Ecommerce Fulfillment: What’s The Best Business Model?
It’s safe to say, ecommerce fulfillment is a vital component of all online businesses that have an ecommerce business. If you sell products, you have a fulfillment process. In fact, there’s a few fulfillment model types you can use but which one is right for you?
You know you have a great product, hopefully multiple products that are flying off the shelves faster than you can stock them. You’ve created a great marketing strategy that puts your products in front of the right customers. You have orders rolling in and you’re primed for explosive growth that will change the face of your business.
The fulfillment business model you ultimately go with or migrate to is going to have a huge impact on your success or failure. It’s a big decision, you need to choose the right fulfillment model for your company.
The question you need to ask, “do you just go with the flow or do you have a bigger vision?”
While having product and market matches are vital to your success, it’s your ecommerce order fulfillment that’s the engine of your growth.
Let’s Talk ECommerce Order Fulfillment
Generally speaking, order fulfillment, represents the entire process of a customer ordering a product and receiving that same product. By the same token, anyone with experience in ecommerce is likely to know that there’s a series of complex steps in the supply chain that play a role in how customers view your business.
First, let’s look at the core steps in the ecommerce fulfillment process.
Likewise, for those of you that have medium to large sized businesses, you’ve likely already began researching ecommerce fulfillment services. For the most part, most smaller businesses are able to do their own inventory management, packing and shipping. However, as operations begin to scale up, fulfilling orders yourself will become more difficult.
Ecommerce Fulfillment Business Models
There’s no question that having the right ecommerce fulfillment business model is extremely important. Ultimately, you have 3 business models to choose from.
Of course, each ecommerce fulfillment business model has its pros and cons. Depending on where you are with your company and the goals you have in mind, one business model may be favored over the others. Let’s take a look at each one.
Third-Party Fulfillment (3PL)
With 3PL fulfillment, your inventory is owned before you sell it. You either purchase or manufacture the product. You then store your inventory with a 3PL provider and it’s often up to the you to market your products.
When an order is made by your customer, the third-party fulfillment company picks the order, packs the order and ships it out to your customer. Also, many third-parties help with COGS and economies of scale, but that’s something you’ll want to confirm first.
These ecommerce order fulfillment companies provide your business with a lot of different perks. As for the 3PL fulfillment model;
Third-Party Fulfillment Model
- Products are purchased or manufactured by you while stored at a 3PL
- The ecommerce store you’ve chosen is integrated with your fulfillment partner
- A customer places an order and pays for that order.
- Your fulfillment partner picks, packs and ships out the order
- The customer receives the order.
Third-Party Fulfillment Benefits
When you select the right fulfillment partner you experience a number of different benefits. Here at Thill, our fulfillment software integrates with most popular ecommerce platforms. Here’s a few of the ecommerce platforms our fulfillment software works with.
- Amazon Ecommerce Integration
- Shopify Ecommerce Integration
- Magneto Ecommerce Integration
- Ebay Ecommerce Integration
Not only can you outsource your ecommerce fulfillment, but also free up your time so you can focus on other areas of your business. When you decide to outsource your fulfillment, you don’t have to worry about finding space for your inventory or hiring a big fulfillment team.
Equally, due to most 3PL fulfillment options, hiring a 3PL can also help you lower your shipping cost and potentially save you tens of thousands of dollars.
Dropshipping Business Model
The dropshipping business model is another option for ecommerce fulfillment. With this business model, you are the middleman. When a customer places an order, you place the order with your chosen partners.
With dropshipping, you don’t have to worry about shipping orders or any part of the ecommerce fulfillment process. You sell the product higher than the retail price and that’s what you get to keep.
- Integrating your business with your dropshipping partners.
- Customers placing an order and pay for it with you.
- Your supplier ships the item to your customer.
Self-Fulfillment Business Model
The self-fulfillment business model is straight forward, you do it all. In this case, you’re responsible for everything.
Most start-up companies have a self-fulfillment business model or drop-shipping business model. In the beginning, it can be cost effective to do your own ecommerce fulfillment where you:
- Control manufacturing, inventory storage, warehousing, under one roof.
- Take your customer’s order and payment.
- Pick and pack, ship the product to your customer.
Which Model Is Best?
With ecommerce fulfillment, all 3 business models work.
Again, based on the goals and vision you have for your company, you decide which model works for you .
You decide what size your organization fits into. Dropshipping and self-fulfillment are great if you’re a start-up business. Of course, what is the plan if you grow? As you can see, if you are a medium or large sized company you would benefit greatly from a third-party logistics company.
Call us today with any questions about your ecommerce fulfillment or fulfillment in general. One of our fulfillment experts will be happy to assist you!