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On-Demand Warehousing and Fulfillment – Don’t Believe the Hype

Suddenly, warehousing and fulfillment has become popular. Yes – packing and shipping is now “sexy”. Why, you might ask? Over the last few years, e-commerce sales have grown at an exponential rate, and where growth is, so too will be interest and opportunity. But the growth in e-commerce fulfillment hasn’t been the only fuel to fire the flame of interest in this otherwise dull industry. Fulfillment and warehousing have been amplified to a new height within the news and media due a new way of doing business within the industry – on-demand warehousing and fulfillment.

On-demand warehousing has captured the hearts of venture capitalists and big businesses alike. Over the last few years, significant money has been raised to start-up and grow multiple new on-demand warehousing businesses. Flexe has raised over $20 million in venture funds, Stord has raised $2.4 million, and Flow Space has raised $2.2 million. Venture capitalists aren’t the only ones entering the fray either – UPS just launched its new Ware2Go platform in an attempt to capture some of the forecasted $26 billion market for on-demand warehousing and fulfillment services.

So on-demand must be the next big thing in logistics that every online retailer should choose, right?

What is On Demand Warehousing?

On-demand warehousing is quite simply an online marketplace of warehousing services where users of warehouse space can tap into the network and use warehouse space on an “as needed” basis, and providers of warehouse space can offer excess warehouse space to other companies as it is available. Popularized by the consumer facing Air BNB and Uber, on-demand warehousing, in theory, connects ANYONE with additional warehouse space, regardless of background in commercial warehousing or traditional 3PL warehousing. In essence, anyone can offer their excess warehouse space as it becomes available, to be used by those in need for short or long-term projects. On demand warehousing attempts to disrupt the commonly used channels of either acquiring leased space as needed or using a 3rdparty warehouse by creating an Uberized platform to “exchange” these services in real-time.

On Demand Warehousing and Fulfillment

Companies such as Flexe, Stord, Flow Space and Ware2Go have each built an online platform where warehouses can list their space and those in need of services can acquire space. These online platforms are built in such a way that the entire transaction is run through the platform, from listing and acquiring warehouse space, to the management of inventory and shipping of orders, as well as the final billing of the customer for services rendered and payment of the warehouse operator. In exchange for providing this platform, these on-demand companies earn a commission for serving as a medium for the exchange.

As you might have guessed, on-demand warehousing companies aren’t only geared towards the exchange of seasonal or additional warehouse space. Rather, they’ve even ventured into the realm of attempting to exchange more complicated “fulfillment services,” so that companies with extra space can earn money by not only storing pallets in their warehouse but also picking, packing and shipping orders for those in need.

The “Apparent” Advantages of On-Demand Warehousing

Initially, on-demand warehousing was started in order to solve the ever-growing warehouse space dilemma. Businesses that need additional warehouse space, whether on a short-term basis or in another location, have traditionally had to search for a warehouse space to lease or use a 3PL warehouse, as there haven’t been any avenues for this need in the past, especially for non-3PLs.

Some of the most common reasons that companies need additional warehouse space are:

  • Seasonality
  • Product promotions
  • Bulk buying
  • Lead time variability
  • Same/next day shipping demands
  • Business contraction
  • Growing into new space
  • New products
  • End of year challenges
  • Expansion into a new territory
  • Buying discount
  • Product recalls

According to Stord (with an admittingly small sample size), only 80 percent of warehouses are utilized fully, meaning there is 20% capacity at any given time within industrial warehouse space. On the opposite side of the coin, nationwide, the industrial vacancy rate is 5.3 percent, and industrial rents were up 8.2 percent in 2017, after increasing 8.7 percent in 2016, according to the JOC.com. These unique circumstances have created an environment that both presents an opportunity to fully utilize excess warehouse space as it becomes available and also circumvent some of the challenges of finding and acquiring additional warehouse space that is needed. In the past, the only solutions were to sign a short-term lease, shift to another DC if relevant, sell off inventory, hire a 3PL to take care of it, sign a long-term lease, or search for and solidify some sort of alternative off-site storage solution.

On the surface, it seems like there could be some use for on-demand warehousing.

Not Just Warehousing – On-Demand Extends into Fulfillment

These on-demand solutions claim to be the answer to not only warehouse space needs but also fulfillment. On-demand companies have upgraded from tracking inbound and outbound pallet shipments, to facilitating the exchange of carton and single unit order fulfillment. Using the provided system, users of on-demand fulfillment can have another business in another location ship orders for them. The primary goal of on-demand fulfillment is to fulfill shipping needs in additional locations and to enable smaller and growing retailers to compete in the “same-day” or expedited shipping environment without opening up additional in-house locations.

On Demand Warehousing and Fulfillment Has Serious Weaknesses

Sounds like an interesting proposition, right? But can ANYONE fulfill orders for another business? Is on-demand warehousing and fulfillment actually beneficial from a cost perspective? We answer these and other questions below.

Can Anyone with Warehouse Space Fulfill Orders?

Companies like Uber and Air BNB work well because anyone with a license can drive a car and anyone with a home can rent out space. But is the same true for warehousing? Certainly, it’s easier to be convinced that a business with additional warehouse space can without tremendous headache accept bulk pallets, store them, and occasionally send them back out from time to time. As long as the systems are streamlined and the business has some idle labor, storing and shipping pallets is “doable.” But what about complicated pick, pack, and fulfillment operations? Can any business add this to their list of capabilities? On-demand companies want you to think that as long as you have experience shipping orders, you have the ability to handle fulfillment for other companies.

The reality, however, is that there are a few large obstacles to making on-demand fulfillment work. First, the company offering on-demand fulfillment services must have significant idle capacity on the labor side in order for fulfillment and shipping to be more than an “afterthought”. One can easily pull a pallet and leave it at the dock for pick up, but it’s far more challenging to pick, prepare, and ship 100 orders in the afternoon on a busy day.

Second, non-3PL warehouses will always battle the “priority” problem. A 3PL warehouse has to serve all of its customers or risk losing any one of them. But a company that has a primary business will almost always put the needs of their business first, above any need of a fulfillment customer that they’re simply earning some incremental revenue from.

By the way, most professional fulfillment companies with years of experience make mistakes – even with the latest and greatest in technologies and staff that are geared towards that singular focus. Companies that don’t focus on being a fulfillment operate will, without a doubt, make more mistakes even still than warehousing firms.

