundane tasks in the order fulfillment process while navigating your business to success. 

• Inventory management 

3PL’s integrated software into your system can help you manage your inventory better. The real-time information and updates of your online orders with the stock amounts in the warehouse prevent stockouts and help you take timely actions. 

• 2-day shipping

The shorter the waiting time is, the more satisfied and loyal customers become. The service of delivering your products to customers within 2 days makes it become one of the 3PL’s advantages. Thanks to the relationships with many carriers, 3PL companies can offer you an affordable and suitable package of 2-day shipping. 

• Same-day delivery 

Same-day delivery means that customers get their desired products on the same day they order. This practice requires strict control over the order fulfillment process and rhythmic coordination of involved parties. 

Some 3PL companies might have some criteria for your customers’ orders, such as their order time and locations so that they can guarantee the same-day delivery service. 

• Distributed inventory

Distributed inventory is the service that allows you to split your inventory across different warehouse locations. The 3PL companies with this service can ship products from the closest warehouse to customers, shortening the delivery time and cutting shipping fees. 

• Centralized inventory

Centralized inventory offers one central location to keep your stocks for order fulfillment. It can simplify the inventory management process yet may increase your shipping costs to far locations. 

• Advanced data analytics

Some 3PL companies offer comprehensive analytics that generate deep insights into your order fulfillment. They can also consult some solutions related to order fulfillment, such as logistics strategies, software, and inventory management. The level of consultation depends on the contract terms you’ve signed with them.  

• International fulfillment

If you partner with a 3PL with a global network of warehouses and staff, your business can easily scale up across countries with their international fulfillment. They can enlarge their services within many countries and handle complex logistics procedures for your eCommerce business. 

Enormous benefits help 3PL fulfillment reverberate in many industries, especially in eCommerce. Technically, fulfillment includes the picking and packing process, yet 3PL order fulfillment is much more than that. 

The critical point here is whether your business needs a hand of 3PL in the process. Consider all the relevant costs and risks when outsourcing third-party logistics to take over your order fulfillment. 

We hope that this article can help you comprehensively understand and sort out the key points of 3PL eCommerce order fulfillment. 

If you seek tailored solutions for your retail business in terms of order fulfillment, multiple sales channel management, warehousing, etc., let’s book a free talk with our experts for in-depth discussion.

What is the difference between 3PL and 4PL?  

3PL refers to managing one or many operations of an eCommerce store and fulfillment activities can be a punchy way. On the other hand, 4PL (fourth-party logistics) takes over a company’s entire supply chain management and logistics. Let’s explore some critical aspects between them.

• Main responsibilities
  • Order fulfillment is the focal point of 3PL companies. 
  • 4PL will be in charge of every step in the entire supply chain, such as transportation, supplier coordination, inbound and outbound logistics, and distribution networks.
• Communication  
  • Working with a 3PL fulfillment company, you directly communicate with your customers and other partners. 
  • 4PL covers the entire supply chain activities, so you just need to contact your 4PL partner if there are any problems. 

>> Read more to understand thoroughly the differences between 3PL and 4PL.

Is fulfillment a 3PL?

Yes and No. Fulfillment involves receiving, packing, and shipping orders to customers. 3PL refers to a third-party logistics company managing one or some fulfillment activities for an eCommerce store and also managing their inventory and warehousing.

You might say that 3PL is the same with a fulfillment center at some points. However, 3PL can also involve the management of your inventory levels and warehousing through an integrated or synced system other than just order fulfillment. 

What is the difference between 3PL and fulfillment?

Fulfillment means an in-house or outhouse team takes care of every step to get your products delivered to customers, such as picking, packaging, warehousing, and inventory management. 

With the 3PL approach, you’ll work with an external team with specialized skills and technologies to handle some parts or the whole process. 

Insights into these two terms indicate that retailers can be mainly responsible for your fulfillment process and work with a 3PL company for some processes requiring high specialization. In this scenario, 3PL can be a part of a retailer’s fulfillment process. 

How much is a 3PL fulfillment center?

The exact cost you need to pay for a 3PL fulfillment center depends on your 3PL partner’s pricing and your requirements in terms of services and technology. You usually pay $0.20 per pick for order fulfillment as a common order picking and packing fee rate. 

Check out the related costs to 3PL fulfillment below.

• Labor costs for receiving new inventory, order picking, and packing
• Inventory and warehousing management 
• Costs of packaging, whether you use standard or custom labels for branding or eco-friendly purposes 
• Costs of restocking or discarding returned items 
• Maintaining fees for technology and management systems to automate the process and synchronize the information

What industries use 3PL the most?

