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. 

What is a product catalog?

A product catalog is simply a set of information about all the products that you are ready to showcase on your website. A product catalog on a website acts as product display booths in an offline store. Depending on customer understanding or business purposes, the information in product catalogs is divided into different sub-categories varying from industries to industries.

(An example of a product catalog on Magestore POS)

What does it include?

A product catalog typically includes the following information:

• Product name, title
• SKU (Stock keeping unit) (which is unique for each product used for inventory management)
• Product category/sub-category
• Dimensions (size, length, volume, height, etc.)
• Product description/short description (constituents, features, version, year of the launch, ideal conditions of usage, safety measures, etc.)
• Price
• Pictures 
• Terms and conditions

Who needs a product catalog?

To better answer the question: “Why is product catalog management important”, we first should understand who needs a product catalog.

• Merchants: you are the very first one to need this information. You need it to showcase what you’re selling to customers, for inventory management, for marketing activities.
• Customers: they are the ones reading your product information the most. Before making a purchase, they will research the products carefully, consider information from various sources. If they visit your website and see that you’re providing the items they demand, they are more likely to buy from you. In this case, a concise and comprehensive product showcase on your website will help you win these customers.
• Your sales staff: They may be the second-most readers of a product catalog. Your sales staff can refer to the product catalog to communicate, consult with customers about the product benefits or other crucial information about a product.
• Your partners: You’re a wholesaler and have a lot of retailers, do you like to spend some time every day just informing or answering questions about products again and again from your retailers? It’s kind of time-consuming, isn’t it? Show them your well-organized and real-time product catalog to save time for both.

What is product catalog management?

Product catalog management is now a must-have in retail businesses. The managing task refers to the strategic approach of structuring, organizing, standardizing, and publishing the product information across all online sales channels. To put it simply, it is about maintaining the product database in a well-organized and well-structured manner and keeping it up to date.

Why is it important?

Now that you’ve known what product catalog management is and who needs the product catalog. Thus, it’s now easier to understand the importance of product catalog management. A well-organized, concise product catalog on your website will help you set up a foundation for your business.

Create an Omnichannel experience

Going omnichannel is now more than just a trend. It may be one of the best ways to operate a retail business thanks to its outstanding benefits over multichannel. The primary concern of any retailer is to maintain a consistent omnichannel experience. Effective and proper product catalog management will allow you to ensure the correction and consistency of the product database.

Enhance customer service

When a customer visits your website, does it mean you’ve successfully won this customer? It’s too early to make that conclusion. You want that customer to have further engagement with you. The customer will read the product information provided on your website and compare it with other information they’ve collected from different sources.

If they can’t find the information needed or find the information confused or poorly organized, they will soon leave your website and may never come back. When you haven’t had the opportunity to talk directly with customers, let your powerful words on your website take the lead.

Develop your business

Looking at a good product catalog management, you can easily see what products you can sell fast, what your key products are. Based on that, you can add more products to your catalog, have more marketing activities to promote key products. That is how excellent product catalog management can grow your business.

Offer relevant and quality product information

This is the first and foremost point to notice when talking about managing a product catalog. As business owners, you need to make sure you’re delivering the correct and updated information to your customers. This helps ease the product search process of customers and increase their trust in your brand.

Categorize your products properly

How you convey product information to customers is as important as what information you want to convey to them. At this point, you should pay attention to easy product navigation options and clear categories. For example, your first product catalog looked like this:

Fashion Store

• Casual clothing
  • Women
  • Men
  • Children
• Underwear
  • Women
  • Men
  • Children

But after you’ve observed your customer’s behaviors carefully and consulted from other stores, you decided to change the current catalog to:

Fashion Store

• Women
  • Casual clothing
  • Underwear
• Men
  • Casual clothing
  • Underwear
• Children 
  • Casual clothing
  • Underwear

Another example maybe instead of using L to denote Large size, you change it to 38. A good product catalog structure comforts the filtering process of customers.

Provide alternative products

An effective product catalog should not only show the right products customers are looking for, but also can suggest alternatives for different products. This benefits both your customers and you.

