Why is excellent logistics performance important for successful sales on online marketplaces? What are the shipping models available? And what should be considered when choosing the right fulfillment model? We have the answers.
Last updated on April 20, 2023
Those who already sell products on online marketplaces know the problem: the platforms generally have strict requirements for delivery speed, return and inventory processes, as well as adherence to service level agreements (SLAs). If manufacturers meet these requirements, their visibility on the marketplace is increased, and they can be given preferential treatment by the platform. If the so-called SLAs cannot be met, the platform algorithm punishes the provider, and products become difficult to find, leading to a decline in revenue. It is a downward spiral.
In addition, end customers put enormous pressure on manufacturers. They expect fast and reliable delivery, as well as a high standard of product quality and customer service. When manufacturers meet these expectations, the likelihood of customers leaving positive reviews and becoming repeat buyers increases. It is, therefore, crucial for a brand to think carefully about choosing the right shipping model.
When choosing the shipping model, manufacturers are faced with the question: which fulfillment model should I choose? However, what does fulfillment actually mean? The term fulfillment refers to the entire process of storage, commissioning and shipping. There are various shipping models that companies can use to process their orders, ranging from self-fulfillment to fulfillment centers to drop-shipping. Each model has its advantages and disadvantages that should be considered to choose the right shipping model for one’s own business. Making the wrong choice can lead to high costs, poor customer communication, and dissatisfied customers. In contrast, choosing the right model can lead to an efficient and cost-effective fulfillment process that ensures high customer satisfaction and profitability.
Another shipping model is drop-shipping, where the retailer sells products that they do not have in stock. Instead, they purchase the products from a wholesaler or manufacturer, who then directly ships them to the end customer. Drop-shipping has the advantage that the retailer does not have to hold their own inventory and, therefore, does not have to bear inventory costs. The wholesaler or manufacturer also covers the shipping costs.
However, drop-shipping also has some disadvantages. One significant disadvantage is that the retailer has no control over inventory. If the wholesaler or manufacturer has a bottleneck or stops producing the product, the retailer cannot accept orders. Additionally, the quality of the shipping may vary significantly since the retailer has no control over the shipping process.
Fulfillment through service providers refers to the outsourcing of storage, picking, shipping and return handling to a third-party provider. The service provider takes care of all the steps necessary for successful delivery. Choosing a fulfillment service provider offers companies a number of advantages. Firstly, retailers can focus on their core competencies like sourcing, sales and marketing. Secondly, they can benefit from the expertise and infrastructure of the service provider, such as modern storage and shipping systems. Another advantage is flexibility: fulfillment service providers can adjust storage capacity and shipping as needed. Additionally, companies can save costs by outsourcing logistics processes and thereby strengthen their competitiveness.
Choosing the right fulfillment model is crucial for the success of a company in the e-commerce sector. There are various factors that should be taken into consideration when making a decision, such as specific requirements for storage and shipping of products, SLAs of the marketplaces, the geographical location of customers in the case of internationalization, and the company’s own resources. Another important factor is the scalability of the model to ensure that it can keep up with the company’s growth. A thorough analysis of the company’s needs and an evaluation of the available options can help find the most suitable fulfillment model. It may also make sense to combine or switch between different models to maximize efficiency and customer satisfaction.
Overall, an efficient and reliable fulfillment system is crucial for the success of a company in online commerce. Choosing the right fulfillment model depends on various factors, such as the size of the company, type of products, budget, and target audience. Drop-shipping, self-fulfillment, and fulfillment service providers each have their advantages and disadvantages that should be considered when making a decision. However, a professional fulfillment service provider can often be a valuable option to save time, money, and resources, and achieve high customer satisfaction. A careful analysis of one’s own needs and thorough research of potential fulfillment partners are crucial to finding the appropriate fulfillment model for one’s own company.
If you’re looking for an experienced fulfillment service provider for your business, please contact us.
Look no further! The onQuality Logistics team has more than 10 years of experience in supply chain optimization and can help your company expand across Europe.
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