3PL has been in its prime time with the explosion of online shopping and the trend of door-to-door delivery. In such a way, people can now get almost everything with a few clicks. The list of industries using 3PL the most might get you surprised. 

• Manufacturing 
• Pharmacy
• Construction 
• Retail business 
• eCommerce
• Food and Restaurants
• Cosmetic industry
• Technology
• Automotive industry

Is Amazon now a 3PL?

Yes. Fulfillment by Amazon (FBA) and Amazon Multi-Channel Fulfillment (MCF) offer the same services as what a 3PL provider does. FBA exclusively supports Amazon’s store owners, while MCF offers order fulfillment for external businesses that don’t sell their products on Amazon but still fulfill with Amazon warehouses.

Fulfillment meaning in retail is a process including receiving, processing, and delivering orders from merchants to customers. 

Nowadays, most retail activities and successes depend on efficient processes and strategies. Many shops are finding it hard to meet the rising demands of their customers regarding value, convenience, and quick delivery. The ability to adjust to changes in the business environment and having the right resources on hand will be essential to your long-term success.

Improved customer satisfaction

Customers expect to receive their orders accurately and on time, so retailers should implement an effective retail order fulfillment process. Efficient retail fulfillment helps minimize delivery time, ensure accuracy of goods delivered, and maintain transparency. Customers are more likely to come back for a second purchase if they’re satisfied with their first transaction. That, in turn, can improve customer loyalty and help your business thrive. 

Optimized inventory management

The retail fulfillment process empowers retailers with effective inventory management. Efficient retail fulfillment helps retail managers frequently control inventory levels and precisely forecast demand to ensure they have enough stocks to meet customer’s needs. 

Adaptation to consumer preferences

Consumer shopping habits are changing over time, which retailers should be aware of and adapt their fulfillment process accordingly. Businesses can use a variety of fulfillment strategies, such as in-store pickups, dropshipping or subscription services, to better meet customer expectations and stay competitive.

Enhanced operational efficiency and increased profit

Fulfillment operations can impact significantly on the overall performance of your business. By making sure that your orders are processed and delivered effectively, you can reduce picking costs by a half like Walmart, enhance customer satisfaction, boost sales and profits.

Generally, there are five steps in a fulfillment process in retail. Follow us to see how it works.

Step 1: Receive inventory from suppliers

As soon as the package arrives at your receiving location, verify its accuracy. Then, check carefully to see if the following components match your PO:

• Product quantities
• Product details: size, color, price, etc.
• SKU numbers

If you detect a mistake with inventory, contact your suppliers right away. They’ll cooperate with you to fix any errors, regarding faulty products, wrong products received, or missing numbers of items. The sooner the better.

Lastly, after confirming that you received the right inventory and quantity, it’s time to store them in your warehouses or distribution centers. 

Step 2: Store inventory in warehouses

Scan barcodes and enter SKU numbers for items as soon as they arrive in your inventory management system. After that, use a pallet, bin, or shelf to place the goods in storage for easy pickup later.

Tracking things when they leave your warehouse is just as crucial as tracking them when they arrive since they’re parts of the order cycle.

To ensure having enough inventory for fulfillment, you should know when, what, and how much to reorder from your suppliers. While you can use spreadsheets to track stock flow, an inventory and purchasing system can notify you when it’s time for replenishment and auto-replenish products. This will save you a lot of management time for more important tasks like sales or marketing to increase revenues.

Step 3: Pick and pack

The next stage in fulfillment retail after receiving an online order is to pick and package the products for delivery.

It’s a crucial phase in your fulfillment operations since you want your orders to remain intact and arrive at your customer’s place securely.

There are some points to consider in this step:

Plan a picking route

The ultimate purpose of this point is to save time for you and your pickers. According to research, traveling accounts for 55% of the total order-picking time. Therefore, you should take into consideration the size and layout of the warehouse, the type and volume of inventory in order to figure out the most optimal picking routes.

Scan by barcode

Barcode scanning helps improve your warehouse efficiency by automating tasks like receiving, picking, and shipping and increase accuracy by minimizing the risk of human errors. Also, barcode scanning software can recommend efficient picking routes for each warehouse employee.

Double check the products picked

This may seem obvious, but retailers should pay attention to every detail in the packaging step to guarantee the product is correctly labeled and securely wrapped.

