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Ecommerce fulfillment

Guide to fulfillment: grow your online sales channels

Illustration of a house with an Amazon delivery truck and package at the doorstep

What is ecommerce fulfillment?

Fulfillment is the process of getting orders to customers. It can involve the related tasks of receiving inventory, storing and packing products, shipping orders, and handling returns, as well as maintaining communication with the customer, along the way. Some sellers manage fulfillment in-house, while others use an ecommerce fulfillment service like Fulfillment by Amazon or some combination of in-house and third-party fulfillment options.

Why is fulfillment important?

The right order fulfillment service can give you a competitive edge by helping you:
  • Store products and track inventory
  • Package and label orders
  • Manage customer relations
  • Send shipments on time and provide tracking information
  • Obtain current information on stock levels
  • Attract customers with fast, cost-effective shipping
  • Take care of product returns and exchanges
Effective, reliable fulfillment services can help build trust with shoppers and keep customers happy. But what if product delivery doesn’t meet customer expectations, or items are damaged during transit? Fulfillment problems like these can hurt business.

What types of businesses should invest in fulfillment?

Fulfillment is a vital process if your business relies on getting products to customers. It might be cost-effective to handle fulfillment yourself. But how do you know when to invest in storage space or a third-party fulfillment solution? Here are some cues:
  • Orders are on the rise: As you scale, it might become difficult to keep up with fulfillment demands
  • You don’t have the infrastructure to handle inventory: You might run out of room to store and stage inventory between restocking and shipping to buyers
  • Fulfillment costs are eating into your margins: Fulfillment can consume valuable time and resources, with costs adding up quickly
If you’re experiencing challenges like these, a service like FBA might help free you up to focus on other areas, such as strategy and growth.

Consequences of subpar fulfillment

Improper packaging might lead to a customer receiving a damaged item. A box with the wrong label could get lost or end up in the wrong place. And if products don’t arrive on time, do you think the buyer will order from you again? Fulfillment issues like these can hurt sales and negatively impact your reputation in the form of bad reviews.

Fine-tune the fulfillment process or work with a fulfillment solution to grow your brand and keep customers happy.

We’ll walk you through some considerations, best practices, and top tips in this article. Here’s what we’ll cover:
illustration of a person packing a product with the Prime logo

5 types of ecommerce fulfillment models

As a business grows, ecommerce brand owners often reach a crossroads: Should you scale up in-house operations and find a way to store, manage, and ship more inventory, or enlist a fulfillment service? Here are three potential solutions:

1. In-house fulfillment

Storing and shipping orders from your place of business is a common approach for smaller brands. This option may limit the variety and quantity of products you can store and sell, and it could increase your overhead expenses.

In-house fulfillment is worth considering if you:
  • Sell a low volume of products
  • Have a functioning logistics network
  • Sell products with complicated packing and shipping requirements
Storing, packing, and shipping inventory quickly and efficiently to the customer’s front door becomes even more critical as orders increase. You can scale to a bigger warehouse or storage location or outsource fulfillment for some products to an outside party.

2. Third-party fulfillment

Many ecommerce service providers offer fulfillment solutions, including warehousing, packing, shipping, and handling returns. For example, FBA provides all these services for Amazon sellers. During 2021, more than 600,000 sellers in Amazon’s U.S. store used FBA to provide free, two-day shipping to customers. (source)

3. Multi-channel fulfillment

Multi-channel fulfillment is the process of managing and fulfilling orders across various channels where customers can purchase products, such as from your website, in Amazon stores, on social media, or elsewhere.

You don’t need an exclusive fulfillment option for each channel. Having a multi-channel fulfillment solution can help you diversify your ecommerce marketing and sales channels while keeping your order fulfillment process manageable.

4. Fulfillment by Amazon

Ecommerce customers expect reliable delivery and fast shipping timeframes. Many online retail businesses use FBA to provide Amazon Prime shipping to meet customer expectations.