Which is why 3PL warehouses are likely going to be the primary warehouses used by on-demand solutions, since they’re already geared towards providing this service and detail. But is it better to use an on-demand fulfillment service (only to use a 3PL that they’ve matched you up with), or are you better off just going straight to a 3PL? We’ll touch on these questions below.

Is There Really a Cost Savings Using an On-Demand Warehousing Solution?

The concept behind cost savings in on-demand warehousing is that they will leverage their overall volume of deals to get better individual rates. But this doesn’t really work. Here’s why:

First and foremost, the warehousing and fulfillment industry is a very low margin, high volume business. You have to understand that there isn’t a huge amount of “play” in rate structures. If rates are decreased significantly without a corresponding synergy due to volume, performance and quality will diminish as a result. There’s only so much room to squeeze out of fulfillment pricing.

Therefore, an Air BNB warehouse must either force the warehouse to operate at a lower than acceptable margin and mark up this cost (in order to remain competitive with stand-alone fulfillment solutions), or they must accept a much smaller margin and simply mark up the costs to customers slightly, or they must be marking up costs over and beyond the pricing of a traditional 3PL in order to make appropriate margins. Because most of these companies are venture backed, you can be certain that their business model isn’t to make a small margin of profit. Because of this, it’s reasonable to assume that they are either forcing businesses to offer service at a lower rate or they’re marking up costs above fulfillment companies in order to make their desired margin.

Paying too much for on demand fulfillment

This is a recipe for disaster. If on-demand providers are forcing businesses to operate at a lower than desired margin, performance will dip. There is just no way to complete the same amount of work at a lower margin. The warehouse may decide to make this additional money while they have some capacity but once they have a source of revenue that provides a better profit margin, they will ditch it in a heartbeat. And if they’re simply marking up costs above those of a 3rdparty warehouse, then eventually the market will bear that imbalance and companies will switch as they realize that they can get better rates elsewhere.

It’s extremely difficult to add an unnecessary third party to a transaction, add the additional fees necessary to pay this third party, and not have a resulting increase in costs – especially in the case of a very low margin business.

But to further illustrate the pricing dilemma, we found the following related to on-demand warehousing and fulfillment rates:

  • You pay $10-15 per pallet for storage, the local warehouse gets $5, and the on-demand warehouse gets $5-10 (remember – the on-demand warehouses have to provide a return to all of those shareholders that invested millions of dollars in their idea!). We found the average pallet rate going direct to be around $9 per pallet.
  • You pay $7-12 per pallet for in and out handling, when the average for the industry is typically around $3-5.
  • The on-demand warehouse prices fulfillment at $1.85 per order plus $.85 per item (which is lower than the fulfillment pricing industry averages we uncovered during our last survey), forcing the local warehouse to operate well below their normal operating margin, which makes one wonder are shipping prices used as a cover for lower fulfillment fees (see below…)
  • Promising a very non-detail-oriented “shipment fee per shipment”, which is most likely marked up to a degree to offset the lower fulfillment fees

Pricing will be higher for your business using an on-demand solution – guaranteed.

If You Won’t Necessarily Get Better Rates, Why Should You Choose On Demand?

And this is where it gets interesting – the claim of on-demand warehousing and fulfillment is that not only will you save money versus using a traditional 3PL warehouse (which we rebutted above), but you’ll also get better performance than managing a 3PL fulfillment company relationship yourself. From Flow Space itself:

FlowSpace

A few thoughts on the above graphic. First, due to changes in the industry and pressures from customers, many 3PLs have adopted month-to-month or ‘no-commitment’ contracts. Similarly, many warehousing firms have opted to charge no or very little minimums. These claims are simply inaccurate for many fulfillment options.

Second, the claim that 3PL warehouse software is more difficult than on-demand software is simply an advertising ploy. Unlike on-demand warehousing which has been around a few years, 3PL warehouse software has been around for decades. In this time, the software providers have adapted, evolved, and done everything they can to make their systems more user-friendly. In fact, many 3PLs themselves have built their own 3PL software to make things even better for their specific needs and the needs of their customers.

Third, the claim that 3PLs are poorly organized is highly subjective and not backed by data. Fulfillment companies oftentimes have dedicated account management staff, so you’d be hard pressed to find a better solution for customer service. In fact, getting someone on the phone to be able to answer questions is oftentimes more desirable than email communications.

Which leaves us with hard to scale integrations among multiple fulfillment centers and confusing pricing. If a company uses multiple fulfillment centers that aren’t the same company, then perhaps the on-demand solution is less cumbersome. One of the main objections people have with fulfillment houses is that they have pricing that is difficult to understand. However, this isn’t necessarily lost in on-demand solutions, who charge in a very similar fashion to most 3PLs.

What About Using On-Demand for Increased Delivery Times?

Let’s focus on another big area of emphasis within the on-demand world – fast delivery – You keep hearing about how everyone wants their product in 2 days or less (popularized by Amazon Prime services). But is this statement really true? Yes, Amazon has helped push the limits on same day or 1-2 day expedited delivery, but how many orders are really shipped within hours or next day? We can tell you through our site that the number of people that request multiple locations due to the need for same day or expedited delivery options is less than 5%, indicating a small desire for this service – at least today.

Actually, many recent studies have shown that low shipping costs fully trumps speed – 87% of shoppers like free shipping over fast shipping. In another study, 74% of shoppers said cost is more important than timing. According to a recent Shippo survey, 3% of those polled want same day shipping, 44% want 4-7 days and 53% want 2-3 days.

The Amazon effect (because so many people use Amazon Prime) has created a bit of an expectation, but it’s not translating into absolute expectation. This is not to say that shipping speed isn’t important, but it’s just to say that warp speed shipping isn’t an absolute necessity yet, especially for smaller and mid-sized retailers. Therefore, the argument to use on-demand fulfillment services to exploit expedited shipping advantages seems like more of an emotional ploy than a fact at this point.

Is On-Demand Good for Small Businesses?

Another unstated reality is that most on-demand companies are geared towards mid-tier and larger companies. It’s been reported that only one of the new on-demand companies listed above really focuses on smaller and growing companies. But the interesting part is that this company, Stord, apparently focuses on small as being 50 to 100 pallets of storage, or hundreds if not thousands of orders processed per month. Many small business clients have storage needs that are far less than 50 to 100 pallets, and may only ship a few hundred orders per month or less.