Use appropriate packing materials

Your choice of packaging materials really matters as it helps protect your products during delivery, promotes your brand image, reduces your shipping costs, etc. Some important criteria to choose the suitable materials include: 

• Secure and durable
• Cost-effective
• Easy to use
• Widely available
• Environment-friendly and legally compliant

Step 4: Ship orders

Now, your online orders are ready for delivery. Depending on your applied fulfillment model, shipping will appear different.

If you run a small business out of your home, for instance, you might schedule a carrier pickup or hand the package to the post office for delivery.

Step 5: Process eCommerce returns

Returns have reached 16.5% in 2023, amounted to over $231 billion in returned merchandise.

When a client returns the product to the distributor, this is known as reverse logistics. Reverse logistics consists of exchanges, refunds, and even rubbish to be disposed of, reused or recycled.

The general process of handling returns is as followed:

• Inspect the returned items: Make sure you note any damage found on the objects.
• Record return and inventory: You must record the return in your system and add the item back to your stock if you can refill and resell it later. If it’s damaged or not sellable, you need to have a plan in place on how to get rid of it.
• Satisfy customers: Based on your return policy, you may need to give customers another item, provide them with store credits, gift cards as replacement, or refund them in cash or via bank transfer.

The following figure and insight may surprise you. 81% of online shoppers returned their purchases because of damages or defects. Other reasons include: 

• Item doesn’t fit.
• Item mismatches description.
• Customers don’t like the items.
• Customers ordered multiple items/sizes.
• Items arrived late.

You can manage return process and lower your return rate with these best practices:

• Pack the goods safely
• Provide thorough size charts
• Optimize product descriptions
• Improve item photos
• Deliver products on time

It’s essential for retailers to know the available options of retail fulfillment and how each model aligns to your business. 

In general, there are 4 major order fulfillment models that are widely adopted in the retail industry. In this section, we’ll illustrate these 4 options by comparing their main features, pros and cons, and whether it’s suitable for your business. 

Third-party logistics (3PL)

A third-party logistics company receives shipments of goods, monitors warehouse stock levels, chooses and packages orders, and ships them to your customers. Other names for a 3PL include retail fulfillment centers, fulfillment warehouses, and fulfillment companies. 

Typically, 3PL providers offer the following services:

• Warehousing
• Inventory management
• Picking and packing
• Shipping and receiving returns

Some extra services are also provided:

• FTL and LTL freight shipping
• Freight forwarding
• Kitting
• Reverse logistics

Pros and Cons

Pros	Cons
Scalability for company’s space, labor, and transportation Time and cost savings Support retailers to enter new markets	Loss of control over inventory and service quality Substantial initial investment Extra costs: tariffs, over-regulation, etc.

When to use:

3PL is suitable when you plan to expand your business without intending to build and manage your own warehouse. Moreover, if your business often experiences sales seasonality or industry fluctuation, you may also opt for a 3PL service to take care of your fulfillment process.

Self-fulfillment

When retailers fulfill orders by themselves without help from a third-party logistics provider, it’s called self-fulfillment. 

In this case, you’ll need a system to initiate and manage the retail fulfillment process.Here’s  how the procedure works.

• Receive an order
• Select appropriate packing materials
• Package an order
• Label the order and deliver
• Follow the package to its intended location

Pros and Cons

Pros	Cons
Easy to start Control over the whole process Brand consistency	Substantial hidden costs: additional storage costs, labor costs,  ect. in peak seasons Time-consuming Complex to expand globally if you plan to operate in different countries

When to use:

Self-fulfillment could be more economical if your business is small and just getting started. It’s suitable when you have enough resources to support your internal logistics, and you want to have more control over your brand and consumer satisfaction.

Dropshipping

Dropshipping is a model of selling goods online without having to keep them in stock. When customers make an order, the seller sends information to the supplier’s system. The supplier subsequently takes care of order fulfillment and ships the product to the consumer.

Indeed, sellers, or dropshipping providers, serve as an intermediary and concentrate on product promotion and sales. 

The dropshipping process includes the following major activities: 

• Packing and shipping
• Inventory management
• Customer experience management
• Customer communications

As your supplier mainly takes charge of the order fulfillment procedures, retaining customer loyalty should be your focus now.

Every dropship order involves these five steps:

• Step 1: You sign an agreement with a manufacturer, retailer or wholesaler to provide the goods you advertise.
• Step 2: Customers place orders via your website, apps, marketplaces, etc. 
• Step 3: You notify your suppliers of the orders. 
• Step 4: The suppliers select, package, and send the products to your customers. 
• Step 5: You pay your suppliers.