FBA may be the right fulfillment option for your business if you:
  • Are looking for a way to save time and scale your business
  • Need an end-to-end solution for inventory storage, shipping, and returns
  • Want to attract customers with fast, free shipping
FBA allows you to ship inventory to an Amazon warehouse at a competitive cost. When an order comes in, Amazon delivers the product to the customer. You can take advantage of Amazon’s distribution network, infrastructure, world-class delivery service, returns system, and customer service process.

5. Dropshipping

Dropshipping involves outsourcing all or most of the supply chain process—from product sourcing or production through delivery and returns. You can use dropshipping to work with a manufacturer or third party to send orders directly to customers.

This option appeals to some sellers, since it can reduce overhead. You handle marketing products and other business operations, while the fulfillment service manages the physical goods, including the fulfillment process.

Is dropshipping allowed in Amazon stores?

Yes, as long as the business meets Amazon criteria, you can use dropshipping for your business in Amazon stores.

To use dropshipping in Amazon stores, your business must:
  • Be the seller of record of the products;
  • Identify yourself as the seller of the products on all packing slips, invoices, external packaging, and other information included or provided in connection with them
  • Remove any packing slips, invoices, external packaging, or other information identifying a third-party dropshipper before shipping the order
  • Be responsible for accepting and processing customer returns of the products
  • Comply with all other terms of your seller agreement and applicable Amazon policies
Learn more about how dropshipping works and Amazon’s Dropshipping Policy.
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What fulfillment solution is right for you?

The best fulfillment solution for your ecommerce business will depend on several factors, including the nature of your business, the types of products you sell, your location, and your approach to satisfying customer demands.

In-house fulfillment may be right for your business if you want to:
  • Keep inventory on hand
  • Use your own packaging or labels
  • Stay profitable on products with tighter margins
A fulfillment service like FBA may be ideal if you want to:
  • Decrease fulfillment headaches and get help scaling your business
  • Outsource storage, shipping, customer service, and returns
If you sell in Amazon stores, FBA also offers several more advantages:
  • Offer fast, FREE delivery to Prime members
  • Display the Prime badge on eligible products
  • Improve your chance of winning the Featured Offer spot on detail pages
Illustration of a Prime truck being loaded at an Amazon Fulfillment Center

How does the fulfillment process work?

Every step in your fulfillment process is an opportunity to optimize, from the moment a customer hits the buy button, to when they unpack the product. Small delays or minor errors can result in a terrible customer experience. To avoid common problems, let’s take a close look at each stage of the fulfillment process.

Step 1: Receiving inventory

Step one is getting products to a distribution location. This stage of the fulfillment process is known as receiving inventory. The place where you receive merchandise could be your place of business, a warehouse, a fulfillment centre, or a storage location.

If you’re working with a third-party service, be sure to pack products with the right shipping material and clear labeling. Doing so will speed the process of receiving inventory and ensure the product is ready to ship out to customers.

Common errors that slow receiving

Small oversights can lead to significant delays. Amazon shipping criteria helps keep the fulfillment process as smooth and speedy as possible:
  • Multiple boxes must not be taped or banded together
  • Shipping boxes should not have any other scannable barcodes except the shipping label
  • Don’t place the shipping label over box seams
  • Boxes should match Amazon size requirements
  • Don’t use loose packing materials such as packing peanuts or shredded paper. Instead, use foam, air pillows, or full sheets of paper.
  • Make sure individual units in the boxes have scannable barcodes. Each unit should only have one scannable barcode.
  • Case-packed units must only have barcodes on the individual units and not on the outer carton.
  • Ensure each unit is packaged properly to avoid damage to the product.

Step 2: Inventory storage

Inventory storage is the location where orders are stored. If you choose in-house fulfillment, this could be an accessible location such as a home garage or spare room. Businesses with a lot of inventory may require warehousing.

It’s essential to have enough inventory to meet customer demand, especially during seasonal holidays or peak ecommerce sales events such as Cyber Monday or Prime Day.

Each product should have a stock keeping unit (SKU) identification code to assign it to a dedicated storage place to help you manage inventory.