Are on-demand warehouses really helping small companies? Because margins are lower for low margin scenarios, the resounding answer is NO!

Does On-Demand Warehousing Work for Seasonal Needs?

Let’s tackle seasonality of needs. One big timeframe where service is needed is during the holiday rush, which is quite common for retailers and 3PLs. In other words, at least logically, the on-demand warehouses will have to match users during the holiday season with warehouses (non-retailers and non-3PLs) that don’t see peak activity in the holiday season, or else they too will be subject to limited supply and limited availability to help process orders.

Do you want a company that does something else completely to perform shipping services during a time when they’re already busy and your business is secondary to theirs? Otherwise, we’re really talking about just having 3PLs help out, which is already in existence and without the needless markup previously mentioned. So apparently there must be a big pool of non-retailer/non-3PL based warehouses that are willing to help you during your rush, have a slower season during the holidays and are itching to earn some extra dough at the end of the year and give you a priority status in their business. Something isn’t quite adding up…

Does On-Demand Fulfillment Software Really Simplify Processes?

The on-demand warehouses claim that their systems are extremely easy to learn and implement – and we will take them at face value that this is true. However, it’s important to note that this is essentially creating a new business for the warehouse using their software. For a non-3PL, this is a separate inventory/fulfillment/shipping system than the one they use, and there will be different packaging and labeling requirements, etc. Essentially the company is managing two businesses with two separate software systems.

For 3PLs, they will be utilizing another system that is separate from their core. They are probably best positioned to learn the new system and implement it, but it’s still secondary to their core processes, and their core customers that they don’t “share” with anyone else and that they presumably earn more profit from. You need to know that there’s a chance that the company will be faced with a last-minute crunch during a busy time and may be left with processing either your on-demand order where they earn less and use someone else’s processes and procedures or they will choose to help their existing customer where they earn more money and have to actively manage the client. Which path do you think they’ll take?

Will You Receive High Quality Customer Service?

The actual on-demand warehouse seems to be the one performing customers service. If you have a question you’ll contact them as opposed to the warehouse that has your goods and is shipping your orders. For some customer service this is understandable and workable, as much of the data is tracked in the inventory and shipping management system provided by the on-demand solution. However, there are many instances when answers won’t be easily obtained by looking at the system (such as changing an order, diagnosing an error, checking in on a return or receipt that hasn’t been entered, etc.).

In these cases, you will have to contact the Air BNB warehouse company, who will in turn contact the warehouse. Once an answer is obtained, you’ll be provided a response. This adds an additional layer of communication into the fold, and will definitely lower the overall response time. As opposed to simply calling a 3PL warehouse directly, you’ll be waiting longer to get a response. In the case of a very critical order or shipment, this increased time could spell disaster.

Bad Customer Service with On Demand Warehousing

Furthermore, another challenge is that the warehouse may start receiving customer service requests directly from the customer. As an example, once the user of the on-demand service finds out that it’s ABC Fulfillment Service shipping their orders, they may be inclined to contact ABC first for questions – and it won’t take long for them to figure out who is shipping their goods. This will add another layer of service for the warehouse processing the work, and if they’re already operating at a lower margin, it may serve as another challenge to continued participation in the network.

With so Many Problems, What is On-Demand Good For?

Warehousing on-demand is challenging for many scenarios, but it isn’t the wrong choice for everyone. In fact, in one area is could truly excel – connecting very simple pallet in/pallet out needs with warehouses that have excess capacity to handle the workload. Especially in cases where the pallet minimums are reached (e.g. over 50 to 100 pallet minimums) and in cases where the pallets are exact dimensions and not product that is subject to any warehouse condition requirements (e.g. non-food items that aren’t subject to temperature controls), on-demand warehousing could work out. Also, on-demand warehousing could be helpful in cases where you just simply can’t find an option in an area. These may be few and far between, but the on-demand service might have an option in an area that you can’t find on your own.

But in many other cases, on-demand warehousing and fulfillment appears to be extremely problematic. From a service and pricing perspective, following a more traditional 3PL warehouse route will be far more advantageous. Don’t be fooled by the fancy headlines and sales pitches – on-demand warehousing may seem like a great solution at first glance but it could end up costing your company severely in the end.

Survey Reveals Whether Fulfillment Companies Believe Amazon Is Becoming a Monopoly

Is Amazon a Monopoly?FulfillmentCompanies.net surveyed its warehouse network of fulfillment houses throughout the US and Canada in order to see how logistics professionals are responding not only to Amazon’s recent expansion into a small parcel delivery service but also to Amazon’s overall position in the logistics marketplace. The goal of this survey was to determine how warehouse operators perceive Amazon’s growing dominance in the industry. The findings are below, including the questions that we asked on the survey as well as the percentage of responses.

Do you see Amazon’s recent announcement to recruit entrepreneurs to run small scale delivery services as an opportunity or threat for the logistics industry and in particular fulfillment companies like yours?

61.5% said “Opportunity”
38.5% said “Threat”

Do you consider Amazon fulfillment as a direct competitor to your business?

44.2% said “Yes”
55.8% said “No”

Do you believe Amazon’s dominance in online retail, growing fulfillment network, and now entrance into the shipping industry is moving the company more towards a monopoly position within the e-commerce logistics industry?

80.8% said “Yes”
19.2% said “No”

How much of a threat do you perceive for your company with regard to either Amazon’s fulfillment services and/or shipping services?

7.7% said “No Threat”
23% said “Mild Threat”
23% said “Neutral”
36.5% said “Slight Threat”
9.8% said “Strong Threat”

Conclusions to be Drawn from the Survey

While a majority of our respondents felt that Amazon’s new Delivery Service Program represented an opportunity rather than a threat, other responses reflected that warehousing companies feel that Amazon is a serious contender in the logistics industry that needs to be accounted for in any strategic plans. Nearly half of the respondents of our survey (44.2%) indicated that Amazon is a direct competitor to fulfillment warehouses. But even more alarming is that a vast majority of warehouses (80.8%) believe that Amazon is bordering on a monopoly. Almost 47% of the warehouses in our network indicated that they believe Amazon is either a slight threat or a strong threat to their business. All in all, fulfillment warehouse operators have a sharp eye on everything that Amazon is doing so that they can respond and best position themselves against this market leader.

