Order fulfillment and shipping

Order fulfillment and shipping are important considerations early in your e-commerce strategy development. Your decisions impact the final cost to consumers and also determine the resources you might need within your business.

Order fulfillment and shipping are important to consider early in your development

Your strategy for order fulfillment and shipping will impact many factors of your e-commerce business. It is beneficial to consider the choices early in your adoption of e-commerce as they can influence your choice of e-commerce platform and even the margins you need to deliver. There are several options which include:

  1. Developing the resources to fulfill and ship orders in your business, referred to as Fulfillment by Merchant on Amazon (FBM)
  2. Employing a 3PL company for some or all of these tasks
  3. Enrolling in the services of an online marketplace, such as Fulfillment by Amazon (FBA)

Your sales estimates, the complexity of your order fulfillment, shipping requirements and the resources you have within your business can all impact the strategy that you determine as right for your business.

Challenges to order fulfillment and shipping in food and beverage categories

One challenge to building a successful e-commerce business for your food and beverage products will be to overcome any order fulfillment and shipping issues you might have. There are a number of factors to consider such as packaging, shelf life, refrigeration, product weight or even temperature fluctuations in geography or different seasons.

Packaging such as glass can add complexities to shipping online. It is likely your product will need to be wrapped carefully to withstand the abuse it might suffer during shipping. Any additional packaging for shipping will add costs and complexity in order selection.

Consumers in stores stop in the aisle to check best before dates and it is reasonable to assume they have the same expectations while shopping online. They have to put their faith in the person selecting the product for shipment to ensure the best before date is reasonable. If your product has a limited shelf life, consumers will want to know this in advance of making their purchase online. For example, you could include the estimated shelf life when the product arrives to them in your product description. This ensures buyers have the facts to make an informed decision as to whether they buy or not.

Many food and beverage products require refrigeration to maintain their product quality. This will add complexity to your e-commerce business, but it does not make it impossible. There are many examples of refrigerated or frozen products available online. The objective should be to ship products as fresh as possible with the correct packaging and shipping materials to maintain the temperature integrity. It might also be required to pay increased fees for expedited shipping to reduce transit times. Any additional fees should be clear to consumers prior to adding the item to their virtual shopping cart.

Some food and beverage products such as flour or beverages are heavy. Many shipping companies include weight as one of the determining factors in the final price. You might consider a smaller format for online sales that weigh less or in bundling heavier products with other lighter, complementary items. This results in lowering the shipping costs per unit for consumers.

Outdoor temperature fluctuations at the final destination or during different seasons can add challenges to shipping food and beverage online. Your beverage might be shelf stable but if it is shipped during winter months to northern Manitoba, you risk the product sitting outside during shipping for an extended period of time and freezing. This can compromise the integrity of the item to the consumer. When shipping to certain locations or during certain seasons, you might have to invest in extra shipping materials or change your shipping providers. A less expensive ground option might be acceptable in spring, summer and fall, whereas faster overnight shipping is required in the winter.

There are many companies selling a wide array of products online who have solved some of the shipping challenges. It is possible to benefit from their learnings and discuss options with shipping companies. Your business is the customer in this relationship so shipping companies should help you find solutions.

Fulfilling orders in-house vs. using outside or third-party resources

As you develop your e-commerce business model, one decision required is whether you will fulfill orders with resources from your own business or use outside resources. There are a number of considerations such as:

  • Complexity of order selection and packing
  • Product knowledge required
  • Maintaining product inventory in multiple places
  • Buying and maintaining inventory of shipping materials
  • Process for orders received to be picked
  • Estimated volume of orders
  • Physical proximity of 3PL providers
  • Costs associated with either option
  • Physical space required to do the work
  • Is this work you want to do?

Order fulfillment and shipping are tasks that can evolve within your business. If you plan to start reasonably small with online sales, you might prefer to receive orders and do the fulfillment and shipping yourself. This is an opportunity to learn about the e-commerce business and what the costs are for different components. If you are making a significant investment and expect large volumes, it might be more efficient to work with a 3PL company to fulfill and ship your orders.

Once you have established sales projections for your e-commerce business, you can forecast the requirements for order fulfillment and shipping. If you are undecided about the best solution, it is possible to calculate the costs for an in-house option and compare quotes from 3PL companies or the online marketplace.

It is possible to promote your products on your own website with links to your presence on an external e-commerce platform, such as Amazon or Well.ca, where consumers can purchase products and have their order fulfilled. This is an option to offer e-commerce without implementing an order fulfillment and shipping strategy.

Snapshot: Fulfillment by Amazon (FBA)

If you are selling on Amazon, their robust Fulfillment by Amazon (FBA) process ships very large volumes of product and there are potential advantages for you to enroll in FBA. For example, participating productsare eligible for Amazon Prime Free Two-Day Shipping, FREE Shipping for eligible orders and other benefits that could help you be more competitive. Another benefit of FBA is Amazon will handle all returns, which can require significant resources.

There are three variable fees with FBA. Fees are calculated based on the size of your products, the time they spend in the Amazon warehouse (which change depending on time of year) and the shipping method.

Amazon has expectations for inventory movement. Any product with more than 90 days of inventory on hand will be considered as having excess inventory. Amazon expects sellers to take action such asprice reductions or removal of inventory. Amazon also expects sellers to maintain the correct inventory to eliminate out of stock items.