Step 3: Order processing

Once a customer completes a transaction, order processing begins. This process includes item selection, packing, and preparing the order for shipment.

A critical part of order processing is choosing the right packaging. This could be:
  • Boxes
  • Paper or bubble mailers
  • Packing material such as bubble wrap or air fillers
Be sure to follow all Amazon requirements for packing and preparation to minimize costs and avoid damaging items in transit.

Step 4: Shipping orders

If you don’t use a service like FBA, shipping orders through a major carrier like Purolator or Canada Post is the next step in the order fulfillment process. For small orders, shipping may be as simple as a quick run to your local Purolator or Canada Post location. For larger orders, you may want to have a carrier pick up orders in front of a fulfillment location, whether your business premises or a storage facility.

Step 5: Processing returns

Returns are a normal part of the business and are to be expected. Whether you use in-house fulfillment or third-party fulfillment service, you will need a process for dealing with returns, restocking or discarding defective products, and sending refunds to customers. With FBA, Amazon processes returns on your behalf.
Throughout each stage of the fulfillment process, be sure to have systems in place for seamless customer communication. Set up notifications to let customers know you’ve received their orders, and allow buyers to track shipments. You can also provide instructions on how to return items, if needed. Use templates and manage notifications using customer management tools available through an Amazon store.
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How to choose a fulfillment model for your business

Customers expect reliable, timely order processing, no matter what size your business is. Outsourcing fulfillment is one way to meet these expectations and provide a good customer experience. As you consider fulfillment options, here are a few factors to keep in mind:


What’s the size of your ecommerce business?

The scope of your operations will determine what type of fulfillment is right for your business. If you’re just starting your ecommerce business or handling a low volume of orders, shipping orders from your place of business might be feasible.

Once your business takes off, instead of taking on the costs of processing orders yourself, it may make sense to pay for storage space. Either way, it’s important to have the right amount of inventory available to satisfy orders during peak shopping times.


What products do you sell?

Does your business sell small parcels of new and used books? Or do you regularly package large orders of heavy equipment? The type of products you sell could determine what support you require from a fulfillment service.

This is especially true of shipping. Keep in mind not all types of shipping are available for all products.

In the Canada certain products have transport limitations. Shipping for bulky or large items will typically cost more. Hazardous materials or dangerous goods, also known as hazmat items, must use ground shipping.


How many sales channels does your fulfillment service need to serve?

Order management is the process of tracking and fulfilling customer purchases across all sales channels.

If a fulfillment service cannot process orders from one or more of your sales sources, then it may not be the right match for your business. For simplicity, it might be ideal to work with one fulfillment service to cover all your fulfillment needs. If necessary, you may want to work with more than one fulfillment option to cover all your sales channels. Alternatively, you might want to reevaluate your sales channels and consider removing or consolidating some.

A central monitoring system on customer orders is a crucial part of order management. It will allow you to record all customer orders, shipments, and returns. Knowing the status of each customer order is especially helpful when dealing with customer service calls. Order tracking can also allow you to analyze customer purchasing behaviors.

Be sure to monitor how a fulfillment provider processes orders. Work closely with your fulfillment service to manage orders from all your sales channels. Above all, you must be able to immediately spot issues such as insufficient stock levels or delayed shipments.


How well can you track supply levels?

Inventory management is the process of tracking stocked goods. Ordering, storing, and restocking any products running low are all part of inventory management. Use a fulfillment solution with the ability to track inventory levels to avoid accidentally selling an out-of-stock product.

Successfully managing inventory requires staying agile and stocking the right number of units your business needs. Too many, and you risk paying more than necessary in storage costs or overstock. Too few, and you can run out of stock and miss out on sales revenue.

If you sell perishable items with a limited shelf life, or seasonal items with demand that changes with consumer trends, be sure your inventory management plan takes these variables into account.

Your fulfillment solution should provide up-to-the-minute reporting on sales and inventory. It should also allow you to monitor inventory status on demand.


Who will answer customer questions?