Final Thoughts from the Warehouses in our Network

Below are some of the other general thoughts from the warehouses that responded to our survey:

  • Amazon can never give the service level that smaller 3PL’s can deliver. If you fit in their box, then great, but most brands don’t fit in only the FBA box for their brand. This means there is a place for both FBA and higher service-level 3PL’s to co-exist.
  • Amazon fulfillment services are definitely creating problems for the smaller fulfillment company and UPS and FedEx. I believe that they have a huge market share and are a definite game changer.
  • UPS and FedEx have owned the small package delivery services for years. Amazon will be moving into this space as a disruptor and if they prove to have reliable service, may reduce to costs of shipping small packages. If Amazon can provide service to our customers on a 24-7 basis, this will certainly be a large threat to our company in the future or we will need to change our business model to include also working 24-7.
  • I don’t like the Amazon business model where they use 3PL and delivery companies to start the business then take it over on a direct basis.
  • Amazon has too much overhead to work with many of our customers. The ones that can go to Amazon recognize they must deal within their rules, their ever-changing rules. Our customers can’t afford Amazon’s ridiculous storage fees. However, many do because they sell their product, it’s more than a fulfillment house, and they’re the selling vehicle. We see it as a cycle, many clients have gravitated to Amazon but are beginning to develop strategies to sell more from their own sites. They’re beginning to see the value in education on eCommerce selling.
  • While I agree that Amazon is building a monopoly with online retail I think there will always be plenty of logistics business for smaller providers who focus on their customers, provide excellent service, and can offer customized flexible solutions unlike big companies like Amazon.
  • We don’t understand why Amazon isn’t in the crosshairs of the Government for anti-trust violations. Their actions to gain vertical integration, and their pressure on the Government post office to lower costs clearly block competition.

Drop Shipping, Fulfillment Companies or Self Fulfillment: Which is the Best?

Drop shipping, fulfillment outsourcing and self fulfillment explainedWhether you are new to the world of eCommerce or already enjoying success, it will always pay to consider trends in business. One trend may surprise you. It is the simple fact that the “post-purchase experience” is now rising to the foreground and forcing online merchants to reconsider how they handle issues such as order fulfillment, shipping and even returns.

Customers want a noticeable measure of customer service if any issues occur, but they also expect well-packaged goods, clear and prompt communication about issues such as packages shipping or ID numbers, and so on. This leads to repeat business, and as that is the key to long-term success and growth, it pays for you to take note and consider the best options.

As this is such a huge area for anyone in eCommerce, the focus of this article will be those three main routes through which your customers’ post-purchase experiences occur. As the title describes them, they are:

  • Drop Shipping
  • Fulfillment Companies
  • Self-Fulfillment

We are going to look at each in turn to find out what they are, their pros and cons and any other factors that might influence your decision. Before we do, though, let’s be sure you understand that post-purchase experience through the lens of order fulfillment.

Your job, once a customer has made the order, is to get them whatever they purchased as quickly, affordably and safely as you can. You will have to consider things like inventory management, warehouse operations, order processing, picking and packing, shipping and communicating with the client.

The problem you might already see is this: You did not go into eCommerce to run a warehouse and shipping firm. This is exactly why you will want to consider passing that on to experts who ARE in the business of running warehouses and shipping to the most professional standards.

Drop Shipping Explained

The use of drop shipping is not at all new. It is a scenario in which you are more the proverbial “middleman” than vendor. This is because you never actually have the merchandise in your possession. Instead, you are going to market the products and once orders are placed through your website, special software or other methods convey those orders to the “drop shipper”. They will package the goods per your requirements and ship them to the buyer. Drop shippers can be manufacturers, but they are just as often specialized warehouses.

In short, drop shipping is where you focus on your core competency of selling and marketing while outsourcing everything else to the drop shipping firm. The only exception is that you may be in charge of customer service.

What are the pros of this model? You have almost no overhead, which means you can begin this sort of eCommerce model at once. The profit margin depends entirely on the prices you negotiate with the drop shipper or manufacturer. You are never at risk for investing in too much merchandise you then unload at a loss. It also offers you tremendous insight into your audience. Did they respond more to product A or product B? Maybe they wanted a little of both? With this data, you never had to invest in huge amounts of merchandise, but you could then (with confidence) do so and use an alternative approach to the post-purchase process; third party fulfillment, also known as fulfillment companies.

However, in terms of cons – you will pay a higher per unit price because you’re not purchasing the product in bulk. Also, you will be at the control of the drop shipper in terms of fulfillment and shipping, relying upon their services for the critical last steps of the customers journey.

Fulfillment Companies Explained

In this approach, you do make that investment and buy the inventory before you offer it for sale on your various websites, marketplaces and landing pages, meaning that you can capitalize on lower costs per unit due to buying in bulk. Where the fulfillment companies enter the equation is that the warehouse and shipping center receives, stores and ships orders to your customers. In other words, they receive bulk lots of goods you sell through your online venues, and they then process all your orders and ship them to your clients.

Though you might automatically assume that your profit margins are lower with this model, give it a few moments of reconsideration. Firstly, you don’t have the cost of keeping a warehouse (either buying or renting). You have no employment expenses, utility costs or materials costs (such as investing in large quantities of packing materials). Instead, you have the cost of the goods and the fees from the fulfillment company used to determine your retail price and profit margin.

Are there other pros and cons? Absolutely, just consider the amount of time that is saved by outsourcing every part of the process after making the sale. Instead of managing a warehouse and shipping operations yourself, you are going to look at expanding your audience, offering superior customer service and satisfaction, improving marketing, and exploring additional product lines.

One thing to consider in our “versus” comparison thus far is this: Fulfillment centers “are best for brands which have their own, unique product (in drop shipping, you are using a supplier’s product), no inventory space and want to focus on acquisition rather than shipping.”

This brings us to the final model to consider, the self-fulfillment model that is the one that leaves you with the most control, but also the most responsibility.

Self-Fulfillment Explained

As you might realize, a business that uses the self-fulfillment model is one that owns the inventory and handles all the order fulfillment itself. It means you may be making your products (or buying them), storing them and performing other warehouse operations. It means you will have a shipping department, and all the staff that these various tasks require. You may have to maintain separate offices and handle all the administrative work from there. This would mean relationships with shipping firms (if you are not manufacturing your own goods) and doing a tremendous amount of work to ensure the utmost quality and satisfaction.