Pros and Cons

Pros	Cons
Lower expenses and obligations Greater profit margins Low initial outlay Quick and easy to begin Flexible locations with a wide range of products to sell	Limited ability to control product quality Dependence on vendors  Increased possibility of supply chain problems Inadequate branding Harsh competition

When to use: 

Briefly, dropshipping is the practice between vendors and suppliers to sell and fulfill orders while in fact, vendors or sellers don’t keep the items in stock. Therefore, startups and businesses with new product testing can benefit from this strategy. 

In-store pickup

In-store pickup or buy online, pick up in store (BOPIS) means customers can purchase items online and pick them up at a physical place. As a result, this strategy helps retailers save shipping fees, increase store traffic, and boost sales. In 2022, there were 47% of U.S. customers buying more products when they visited the store.

By streamlining online to offline retailing with in-store pickup, retailers can engage with customers in person and offer them a more comfortable shopping experience. BOPIS or click and collect gained enormous popularity during the COVID-19 pandemic, and now 54% of retailers have offered it.

Below is how the procedure works:

• Step 1: Customers shop online.
• Step 2: Retailers prepare the orders.
• Step 3: Customers pick up their orders at the chosen physical stores.

Pros and Cons

Pros	Cons
Lower shipping cost Increase store traffic Faster transaction Reduce cart abandonment rate	Long waiting lines during peak time High staff expenses for preparing orders

When to use: 

In-store pickup is suitable if you’re operating both online and offline, and want to minimize both shipping expenses and cart abandonment. Then, higher store traffic can convert into higher revenue from extra items sold.

Fulfillment optimization is all about making sure that products get from the warehouse to customers as smoothly and quickly as possible. Let’s explore some factors to enhance your fulfillment process below:

Optimize warehouse layout

How you organize your warehouse can greatly impact your fulfillment operations. Optimal warehouse layout design can reduce travel times and improve accuracy during picking and packing steps

There are 3 most used warehouse layouts:

• U-shaped

This warehouse layout is in the form of a “U”, or a semicircle. Receiving and shipping are next to each other on two ends of the “U” and storage is located at the back of the warehouse.

This design works well for small warehouses, but note that congestions may occur if the receiving bay is too close to the shipping bay.

• I-shaped

In the shape of a straight line, this layout has shipping and receiving on two ends, while storage is in the middle. This design is helpful when your warehouse has to deal with high-volume orders because all goods will move in the same single direction to reduce travel time.

• L-shaped

This layout is in the shape of an “L” or a 90-degree angle. With storage being in the corner, shipping and receiving bays are located at each end of the “L”. 

L-shaped warehouses work well for businesses that operate cross-dock or swiftly move goods from an inbound truck to an outbound truck.  

Focus on staff training

Fulfillment staff training is important to ensure accuracy, safety, and productivity. As a retail manager, the following are best practices in training your fulfillment employees:

• Provide detailed instructions on each task, such as how to operate equipment, pack orders, handle inventory, and label shipments 
• Emphasize the importance of accuracy and speed in fulfilling an order, encourage your employees to stay adaptable to changing demands
• Familiarize your staff with the use of technology in the fulfillment process, such as how to use the warehouse management system (WMS), robots, scanners, etc.
• Conduct regular assessments to control your staff’s performance and encourage improvement

Regularly monitor fulfillment performance

It’s crucial to regularly assess how well you’re fulfilling your orders. This could help you determine where enhancements might be implemented and guarantee that your fulfillment processes are satisfying your customer requirements.

Some key metrics used in evaluating fulfillment performance includes:

• Total order cycle time
• Order picking accuracy
• Order fill rate
• Rate of returns
• Shipping cost per order

Invest in technology 

Technology can facilitate inventory level tracking, communication improvement, and process automation.

Warehouse management system (WMS) 

A warehouse management system is a retail fulfillment solution that assists businesses in managing day-to-day operations in the warehouse, from the time materials and items arrive at a fulfillment or distribution center until they depart.

Key features of a WMS include:

• Real-time data sync
• Customization with low to no code
• Continuous order processing
• Optimized inventory management
• Performance analytics and reports

Best warehouse management software:

• Easyship
• ShipHero
• Oracle Warehouse Management
• Veeqo Inventory and Fulfillment

Order fulfillment software

Magestore Order Fulfillment is exclusively made for Magento businesses handling multiple orders per day to automate and optimize the order processing. The fulfillment module supports the typical order fulfillment process at an SME warehouse below.