Every business needs a system for dealing with customer questions. Some fulfillment partners like FBA can take on customer service. Others don’t, so you’ll want to check into this when you evaluate fulfillment providers.

Do you want to outsource customer service or keep it in-house? Either method comes with a cost. A fulfillment service that also responds to order inquiries can free up you and your resources to focus on other matters. But some businesses prefer to build their own customer response team.


How convenient and affordable is shipping?

Shipping time is among the top factors ecommerce customers weigh when deciding whether to buy a product from you or one of your competitors.

Shipping is an essential step in creating a good customer experience and staying profitable. A daily run to the post office may be feasible for smaller operations, but customer needs and expectations will likely change as your brand grows.

Order fulfillment services typically have fast and affordable shipping rates due to the large volume of shipments they process. But every fulfillment service will offer different rates, and those rates will fluctuate based on product type, order location, and other variables.

Also, if you use a fulfillment service, consider the cost and time to deliver inventory to a distribution centre. Learn more about how businesses send and replenish inventory with Fulfillment by Amazon.


Where will you store products?

A sound storage system will ensure quick and easy access to products once customers place orders. The right solution likely involves a safe, temperature-controlled environment with well-labeled shelves and bins in your storage area for easy retrieval.

Proximity to customers is another factor when considering inventory storage. A distributed network of fulfillment centres can reduce shipping costs, if your customer base is geographically broad.


How will you process returns?

Every ecommerce store needs a way to process returns. Standard returns processing provides an easy way for customers to ship items back to your business premises or the fulfillment centre with prepaid address labels. It should also incorporate a notification system to let customers know when they can expect replacements or refunds.

As part of the returns process, you may need to inspect items to ensure they are undamaged or unworn, restock products as necessary, and document or discard defective products. The ability to track returns and faulty items is also useful in product planning. Look at dissatisfied customers as one of the best ways to discover flaws in your manufacturing or product design.

5 ways to reduce returns

Ecommerce businesses see a higher rate of returns in part because customers buy products without seeing the items in person. Here are a few simple measures you can take to limit returns and exchanges:
  • Provide accurate product listings
  • Include sizing guides
  • Allow customers to ask questions about products before purchasing
  • Encourage customer ratings and reviews
  • Build an ecommerce storefront to showcase your brand and product details


Do you need fulfillment software?

Small ecommerce businesses may handle the order fulfillment process with careful admin processes and organized spreadsheets. Larger operations will require sophisticated fulfillment software. Certain programs can benefit businesses of any size with tools for organization and fulfillment tracking.

Some fulfillment software solutions allow you to unite your ecommerce ordering system and automatically forward orders to fulfillment centres.

You will also need up-to-date inventory levels to restock products or offer discounts to offload stagnant inventory.


Do you want to sell internationally?

Ecommerce is a global business. For example, Amazon operates stores on multiple continents, and serves customers in more than 180 countries worldwide.

If you want to sell internationally and reach customers across the world, then research special sales conditions such as regulations, tariffs, and taxes. You will also need to build a process to ship orders across the world reliably.

A fulfillment service will likely help with these complexities, but if you want to fulfill worldwide orders, check to ensure how the fulfillment provider manages international shipping.


Does your fulfillment service offer distributed warehousing?

To shorten shipping times, you will want to find a way to store products in a location as near as possible to both your store and the customers who will place orders with your business. For some sellers, this means using multiple fulfillment centres to ensure each order’s quickest delivery.

This fulfillment strategy is known as distributed inventory because you send merchandise to multiple locations. By dividing shipments and placing them with various distributors, you shorten the delivery routes to all customers who place orders.


Can your fulfillment provider bundle products?

Making it easy for customers to select add-on items through an online store is a good way to increase cart values. Your fulfillment process should anticipate what products are likely to be purchased together and prepare them in advance.

There are several common types of product bundling. They include pick and pack fulfillment and kitting assembly.

Pick and pack fulfillment

When an order is placed, warehouse workers select it from storage and prepare it for shipping. A reliable warehouse management system makes this process quick and efficient by pre-packing items that frequently ship together.