Isn’t this the original model followed by mail order and other similar businesses? Yes, and it does give you immense control over everything from customer data to costs for supplies. Brands choosing self-fulfillment are often particular about the delivery experience. As we pointed out, this is a huge factor to buyers, but it does not mean that drop shippers or fulfillment centers cannot also supply that exact delivery experience, too.

Choosing What’s Right for Your Company

How can you determine which is the ideal model for your company and its goals? Let’s reconsider them each briefly.

Drop shipping is fast and easy to begin, it doesn’t require a lot of business development, it is incredibly cost effective and affordable, it is scalable and allows you to expand your offerings, and lets you focus on your core competencies of marketing and sales. However, it is not ideal where customer support is concerned because you are (in essence) selling other’s products. It does not nurture your company as an actual brand and the ease of entry into the market means your profit margins are going to be the lowest of all three approaches.

Fulfillment centers are one of the darlings of today’s eCommerce firms because they allow you to have global reach and without huge overhead expense. The fulfillment centers themselves are experts at packing and shipping, guaranteeing less damage and lower shipping prices. Where you need to be careful is in the old “if it sounds too good to be true, it probably is” area. In other words, a fulfillment company that promises the world but doesn’t have the credentials to prove it may be worth avoiding. Go with the proven leaders, even if they ask higher prices as your customer satisfaction counts on it, and as we learned at the beginning of the article – that is what matters most in the current climate.

Self-fulfillment is the final path, and is great if you have the funds to make it work. Why? You are in total control of product quality, customer service, optimized and prompt shipping, and even costs for materials. It is heavy in logistics and takes you away from your desire to focus on marketing, sales and company growth – unless you hire someone to tackle it for you. It is not always ideal for a startup because it does demand staff, space and specialized software (and even servers).

Which is right? Only you can know the answer, but if you sell your own products/inventory and want a third-party to handle storage, packing, and shipping for you, you’re looking for an order fulfillment company. If, however, you don’t have products or inventory, but are happy to sell another brand’s goods, the drop shipping model is an affordable way to get started right away. If you are looking to have total control and have the capital, you will find that self-fulfillment is ideal. Whatever path you choose, know that there are many services and resources available to you. From sites like Amazon that allow you to sell and fulfill your orders to online marketplaces like eBay, Etsy or even Walmart, you can leverage your presence. However, don’t overlook the importance of developing your brand. A website, social presence, blog and competent SEO are also part of any eCommerce success, and fulfillment can become one aspect of your favorable reputation and success.

To get a full understanding of costs of using a fulfillment company versus in-house fulfillment, use our handy in-house versus outsourced fulfillment pricing calculator.

The Costs and Benefits of Expanding to an Overseas Fulfillment Solution

international delivery and fulfillmentTapping into overseas markets can become very lucrative for businesses like yours, despite a lot of complexities dealing with international logistics. While many fulfillment centers here in the U.S. can help you make overseas shipping a reality, it depends on what their knowledge is on customs and other international regulations.

Any violations from lack of awareness could hurt your business reputation in short order. Many countries don’t accept certain products, and various fees and taxes need full consideration. Even if the fulfillment center receives a fine for violating these regulations, your overseas customers are going to blame you.

This could ruin any chance of keeping loyal international customers you’re just starting to nurture.

It’s all the more reason to consider the costs and benefits of expanding to an overseas fulfillment solution. Doing so could give you more advantages in reaching various foreign cities that are otherwise too difficult to reach from the U.S.

Let’s take a look at how this could work for you in the coming year.

International Markets Help During U.S. Sale Downturns

As a major impetus to find an international fulfillment center, keep in mind sales here in the U.S. can frequently fluctuate wildly. You may already feel the pain of this with the holidays ending and a sudden drop-off in sales figures.

By finding an overseas warehouse to partner with, they’ll help you find markets in their region to keep sales going when dwindling here. Some countries have specific holidays during other parts of the year that could help you attract sales during slow times stateside.

The Costs of Shipping Internationally

More than anything, you’ll want to find an overseas fulfillment center because of the large cost of shipping from here to there. Once you open new markets, the shipping fees, package tracking, taxes, and customs fees become tremendous. Since this constantly changes, you could also make mistakes on these as mentioned above.

During times when a good portion of your sales occur in a foreign market, it can start to become a major expense shipping there. Since you want new customers overseas to get packages as soon as possible, you’ll probably have to invest in air cargo most of the time.

It may become a challenge when you have to decide whether shipping by slower ship cargo is easier on your budget over air service. Because customers overseas want their deliveries just as fast as Americans do, you may have no choice but to do expensive shipping by air most of the time.

Expensive Shipping Charges for the Customer

A major problem with shipping overseas from the U.S. is that you’ll have to charge larger shipping fees to keep yourself profitable. International customers may balk at this when they see how high overseas shipping rates are. Even American consumers sometimes abandon shopping carts if they see shipping charges going beyond more than a few dollars.

International shipping frequently goes above $10 (and more), depending on what the product is. Going through an international fulfillment center allows you to get rid of the expensive shipping and just charge normal domestic shipping in a particular country.

Caveat: Communicating With Your Overseas Warehouse

Now that you see the benefits in cost for using an international fulfillment warehouse, it’s time to remember how important communication is with them. If you’ve slacked on keeping communicated with a domestic warehouse, you absolutely need to know what’s going on with one overseas.

Thanks to real-time technologies, you can find out without having to visit in person. Be sure to talk with everyone in charge there every day, whether through video conferencing or by real-time chat technology.

Expect them to give you transparency so there isn’t any confusion about your shipping expectations and what’s occurring internally.

Contact us at insightQuote to let us help you find a fulfillment center that’s perfect for you here in the states. We can also help in finding one internationally.

Unreturned Items and the Impact it Could Have On Your Business

Unreturned itemsReturns are inevitable from consumers in a time when customers want specific items to help them solve problems. Not all products you sell are going to please everyone, though how easy do you make it for returns?

You may not know that over a fifth of all consumers surveyed said they were too busy to return an unwanted item to an online store. In many cases, they didn’t bother to return it because they thought the returns process was too complex and time-consuming.

When this happens, it’s usually due to realizing your returns process is too protracted. This only leads to customers thinking you make all returns too complicated to bother. Unfortunately, this usually results in the customer not shopping with your online store again.

You might experience other negative things until you streamline how you do returns. Here’s more on unreturned items and the impact it could have on your business.