• Verify order (optional): Sales staff confirm and edit customer’s shipping and billing address.
• Check available stock: Separate orders into 2 groups whether all ordered items are in stock or not
• Pick items: Print picking list for multiple orders at once, scan a barcode to verify picked items
• Pack items: Create multiple packages for an order, print and add packing slips
• Deliver packages: Display shipping information and tracking number provided by the carrier

Shipping software system

Shipping software is a management solution to automate and simplify the product shipment. 

Key features to evaluate a shipping software include:

• Order tracking and management
• Label printing and packaging
• Shipping rate calculation
• Carrier selection
• Tracking shipment in real time and notifications

Top shipping management software:

• ShippingEasy
• ShipMonk
• Ordoro
• ComFreight

Returns management system (RMS)

A returns management system (RMS) is retail fulfillment software designed to assist eCommerce companies in streamlining and automating the product returns.

Key features of a RMS include:

• Automated customer communications
• Disposition management for resale opportunities and cost recovery
• In-depth returns merchandise authorization (RMA) management

Top RMS to consider:

• AfterShip
• Samsara
• Ordoro
• ShippyPro

What are 4 types of fulfillment?

These 4 types of fulfillment include:

• In-house fulfillment: You’ll take full control over the order fulfillment, from receiving, storing inventory to delivering to customers.
• Outsourced fulfillment: If you choose this option, a third party will do all fulfillment-related tasks, including receiving inventory and storing it. They also help select, package, and send out the products.
• Dropshipping: Dropshipping and outsourcing are comparable, however, dropshipping eliminates the need for inventory management. Retailers don’t hold products in their stock. Rather, they’ll request the ordered products from the suppliers. After that, it’s the suppliers who take charge of delivering the products to the customers.
• Hybrid fulfillment: This approach is a combination of some order fulfillment types listed above. For example, a business might use dropshipping for non-custom items while processing orders for custom items or items that need to be assembled before shipping in-house.

What is fulfillment in Retail POS?

Retail point of sale (POS) software is a technological solution that helps checkout products to complete sales, process returns, track order history, manage retail operations like inventory control, employee management, etc.

Retail POS software facilitates fulfillment process in the following ways:

• Automate order fulfillment
• Reduce shipping costs by suggesting the best time and cost-saving delivery options
• Support managing multiple warehouses and store locations
• Better control your inventory with real-time data sync between your warehouses, eCommerce site, and the POS system

What’s the difference between retail fulfillment and B2B fulfillment?

B2B fulfillment is simply shipping bulk orders from one business to another. This could mean sending products to a retail store, or to a corporate office for employees to use.

On the other hand, retail fulfillment involves packaging and shipping orders from retailers directly to customers or a specific retailer.

Awaiting fulfillment means the seller has confirmed the order and its associated payment. The order is now sent to fulfillment staff, who will pick and pack the listed items into packages. After this step, the package will be handed to a delivery service provider. It is assigned a tracking number, which buyers use to monitor their orders.

Let us examine an awaiting fulfillment example to understand the workflow better.

If a customer orders from a large retailer and the order tracking dashboard says awaiting fulfillment, their order has been successfully paid for and noted. Afterward, the retailer’s fulfillment team will pick out the items listed on the invoice, and prepare packages appropriate for shipment.

If the retailer is of a smaller scale (like a start-up project), one person may handle all fulfillment duties. In the case of a custom product, if it’s awaiting fulfillment, the item is being customized by the seller. 

Typically, awaiting fulfillment status lasts for 48 to 72 hours. Buyers can expect a notification or an email stating that the fulfillment is complete and the items have been shipped.

In addition, the merchant will likely send the order ID and tracking information. With these details, you can check the shipment status from your computer or mobile device. 

However, remember that order awaiting fulfillment time can take longer than this estimation. Disruptions and delays can happen quite often, and the issue may come from the merchant or what occurs is out of their control. 

Why should retailers care about awaiting fulfillment?

Understanding order awaiting fulfillment and other order statuses in the retail fulfillment pipeline is vital for retailers. The information helps retailers gain a general view of logistic processes. They will also achieve better order management. This knowledge will be the key to solving hiccups caused by disruptions such as wars, natural disasters, and accidents.

Furthermore, it enables them to provide timely support for buyers, improve overall experience, and earn good reviews. Buyers can ask many urgent questions like:

• When will my order arrive?
• My order is awaiting fulfillment. What does it mean?
• How can I check if there’s an issue with my order?