Kitting and assembly

For items sold in a set, like product samples or cosmetics, a fulfillment service that offers kitting and assembly services could be important. In the kitting process, packing specialists pre-bundle products that arrive separately at the storage centre into single units and assemble them for quick shipping. Kitting gives customers the flexibility to save money on items, which may increase your average order value.


Can your vendor provide subscription fulfillment?

Many businesses offer products through a subscription service, a popular model that can come along with logistical challenges.

Subscription boxes may include multiple items from different storage locations. You may pack the products yourself or outsource the process to a fulfillment service, where packing specialists will tackle this step. Either way, the presentation of the final product to the customer is important.

Not all distribution centres can process subscription products. If your business sells subscription packets, be sure to check this component before you decide on a vendor.


What do ecommerce fulfillment services cost?

Typical costs for a fulfillment service will vary based on your operations’ scale and complexity and your business’s nature.

Here are common types of fulfillment costs:
  • General administrative expenses
  • Product costs
    • Larger items and products which require assembly or special handling might cost more to fulfill
    • Some providers may charge for each shipment you send, no matter the size
  • Receiving costs
    • Some providers may charge per unit or on an hourly basis
    • Other vendors charge per palette or unit
  • Inventory storage costs
    • Some products incur costs while they sit in a facility
    • You can be charged for dead space if you don’t use all of your available storage space or fill palettes completely
  • Pick and pack costs, also called fulfillment charges
    • These are the costs incurred as fulfillment specialists pick, pack, and ship items
  • Kitting costs
    • Special fees charged when items require light manufacturing or specific preparation at the distribution centre, for example, subscription boxes or relabeled cases
Exact costs differ from one fulfillment provider to another, so be sure to research and understand the full cost of each option you’re considering.

Fulfillment by Amazon can be a cost-effective choice

Based on a study of 600,000 sellers using FBA in Amazon’s US Store, FBA fees are on average 30% less expensive for standard shipping methods than major third-party logistics providers, and an average 70% less expensive than comparable two-day shipping alternatives. (source)
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The right fulfillment partner can help your business thrive

Grow online sales with minimal risk and more flexibility by choosing the right ecommerce fulfillment options.Compared to managing a bigger warehouse, using a third-party provider enables you to scale up or down according to demand. This flexibility may help lower your storage and overhead costs while allowing you to meet customer demands for fast, affordable shipping. The right vendor may give your business a competitive edge by lowering costs, increasing revenue, and creating a good customer experience—ultimately helping you build a thriving business.

Save time and help grow your business with FBA

When customers comparison shop, many take advantage of Amazon Prime shipping for fast, affordable, and convenient delivery. If you use Amazon as part of your selling channel mix, you can choose to offer goods under Prime shipping using FBA.