Bad Feedback From Customers

Because online reviews are so common over the last few years, you can’t afford to ignore what people say about you. Having an inconvenient return policy could backfire and end up being mentioned in online feedback.

When you start getting numerous comments like this, it’s impossible to stop them. With excessive complaints about your returns process, it could lead to new prospects moving on to your competitors where returns are easier.

Places like Yelp make negative comments widely seen, so the impact can become far-reaching into the future. However, you can respond to them and indicate you’re changing things.

Word Spreading About Faulty Products

If you make returns too complex, it’s more apt to spread other negative word about your business. Namely, it could lead to customers being more open about how bad the product was. Perhaps the biggest problem is you’re selling faulty products, something you’ll keep repeating if not amending returns and internal quality inspections.

When a customer can simply return the item and receive a good product, they maybe won’t mention the faultiness. They’ll figure it’s an anomaly, especially when you can make the “return and replace” process fast.

Losing Communication With Loyal Customers

Another bad scenario is if many of your loyal customers start complaining about your products because they aren’t getting what they really want. During these moments, you should realize you’re losing regular communication with those most loyal to you.

Communicating regularly with your most loyal customers can help you find out what they really want so you don’t have to deal with so many returns. However, making returns easy for them is essential since it’s basically another form of communication.

An efficient returns system usually collects information about what the problem was with the product, why the customer returned it, and how many returns you’re receiving. These metrics help give you information you need to improve your products, provide what customers want, and continually streamlines how you process returns.

Placing Your Fulfillment Center in Jeopardy

Since the fulfillment center is where returns take place, not properly processing returns there could lead to the warehouse losing their credibility in the marketplace. All of this may snowball and become a problem for them and you if you don’t change things as soon as possible.

What’s important is to stay communicated with your fulfillment center to work out an excellent returns policy. It’s time to make this work as quickly as possible on a level you see in major corporate stores. Mimic their simple returns packaging, as well as easier return forms.

Contact us at insightQuote so we can help you find a quality fulfillment center with pain-free return processes.

Does Your Online Business Need Chat Commerce? Personalizing Customer Communication

ChatbotPersonalizing communication with customers is something that you’ve likely worked hard to accomplish this year, though the methods you’ve used still lack critical elements. Nowadays, customers want quicker means of being able to communicate with your company if a problem arises. The old methods of phone calls, emails, or even snail mail inquiries are far too slow to get an issue resolved quickly.

Today’s consumers don’t have patience to let a concern go unsolved for weeks, days, or even hours. It’s why if you’re going to open a communication portal to them, real-time chat commerce is the best approach.

Of course, you have to ask yourself: does your online business need chat commerce? Using the words “chat commerce” might sound overly new to you, yet it simply refers to brand and retailers using chatbots or messaging apps to support their customers.

These help your customers search for products, place orders, track orders, or help on returns. Let’s look at what these virtual assistants do and how to cement customer relationships.

Real-Time Chatbots

No doubt you’ve seen real-time chatbots that pop up automatically on many websites. They’re an invaluable way for a customer to inquire about something and get an immediate answer from a chat representative. While the chatbot can come up automatically with an automated “How can I help you?” message, your chat operators can take care of any problems instantly.

These are ideal if you expect customers to ask a lot of questions about your products, especially when the latter have complex features. The sooner you can get any customer questions answered, the better.

At one time, this had to occur through social media to work. Now chatbots are a major answer to personalizing all your customer communications. They can even get used when there’s a problem with orders and a customer needs fast information.

Messaging Apps

You’ll want to try out message apps as well, which are easy to upload on mobile devices. With so many customers on the go now, using messaging apps can change the game in communication. Some products you sell may cater to those who have to travel often. They may need to research a product on a mobile device during a work day and make a fast, educated decision on what to buy.

If they find you have a messaging app, they’ll find out information quickly from a chat representative. This gives you an immediate leg up on any competitors who may not use these apps often enough. Regardless, with so many messaging apps and virtual assistants out there, which one is the best for your business style?

Some of the Best Messaging Apps Today

Dozens of messaging apps are available, but WhatsApp is one of the best for easy use on Android and iOS phones. With easy setup and an ad-free platform, you can start using this almost immediately. It offers texts, photos, voice contact, and video messages to keep in full contact with customers when it’s necessary.

While you might consider WhatsApp unbeatable, it has many equals. Google Hangouts are still a good place to connect with groups of people all at once, especially when wanting to discuss your products in-depth.

Facebook Messenger is another great option, which just builds on Facebook’s current chat network and mobile features. One great feature on Facebook Messenger is their “Chat Heads” feature, allowing you to chat with customers while you have other apps up on your screen.

What’s important is to find a messaging app or virtual assistant with as many communication options as possible. Customers are going to have their own preferences for how they want to contact you, and vice versa. In this regard, give them as much choice as you do payment methods.

Contact us at insightQuote so we can help your business prosper in the new year with our FulfillmentCompanies.net service, allowing for efficient logistics.

How to Differentiate from the 800 Pound Gorilla (Amazon): E-commerce Tools Can Help You Grow?

Alternatives to AmazonDifferentiation is a keyword every business should get to know, because it’s so essential in a time when competition is more intense than ever. No matter what business you’re in, it’s likely you have someone else doing or selling the same thing. Whether it’s on an international, national, or local basis, you have to compete with these other businesses every day with e-commerce.

The question is, do you have decent e-commerce tools to help you carve out a unique identity? Branding needs to become top priority in the new year if you think you can still attract business using mere basics.

Unfortunately, you’re at risk of just blending in with everyone else if you stick to overly simple e-commerce features.

Here’s how to differentiate from the 800 pound gorilla (e.g. Amazon), and how e-commerce tools can help you grow.

Using HubSpot

There isn’t any question that HubSpot is the leading e-commerce tool in the world. It helps you with numerous aspects in your online business (including SEO and marketing). This platform also helps differentiate yourself with their marketing tools, including setting up a valuable CRM to connect with customers in new ways.

You can’t do without a customer relationship management program. Not only can you communicate with customers in real-time, you’ll connect with others in your inner circle. You can include your fulfillment center in the mix to keep updated on logistics being up to customer expectations.

Ometria

Here’s an e-commerce tool you’ve perhaps never heard of, yet can help you differentiate yourself better than any other. One reason Ometria is so popular is it customizes your e-commerce to individual shoppers for a more personalized tactic.