There are also other expectations, policies and requirements that are administered by Amazon to participate as part of FBA, such as a minimum shelf life remaining for food and beverage categories. FBA offers many benefits, however it is also a service that requires your constant monitoring on the company's dashboard. Companies interested in this option are encouraged to conduct their own research to assess if FBA is a suitable option for their businesses.

Order selection

If you plan to fulfill orders within your business, a good Standard Operating Procedure (SOP) is important. From the moment the order is received, you can set up expectations for the entire process. The following provides an example SOP to fulfill e-commerce orders:

  1. Your e-commerce platform or the online marketplace should provide the following information:
    1. Items ordered
    2. Quantity of each SKU
    3. Customization instructions if you offer this
    4. Confirmation of payment
    5. Customer information (name, address, phone number)
    6. Shipping instructions if there are options
  2. Order fulfillment should be clear for the people assembling orders:
    1. An order they can use to select correct items
    2. Access to inventory system to remove items then label as shipped
    3. Packing instructions/materials for each SKU
    4. Seasonal changes for outside temperatures if required
    5. Proper size box to minimize shipping cost
  3. Shipping:
    1. Select best option for shipping if you use more than one company
    2. Print labels and affix to package
    3. Contact shipping company for pick up or arrange for delivery to shipping depot
    4. Share tracking information with customers once order has been shipped

If you plan to fulfill orders and ship from your own business, a return policy is another consideration. Resources within your business will be required to manage any issues with online customers who are not satisfied with their order.

Order shipping

Shipping your e-commerce orders is the final step to getting your product to consumers. Shipping expectations should be clear to online shoppers when they complete their order.It is difficult to improve customer satisfaction with shipping, but satisfaction can be reduced if the product does not arrive in the condition or time they expect.

Depending on where you are shipping from, there are a number of options you can consider. Some shipping companies require you to drop products at a depot and others are willing to pick up your shipments (sometimes for a fee). Many factors depend on the volume you are shipping and what you are willing to pay.

An important consideration is whether you will charge for shipping separately or include it in your price. A challenge for online sellers operating independently is the awareness consumers have now for free shipping offers such as Amazon Prime.

As you plan your shipping, the packing materials and outside packaging you choose can have a significant impact on shipping costs. Your packing materials can also impact the final condition of the product when it is delivered. Canada Post shares some insights that are helpful: 5 costly shipping mistakes e-commerce merchants should avoid

Some online sellers offer different levels of shipping for consumers which are usually related to the time between the order and delivery. Some people are willing to pay a premium for a faster delivery. It is possible to include shipping and charge a premium for expedited shipping.

If you want to expand your market beyond Canada, there are many considerations. Your product must be able to ship across the border, it must be legal in the destination country and that country might have unique or different regulations, laws and taxes related to the product you are selling. It is important to review all regulatory, tax, legal and other requirements in any market you plan to sell into, as well as the requirements for exporting your product from Canada. The following resources provide additional insights into shipping internationally:

Most online sellers include a shipping policy for consumers. This is an opportunity to clarify the expectations and ensure both the buyer and seller have the same understanding of what will happen when. Some food and beverage products require extra considerations such as refrigeration when shipping, so it is beneficial to clarify these prior to the consumer making the decision to purchase.

Shipping can be a significant proportion of your total product costs in your e-commerce business model. Prices can fluctuate, so it is beneficial to compare options and find the best solution for the geographical areas you are shipping to and the requirements for your products.

Summary snapshot: Order fulfillment and shipping

Order fulfillment and shipping are important to consider early in your development

  • Your strategy for order fulfillment and shipping will impact many factors of your e-commerce business such as your e-commerce platform and your margins
  • Your sales estimates, the complexity of order fulfillment and shipping requirements will all impact your strategy
  • Internal resources including space can impact your decisions

Challenges to order fulfillment and shipping in food and beverage categories

  • There are factors to consider such as packaging, shelf life, refrigeration and product weight
  • Consumers will have expectations for shelf life and the condition of the product when it arrives
  • Some consumers are willing to pay extra fees for expedited shipping
  • Outdoor temperatures can impact shipping during different seasons
  • Shipping companies can provide solutions to some shipping challenges

Fulfilling orders in-house vs. using outside or third-party resources

  • There are a number of factors that impact the decision to fulfill orders in-house
  • It can be beneficial to fulfill orders in the initial stages of e-commerce to understand the process and then seek a 3PL provider as your volume increases
  • Fulfillment by Amazon (FBA) is an option to consider if selling on Amazon's marketplace
  • If you participate with a marketplace fulfillment option such as FBA, there are usually expectations for performance and fees associated with the service
  • One advantage to a marketplace fulfillment option such as FBA is Prime subscribers will receive free shipping on these items
  • E-commerce platforms can generate a lot of data about your e-commerce consumers and what they are buying

Order selection

  • If you plan to fulfill orders in-house build a dependable Standard Operating Procedure (SOP)
  • Order selection is best when it is efficient and effective
  • Order selection can be integrated with inventory control and shipping to improve efficiencies and accuracy
  • E-commerce consumers expect to see a return policy for your online business

Order shipping

  • Shipping expectations should be clear to e-commerce consumers
  • It is difficult to improve consumer perception with shipping, but errors or delays will hurt consumer satisfaction
  • Free shipping or extra costs for shipping are important considerations in your e-commerce model
  • If you plan to sell into international markets, there could be different regulations for shipping across borders