Fulfillment FAQs

What is fulfillment?
Fulfillment refers to the processes involved in making sure customers receive the products they order. Steps of ecommerce order fulfillment include receiving inventory and storing stock, as well as packaging and shipping orders. Ecommerce fulfillment services can also include handling returns when needed and maintaining customer communication for each transaction.
What is order fulfillment?
Order fulfillment starts when a customer places a purchase and concludes when they receive the order. If a customer seeks an exchange or reimbursement, the returns process is also part of order fulfillment.
What are different types of fulfillment?
Options for fulfillment include:
  • In-house: Store, package, and ship orders from your place of business. This could be a garage, an ecommerce warehouse, or another space that allows you to adequately process sales volumes.
  • Third-party or 3PL: Outsource fulfillment logistics to a third party that can provide warehousing, packaging, shipping, or returns processing
  • Multi-channel: Use multiple order fulfillment services across different channels, such as your website, an Amazon store, or social media.
You can also use Fulfillment by Amazon to meet your global fulfillment needs, either on its own or as part of a multi-fulfillment strategy to offer customers free, two-day shipping through Prime.
What does fulfillment status mean?
Fulfillment status indicates where an order is in the fulfillment process. The goal is to deliver the right product, achieve an order fulfilled status, and satisfy the customer. Here are five basic stages:
  • Stage 1: Receiving Inventory – Get products to a distribution location, whether your place of business or a storage centre like a warehouse
  • Stage 2: Storing Inventory – Keep inventory and manage stock while it’s awaiting fulfillment
  • Stage 3: Processing Orders – When a customer places a purchase, the initial status of the order will be “pending fulfillment” before the product is packaged and prepared for shipment
  • Stage 4: Shipping Orders – If you take care of fulfillment in-house, you can ship orders using a carrier like the Canada Post or Purolator. You can also use FBA or a 3PL service to handle this step
  • Stage 5: Processing Returns – Returns are to be expected, so have a plan to handle restocking, discarding defective products, and issuing exchanges or refunds
If you use FBA, fulfillment fees and inventory storage fees will depend on factors such as the types of products you want to sell. Review the FBA cost structure to estimate the price of using Fulfillment by Amazon for your business.
How much does it cost to use a fulfillment service?
Fulfillment costs will vary depending on the specifics of your business, including the size of your operations and the products you ship. Some common fulfillment costs are related to:
  • Storage and warehousing
  • Packaging
  • Shipping
  • Returns processing
How is 3PL different from dropshipping?
Third-party logistics (3PL) services act as a middleman in the fulfillment process, working between the seller and customer. The seller sends inventory to the 3PL fulfillment service, and when a customer purchases a product, the 3PL service fulfills the order. Sellers who use dropshipping do not handle their inventory at all. Instead, the seller creates orders for manufacturers or suppliers who then deliver products directly to customers. Ecommerce fulfillment services like FBA often go beyond just delivery to provide storage and assembly, picking and packing, and customer service and returns.
What is direct order fulfillment?
Direct order fulfillment is the process of shipping products directly to the customer. For example, you can procure products and ship orders yourself, or use a dropshipper to send items directly to customers after they place purchases. In contrast, some sellers source products through wholesale and ship in bulk to other businesses (B2B) such as retailers.
How does FBA work?
With a Professional seller account, you’re able to use FBA. If you decide to use it with some or all of your eligible products, you’ll send inventory to Amazon fulfillment centres. Once in our fulfillment centres, we will take care of each step in the fulfillment process: shipping, customer service, and processing refunds, and returns for those products. You can track your FBA inventory in Seller Central. Learn more in this FBA guide.

You can also use FBA with other fulfillment options. For example, if you sell items on social media or through your own website, you can handle some or all of fulfillment in-house or using a third-party fulfillment provider as well as FBA.
What is a fulfillment centre?
A fulfillment centre is a shipping warehouse or distribution location that handles fulfillment processes such as receiving and storing inventory, managing stock, picking and packaging orders, and sending products to customers. Some ecommerce fulfillment centres provide inventory management as well as customer service and process returns.

Amazon fulfillment centres can provide all these services as well as allow you to track inventory and monitor stock levels. To leverage Amazon’s global capacities for storage and delivery, enroll products in Fulfillment by Amazon.
How do fulfillment centres work?
When a customer places an order, the fulfillment centre can optimize delivery by storing inventory closer to the customer. An ecommerce fulfillment centre typically provides some or all of these services:
  • Receiving inventory
  • Storing products and managing stock levels
  • Picking and packaging products
  • Shipping orders
  • Processing returns
Some fulfillment centres also handle customer notifications and provide tracking information for packages. You can monitor sales metrics and stats with an Amazon store. To tap into Amazon’s international fulfillment networks, sign up for Fulfillment by Amazon.
Should I use a fulfillment company?
Many businesses benefit from outsourcing ecommerce order fulfillment. Here are a few signs it might be the right time to outsource the fulfillment process for your business:
  • Sales spikes: You experience a high volume of orders during a certain time of year.
  • Growth: Your customer base is growing, and your present infrastructure can’t keep up.
  • Time: Fulfilling orders is consuming your time and limiting your ability to focus on other aspects of your business.

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