It’s also one of the best out there for metrics, giving you more thorough analysis of what makes each customer tick. Having this available helps you differentiate based on individuals rather than just catering to a faceless crowd.

Also known as retention software, you’ll be able to retain loyal customers easier by providing them with their own preferred way to shop.

Jirafe

Many consider this clever-named e-commerce tool nearly identical to Ometria above. Really, it’s apples and oranges between Jirafe and Ometria. While you’ll find some small differences, Jirafe’s strongest feature is its consumer intelligence system, giving you supreme analytics on what customers buy.

Being able to have this at your fingertips lets you create your own customized e-commerce plan, as well as ways to create sales offers you know can resonate.

As you see, many e-commerce tools take analytics seriously since the more you know about consumers, the more you get into their heads on what they want.

TradeGecko

As yet another tool you’ve perhaps overlooked, this one relates directly to better managing your inventory. You can work with your fulfillment center easier using TradeGecko since it keeps a perfect track record of your inventory as you sell items.

No doubt you’ve experienced some discrepancies with your fulfillment center in the past about how much inventory you have left during critical sale events. TradeGecko updates your inventory in real-time so you won’t need to make last-second phone calls to the warehouse asking about what’s left.

eShopWorld

With eShopWorld, you get another customized e-commerce tool allowing you to present more detailed data on products you sell. More precisely, it lets you list prices in different international currencies to aid your international customers. Plus, it shows the buyer their exact shipping charges, as well as any taxes or other fees they need to pay.

Providing more detail about what people are going to buy brings transparency to your business, as well as more trust.

Contact us at insightQuote so we can help your business succeed with the right fulfillment center. We help vet warehouses through our FulfillmentCompanies.net.

Alternative Payment Methods to Include On Your Webstore: From Direct Debits to Digital Currency

different payment optionsAs the holiday season winds down for package deliveries, perhaps one complaint you received from customers this year is not enough diversity in payment methods. Even if you take all major credit cards, customers expect more nowadays since everyone has their own preferences due to various circumstances. When you consider not everyone can use a credit card, how do you expect them to buy from you in a convenient way? You could lose a quarter of your potential customer prospects not offering alternative payment systems.

The good news is that if you think there’s only one or two alternate methods available, think again. So many new options are out there now to offer more choices than ever. Many of these range from direct debits to mobile payments, to even multiple digital currencies. In many cases, you can do these payment systems through established places like PayPal. Here’s some alternative payment methods to include on your webstore to start the new year with a fresh slate.

Direct Debits

The era of everyone owning a credit card has dwindled considerably as consumers realize it can lead to problems. Many don’t want the fees imposed, or the risks of perhaps charging more than they can afford. Some might only carry a debit card, which looks like a credit card, yet takes money directly from their bank accounts. It’s time to allow debit purchases, something you’ve perhaps avoided for years. Bringing this convenience to customers makes them more apt to buy since they’ll only spend money they have available.

Bank Transfers

Otherwise known as wire transfers, allowing this procedure makes it easier for customers to shop if they use multiple bank accounts. They may have to transfer money from one place to another in order to properly pay for a purchase they make with you. While fees are sometimes imposed with transfers, it’s essential to make it part of your payment methods for the added convenience. Otherwise, some customers may hold off buying from you, simply because you demand one bank account for every e-commerce transaction.

Allowing More Mobile Payments

If you’re not already aware, millions of consumers now shop on a mobile device. More specifically, 122 million consumer bought something via mobile during this holiday season. With this evidence at hand, you have no excuse not to provide mobile payment methods. You should allow a consumer to buy with one just one click on a mobile system accessible anywhere in the world.  Your only challenge is making mobile e-commerce easy to use, easy to read, and adaptive for every mobile operating system.

E-Wallets

An e-wallet works in tandem with mobile devices, yet you’re possibly still in the dark about what this is. With an e-wallet, you’re basically providing an online hub that stores all consumer information for future purchases. It means when customers shop with you (at home or on a mobile device), they won’t have to fill out multiple fields to buy something. Ultimately, e-wallets speed up the buying process to avoid any potential of an abandoned digital shopping cart.

Digital Currencies

Providing digital currencies should also become one of your many options. Undoubtedly you’ve heard about bitcoin, despite a lot of controversies over the worth of this currency. Digital currency experts note you need to watch out for crypto-currency, as well as pre-mined bitcoin. It takes some careful scrutiny to do this right, though other digital currencies exist to give you more variety. You’ve probably never heard of Ethereum, Ripple, or Litecoin, but they’re currency alternatives some prefer for more legitimacy.

Contact us at insightQuote so we can help you with your business by finding the right fulfillment center using our vetting services.

What is Contained in a Fulfillment RFP?

Fulfillment RFPA fulfillment “Request for Proposal” (or RFP) is a major part of the process in looking for a fulfillment center. When you send an RFP, you’re basically using it as part of your vetting process in assuring a warehouse you want to work with is top quality.

As much as you might think every fulfillment center is the same, they’re really not. Many of them across the nation vary greatly in functional quality, technologies, and designs for specific business structures. It’s hard to know this, however, without asking vital questions to help you discern what works best for you.

An RFP is basically a set of inquiries that look more deeply at what the fulfillment center offers. They may give you the basics in their marketing, yet it’s hardly ever enough to know everything.

So what’s contained in a fulfillment RFP? Let’s take a look at the questions you should ask, and anything else you need to include to achieve thorough vetting.

Asking Whether the Partnership Will Truly Work

Always remember that when working with a fulfillment center, you’re going to need to work closely with them like any other business partnership. One of the first statements you should make in your RFP is telling the warehouse exactly what you’re looking for in a fulfillment center.

By telling them directly what you expect, they can better know whether you’re both going to have a successful partnership. It’s best to know early and not realize you’re not a match halfway into a busy customer buying season.

Listing Your Business Concerns and Problems

Giving the fulfillment center a list of your most serious shipping problems, the fulfillment center can better understand where you’re coming from. They’ll also know whether they’ll truly solve your problems with their technology.

Logistics require a lot more challenges now, so if you find out from this that they aren’t completely up to speed on shipping technology, it’s best to move on to someone else.

Some warehouses might have superior technology, yet just don’t have experience shipping products like yours, or equipped for your business structure. Transparency in your RFP scopes this out fast.

Providing Details About Your Company

The more your considered fulfillment center knows about your company, the better it can serve you. It’s unfortunate many business-warehouse relationships go on generalities rather than truly knowing every detail about one another.