Understanding the term helps the merchant address customer concerns instantly. 

What happens after awaiting fulfillment?

When the fulfillment process is complete, the order is packed, assigned a shipment number, and ready to be picked up and shipped to the buyer. Buyers will receive a notification and see the status changing from awaiting fulfillment to awaiting shipment. 

However, delayed shipping can occur due to a myriad of reasons such as logistics disruptions and the increased workload of peak seasons. In this case, the status “awaiting fulfillment” can remain unchanged for longer than usual. 

In the order processing pipeline, apart from orders awaiting fulfillment, there are many status updates that you may have not yet fully understood. We have gathered relevant order statuses in the list below.

Pending

If an order is pending, it means the checkout process is incomplete. On some eCommerce platforms, the word “Incomplete” may be used, though the meaning is still the same. 

You have a few days to complete the transaction, usually up to 7 business days. However, the time allowed for pending varies greatly, and some sites may allow just 5-10 minutes. If a buyer fails to finish the payment process after that deadline, the order is canceled. The buyer needs to start from scratch if they still wish to place the order. 

Pending fulfillment

If the order status reads “pending fulfillment”, it usually means you are one step closer to seeing the package arriving at your front door. Compared to awaiting fulfillment, pending fulfillment indicates that the fulfillment process has started but is not yet finished. Your order is now being packed and labeled.

Pending fulfillment is placed after awaiting fulfillment and before the shipment step. However, since pending fulfillment and awaiting fulfillment share a lot of similarities in their meanings, some platforms may use them to indicate the same order status. 

Processing order

After an order is noted, the status will appear as “processing order”. It means that the merchant is in the process of picking, packing, and preparing your order for shipment.

An order’s processing time can range from a few hours to several days, depending on the merchant. The ideal time is no more than 3 business days. For example, if the seller has the item in stock, they can process the order instantly. If the product has to be transferred from somewhere else, it certainly will take longer. The type of product is also a decisive factor. Customized products can take up to several weeks to be made, significantly increasing the processing period. 

Awaiting shipment

You may notice that your order is at a phase called awaiting shipment, meaning the purchased item is ready to be dispatched and the merchant is waiting for the courier to pick it up. Couriers are usually employed by small businesses without dedicated employees for this task. For large-scale retailers with in-house delivery teams, “awaiting shipment” may signify that the item has been handed to them and is ready for shipping.

“Awaiting shipment” sometimes can be displayed as “shipment awaiting pickup”. Moreover, “awaiting shipment” and “awaiting delivery” can be used interchangeably since they share a similar meaning. 

One may wonder: How long does awaiting shipment or awaiting delivery take? Although it typically takes 1-2 days for the courier to pick up your order, during peak seasons, it is not uncommon for this status to remain unchanged for several days. This is similar to the duration of awaiting fulfillment.

Many people feel negative about the “awaiting fulfillment” phase, assuming their orders are arriving later than they expect. However, the status does not necessarily indicate a late delivery or delayed processing. Your case may fall into one of the following scenarios.

Your order has been received and acknowledged by the seller

The seller has noted this but has not yet started preparing and packing your order. Due to the possibility of a high number of orders, it may take a while for this to happen and for your order status to change. 

There is a delay in the fulfillment process

This may happen if the status does not change within a few days. The items you requested may be out of stock for now, so the merchant must wait for them to be shipped from another warehouse. 

Another solution to an out-of-stock item is putting it on the backorder. Unlike pre-order, backorder is an item that is temporarily unavailable but is guaranteed by the seller to be delivered within a timeframe. 

If you are buying a backorder, it makes sense that the awaiting fulfillment phase can last for days and even weeks.

You have requested a customized product

A customized product needs additional production efforts from the seller before it can be shipped to you. In this case, buyers may have to wait for months before they can see the order status switching from awaiting fulfillment to something else.

Your order is affected by external factors

Your order may have been affected by other external factors, which caused the logistic teams to be unable to proceed.

For example, during COVID-19, work safety restrictions were imposed on facilities worldwide, leading to a significant slowdown in picking and packing. As a result, the fulfillment time experienced a dramatic increase.

So how can your business improve the fulfillment process? 

Undoubtedly, enhancing the process plays an essential role in their profitability. The faster and more efficiently a retailer can fulfill customer orders, the more reliable they appear. Consequently, they gain more revenue from the growing number of satisfied buyers.