One tip in this part is to use tags. Sometimes, customers don’t have a particular intent for a specific product, they just search for products by keywords. In this case, your search result should show them many options rather than just a few ones. When your customers have more choices and you have more chances for upselling or cross-selling.

A good product catalog shows how profoundly you understand your customers which is the pillar stone in successfully managing a product catalog. When you haven’t had the opportunity to talk directly with customers, let the powerful words on your website interact, and keep customers staying. For more discussion about how to design a great-fit product catalog management plan, let’s talk with our experts.

Every day, hundreds or thousands of inventory activities may happen in a business. They create an increase or decrease in the quantity of products.

Let’s explore eleven operations that can create a change of quantity in stock.

1. Deliver items ordered from both website and POS to customers 
2. Return items after customer’s refund or exchange
3. Purchase items from suppliers 
4. Return items to suppliers
5. Dropshipping
6. Transfer items between warehouses
7. Adjust inventory 
8. Stocktaking
9. Delete items in the product catalog
10. Import product list including quantity as master data for the first time using the system
11. Changes in the warehouse structure

To run a business efficiently, merchants nowadays need to utilize technology such as websites, POS system, inventory, or an ERP system. However, no system is perfect, and there’s no guarantee that everything will run smoothly at all times. 

In particular, in inventory systems that record a lot of transactions every day, the differences between theories and real quantity can happen in any period. 

Human error or system issues are where the differences can come from. For example, your staff is unfamiliar with the system, so they record the wrong quantity when receiving items from the supplier. 

Your system upgrade can also result in conflicts and data differences.

Let’s find out some inventory management pains that merchants can face: 

• The system doesn’t record a decrease in quantity although items have been shipped to customers or record an incorrect number.
• The system doesn’t record an increase in quantity although items have been returned to warehouses.
• The quantity doesn’t change after an inventory adjustment or transfer.
• The order is not synchronized to the admin backend.

To help merchants relieve headaches of stock discrepancies, Magestore has released the stock movement report feature on the POS system as well as retail management software.

The report will save and display all information about the stock movement by item in a grid for easy tracking.

Let’s see how it looks!

Inventory movement report in Magento backend

(Inventory movement report on Magestore POS system) 

• Date: Day, month, year, and hour your business create changes of quantity
• Status: It shows Completed if there is no error in the stock change update. In contrast, it shows Failed.
• Product info: Names and codes (such as SKUs) of items that increase or decrease in quantity
• Action: Activities or reason that results in the changes of quantity such as ship to customers or transfer between warehouses
• Source: Location that has the changes of quantity
• Old quantity: Quantity on hand before the changes
• New quantity: Quantity on hand after the changes
• Change of quantity: Quantity of stock moved into or out of the location. For example, if you ship 2 items to a customer, it means that the quantity decreases by 2. The report then will show -2. In contrast, if you receive 3 more items from the supplier, you can see +3 in this column. 
• Action details: The reference that results in stock changes. Admin can click the link to go to the reference such as a purchase order, a sales order, an inventory adjustment, etc.
• User: The person in charge of tasks that created the quantity change.

Magestore inventory movement report includes the following information:

Besides viewing the report, you may want to export it in CSV or Excel for later reference or sending to others.

(Merchants can export inventory movement report CSV file on Magestore POS system) 

Last but not least, merchants can check the list of error orders in a centralized view and proceed to correct inventory data.

(Merchants can check the list of error orders on Magestore POS system) 

Inventory movement history on PWA

The inventory movement report is also available on our Retail Management PWA. With it, store managers can keep track of inventory transactions in their location.

For more details, check out our detailed article on managing inventory on a Magento PWA.

You may invest in a big website, POS system, or a huge inventory system with multiple warehouses and forecasting. However, it still lacks an overview of how each item moves in and out. 

The inventory movement report offers a place to detect issues and find the solution to solve them. 

If you’re interested in implementing a movement report that gives you peace of mind, don’t hesitate to contact us now.

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. 

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.