Tell them about when you opened, your owners, and your sales figures over the last several years. Listing your strategic goals also matters so the fulfillment center knows whether their own growth can handle your future logistics expectations.

If they tell you they probably won’t have any technological growth over the next few years, it’s a possible red flag.

Inquiring About the Scope of the Warehouse’s Services

Asking what the warehouse provides in the way of services helps you pin down what you really need and what might become a waste of time and money. Tell them about what your average order totals are and the type of shipments you need for every customer.

You also need to inquire about how many international orders they can handle if you’ve opened up to overseas markets. Plus, don’t forget to give details about what your product (or products) are so the warehouse understands how to appropriately handle shipments.

Your products may need unique special handling as well, and not all warehouses can accommodate this. In addition, ask about inbound volumes, communication methods, and your expectations in how packaging should occur at receiving and shipping.

Contact us at insightQuote so you can use our FulfillmentCompanies.net site to vet a fulfillment center that works for you. We’ll help you through the RFP process.

Things to Consider for International Shipping: Miminizing Costs and Timeframes

In the coming year, perhaps one of your top business agendas is branching out to international markets. Doing so is one of the best moves you can make to expand your customer horizons, though it's not easy to do on your own. If you've gone this long without working with a fulfillment center, you'll find it overwhelming doing international shipping on your own. You're going to need a fulfillment warehouse to take care of overseas shipping complexities. Considering all the regulatory issues, payment processing, and complicated logistics in shipping things to foreign countries, you need someone professional to help you. When you properly vet a quality fulfillment center with experience in international shipping, things can work out easily. Nevertheless, you need to know what the details are in this type of shipping so you know it's being done right. Here's some things to consider for international shipping while minimizing costs and shipping things faster to your new overseas customers. Researching Import Compliance Laws To show how complicated it sometimes becomes shipping to foreign markets, some countries don't allow certain products across their borders. Before you ship anything there, you absolutely need to diligently research the country's import compliance laws. Not keeping up on this could result in major fines and custom restrictions. This encompasses various products from ordinary objects to specific foods. In the latter case, some edible products might not get delivered due to strict mandates on listing ingredients and expiration dates. You can research this at reliable sources like DHL Express where they have a complete database by country. Courses like Import Dojo get you educated on this if you're just starting. Knowing Your Custom Fees Before you can even send a product into another country, you have to know what the custom fees are, as well as duties, and taxes. These change often, so working closely with your fulfillment center is important to keep up on the latest fees. If you have an e-commerce store, it can become more difficult to keep up with these custom fee changes. It's all the more reason to research the countries you're shipping to so you don't become complacent. Be sure to pass on this information to your fulfillment center so they know how to handle shipments properly to avoid taking blame for violations. Preventing Delivery to Inaccurate Addresses One thing about international deliveries is addresses are frequently written differently from those in the United States. This could lead to a mistake if you have to create some of those addresses manually. PCA Predict is a good source to help you verify addresses before you ship out overseas. Otherwise, making too many mistakes could end up costing you more money to re-ship an item, including more custom fees. It also delays fast delivery, which only risks your reputation with first-time customers. Estimating Transit to the Location Your transit time is where cost and time frames meet. They may collide when you realize you have no choice but to ship through a faster method, at a major fee. It's important to list exactly what shipping charges are to your overseas customers so they know exactly how long it's going to take. If you think you can go cheaper and do a route by ship instead of air, doing so minimizes your costs. In situations where you're shipping food, this might not become the best way for obvious reasons. Whether you use air transport or not should all depend on what your product is and the exact distance between where you are and the country you're sending to. Contact us at insightQuote so we can help you find a fulfillment center that has experience in shipping efficiently to new foreign cities.In the coming year, perhaps one of your top business agendas is branching out to international markets. Doing so is one of the best moves you can make to expand your customer horizons, though it’s not easy to do on your own. If you’ve gone this long without working with a fulfillment center, you’ll find it overwhelming doing international shipping on your own.

You’re going to need a fulfillment warehouse to take care of overseas shipping complexities. Considering all the regulatory issues, payment processing, and complicated logistics in shipping things to foreign countries, you need someone professional to help you.

When you properly vet a quality fulfillment center with experience in international shipping, things can work out easily. Nevertheless, you need to know what the details are in this type of shipping so you know it’s being done right.

Here’s some things to consider for international shipping while minimizing costs and shipping things faster to your new overseas customers.

Researching Import Compliance Laws

To show how complicated it sometimes becomes shipping to foreign markets, some countries don’t allow certain products across their borders. Before you ship anything there, you absolutely need to diligently research the country’s import compliance laws.

Not keeping up on this could result in major fines and custom restrictions. This encompasses various products from ordinary objects to specific foods. In the latter case, some edible products might not get delivered due to strict mandates on listing ingredients and expiration dates.

You can research this at reliable sources like DHL Express where they have a complete database by country. There are even courses where you can get educated on this if you’re just starting.

Knowing Your Custom Fees

Before you can even send a product into another country, you have to know what the custom fees are, as well as duties, and taxes. These change often, so working closely with your fulfillment center is important to keep up on the latest fees.

If you have an e-commerce store, it can become more difficult to keep up with these custom fee changes. It’s all the more reason to research the countries you’re shipping to so you don’t become complacent. Be sure to pass on this information to your fulfillment center so they know how to handle shipments properly to avoid taking blame for violations.

Preventing Delivery to Inaccurate Addresses

One thing about international deliveries is addresses are frequently written differently from those in the United States. This could lead to a mistake if you have to create some of those addresses manually.

There are different source you can use to help you verify addresses before you ship out overseas. Otherwise, making too many mistakes could end up costing you more money to re-ship an item, including more custom fees. It also delays fast delivery, which only risks your reputation with first-time customers.

Estimating Transit to the Location

Your transit time is where cost and time frames meet. They may collide when you realize you have no choice but to ship through a faster method, at a major fee.

It’s important to list exactly what shipping charges are to your overseas customers so they know exactly how long it’s going to take. If you think you can go cheaper and do a route by ship instead of air, doing so minimizes your costs. In situations where you’re shipping food, this might not become the best way for obvious reasons.

Whether you use air transport or not should all depend on what your product is and the exact distance between where you are and the country you’re sending to.

Contact us at insightQuote so we can help you find a fulfillment center that has experience in shipping efficiently to new foreign cities.