In the fiercely competitive retail landscape, providing excellent customer service is a key differentiator. Customers can easily reach out to your competitors if your service is unsatisfactory and the loss is yours to take. 

We have compiled a comprehensive list of actions that can measurably raise the quality and efficiency of your fulfillment process.

Sync data across fulfillment-related systems

For retail businesses, the order fulfillment pipeline can involve more than one system, which is common for those of medium and large scale. The process is even more complex with the addition of third-party service providers such as logistics companies. 

Cross-system data synchronization ensures a streamlined workflow. It allows participants in the order fulfillment process to stay informed and eliminates bottlenecks. If an issue occurs, all stakeholders can quickly figure out how to solve it and avoid downtime. 

Choose a suitable location for your warehouse

Retailers should place their inventory near where their target customers are. It should be also close to where order fulfillment is performed. The proximity helps them save transportation costs, which can be a significant figure, and decrease wait time for buyers. As a result, the items awaiting fulfillment will not pile up in warehouses and take up resources.    

Maintain traceability of the fulfillment process

Customers are eager about their orders and want to know when they receive the package. Thanks to visibility into the order fulfillment process, customer service staff and managers can quickly locate the order and answer customer inquiries. 

Make sure the inventory is always accurate 

Accurate and real-time inventory reports allow retailers to start working as soon as they receive an order. Moreover, they can truthfully report to customers if the product is unavailable or when they expect a delay. That is why keeping track of inventory is beneficial for overall supply chain management.

Plan for fluctuations in demand

Retailers need to have a clear idea of upcoming changes in customer demand. In the holiday season, shopping demand can skyrocket. Forecasting helps retailers avoid facing an overwhelming number of orders awaiting fulfillment. Conversely, accurate demand forecasting means they will not overstock their inventories when the market is less busy. 

Keep the workflow simple

While maintaining an adequate level of monitor and control, retailers should keep the management hierarchy as simple as possible. Consider combining or removing steps, and make sure the number and complexity of decisions and actions are minimal. This practice saves your time and effort and also reduces fulfillment errors.

It is a common practice to leverage innovative digital solutions to optimize the order fulfillment process. With digitally enabled automation and efficiency, managing order statuses such as awaiting fulfillment is a breeze. Magestore’s Magento Order Fulfillment Software allows merchants to: 

• Easily and quickly monitor the order fulfillment pipeline with live-update statuses in one single system
• Instantly locate orders to see whether they are awaiting fulfillment or are ready to be dispatched
• Check stocks across all your warehouses to define the most optimized fulfillment route
• In-depth and highly visual reports 
• Allow both default shipping methods and integration of 3rd-party couriers

Looking for something beyond order fulfillment? Seeking a holistic approach to managing your retail workflow? Check out Magestore Retail Management Software. 

Magestore Retail Management Software is a comprehensive store management solution that covers inventory, purchasing, and fulfillment aspects.

What it unlocks:

• Powerful inventory management and highly accurate demand forecast to regulate stock effectively
• Real-time supervision of omnichannel order fulfillment 
• Insightful reports that foster informed decision-making

To conclude, awaiting fulfillment indicates that the order has been confirmed. Afterward, fulfillment staff will proceed with packaging and shipping it. 

Retailers need to gain a thorough understanding of order statuses, including order awaiting fulfillment. It helps you manage orders with confidence and transparency. With process visibility, you can handle customer inquiries effectively and boost their satisfaction. 

Having reliable order fulfillment software such as Magestore will help you stay informed and run your business more efficiently.

1. What is the difference between awaiting fulfillment, pending fulfillment, and awaiting shipment?

These are the three statuses found in the order fulfillment pipeline. They can be differentiated by whether or not the fulfillment process has started and the order is ready for shipment. 

• Awaiting fulfillment: Your order is soon going to be packed and ready for shipment by the fulfillment staff.
• Pending fulfillment: The fulfillment process has begun. Fulfillment staff are now handling your order. 
• Awaiting shipment: The fulfillment process has been completed. The courier will soon pick it up and ship the item to the buyer. 

2. Are “orders fulfilled” and “orders shipped” the same thing?

No. While “Orders fulfilled” means the orders have been dispatched from the warehouse, “Orders shipped” means the items have been received by the customer. 

Nonetheless, the meanings of the two terms also depend on what e-commerce platform you’re using.

• Shopify defines orders fulfilled as items that have been packaged and soon will be ready to be dispatched.
• WooCommerce identifies an order as “fulfilled” when it has been shipped. It means that to WooCommerce, orders fulfilled and orders shipped are the same thing. 

3. What is the difference between awaiting fulfillment and processing?

The difference lies in whether the fulfillment process has begun.

• An order awaiting fulfillment means the fulfillment team has not yet started working on it. 
• “Processing” means the process has started. The order is now being packed and prepared to be shipped to buyers.

Order fulfillment is a comprehensive process from receiving an order to delivering it to customers. As time is a critical element, businesses have to ensure that the products are shipped on time. Fast delivery is the most critical element of a positive customer experience. It’s also essential to optimize the associated costs with technology tools, such as order fulfillment software or services.

1. Dropshipping 

Dropshipping is widely adopted by more than 40% of retailers even before COVID-19, making it one of the most common types of eCommerce order fulfillment.

Dropshipping means that the retailers don’t store the products but instead rely on a third-party vendor to provide supplies to fulfill an order. When a customer purchases one product from the retailer, the retailer then buys that item from the third-party supplier. 

The supplier is responsible for managing all the orders and delivering them to customers. This approach is suitable for startup sellers with limited capital.

While dropshipping is quite common for eCommerce order fulfillment, it might come with some challenges: 

• Lack of control over product’s quality: The merchant totally depends on the vendor in choosing, packaging, and labeling the products. 
• Additional fees: In case the products are damaged or don’t meet the client’s expectations, the merchants will have to replace the product and pay additional fees. 
• Possible delays: Merchants have to reach a required number of items to fulfill orders. Sometimes, waiting to gather large amounts of orders can take up to several weeks. Consequently, the customers will be more likely to cancel the orders due to the long period of delivery. 

2. Self-fulfillment 

As the name suggests, self-fulfillment means that you’ll have to carry out the whole order management by yourself without the intervention of 3rd-party companies. This can save costs and allow more control over operations. This method is most suitable for startups, family businesses, or medium companies that need to optimize costs. If you want to manage all operations independently  and activel, and get more insights into your business performance, this might be a good choice for you.

However, you could encounter some challenges:  

• Time-consuming and resource-intensive: Self-fulfillment means you have to spend time training your employees to process orders.
• Potential delays: Delays can happen if there’s a need for more resources and infrastructure in place. 
• Finding sufficient storage: Businesses will have to plan to hire the appropriate storage depending on season sales and different events. 

3. Outsourced order fulfillment

Outsourced order fulfillment means a third-party or contract logistics (3PL) provider will manage your orders. When you need extra storage spaces or employees, you can adopt this type. 

While it sounds similar to dropshipping, the difference is that with an outsourced method, you’re managing your inventory through your logistics partner, not vendors.

Outsourced order fulfillment is predicted to increase its adoption in the next 3–5 years, when 18% of retailers expect to outsource the process completely and 48% utilize a mix of insourcing and outsourcing.

You are also interested in: 3PL vs4PL difference

To fulfill an order, you’ll need to go through 8 steps: 

Step 1: Order placement 

The customers will select an order via the company’s website, third-party website, or mobile application. After making payment, they’ll receive a confirmation via email or telephone. This information can include customers’ personal contact, order info, and expected delivery duration. 

Step 2: Inventory management 

After confirming the order, the businesses will carefully examine the stock status to make sure that the items are ready for delivery. This process involves checking the product quantity, where, when, and how the product is kept. 

Step 3. Order processing

If the items are available for shipping, an order processing management system will generate the order details with the number of items and the total estimated costs (including taxes and shipping fees). 

Step 4: Picking

For small businesses (family businesses or startups) that don’t possess a warehouse, the employees will pick and pack the products in the store. Large companies with distribution centers will have a dedicated team to pick items according to the customers’ orders. Sometimes, the company can send out warehouse robots to choose these items, saving more human resources. 

Step 5: Packing

After picking, the items are carefully packed for shipping. In case the customers want to return the items for a refund, the packing teams will print the return shipping labels outside of the package to help the customers easily access the information. 

Step 6: Shipping

Businesses can choose different shipping methods for delivery, such as airlines, freight lines, or motorbikes. 

Step 7: Delivery

The order is picked up at the distribution channels. You can select the partners you usually collaborate with to optimize costs further. 

Step 8: Return processing

If the customers aren’t satisfied with the products or would like to change to another item, return processing begins. 

After you receive the product, you need to check if the product has any issues. If it remains intact, you can refund customers via their bank accounts, by store credits, and gift cards (depending on your return and refund policies). You can then sort and restock the item for future orders.