When buying products online, customers expect their orders to be packaged and shipped as soon as possible. In fact, most retail customers cite convenience as the main reason for choosing to shop online versus in-store.
With around 70% of online shopping carts abandoned, slow shipping and high fees can dissuade customers from buying. That’s why it’s so important to get ecommerce fulfillment right.
To efficiently store, pack, and ship products to customers, some ecommerce businesses fulfill customer orders in-house. Others partner with third-party logistics centers to handle warehousing and processing inventory.
What’s best for you and your customers depends on the size of your business and the type of products you sell. This guide to ecommerce fulfillment covers the basics of fulfillment, the most popular fulfillment methods, and how to select a fulfillment services provider.
Table of contents
- What is ecommerce fulfillment?
- How do you fulfill an ecommerce order?
- The ecommerce fulfillment process
- 7 best ecommerce fulfillment services
- How to choose a fulfillment services provider
- The benefits of using third-party logistics
- When is the right time to switch to outsourced fulfillment?
- Ecommerce fulfillment challenges
- Ecommerce fulfillment FAQ
What is ecommerce fulfillment?
Ecommerce fulfillment is the process of picking, packing, and shipping online orders to customers. It includes managing inventory, storing and packaging products, and delivery logistics.
Fulfillment centers are located strategically to speed up delivery, and they use software to manage large inventories across the complex ecommerce supply chain.
How do you fulfill an ecommerce order?
Small manufacturers typically manage their own orders, while larger companies use third-party logistics (3PL) centers to reduce costs. Ecommerce merchants with dropshipping business models forward the entire fulfillment process to the manufacturer.
3 order fulfillment methods
Businesses that are just starting out, as well as those with unique ecommerce packaging needs, often handle their own logistics.
Packing and shipping your orders is flexible and cheap, making self-fulfillment attractive to any business with cash flow. Sometimes you have more time to spend than money.
In-house order fulfillment may mean renting and managing your own warehouse space, providing customer support, and handling extra staff.
2. Third-party fulfillment
As order volume increases, most ecommerce businesses can no longer store, pack, and ship their products in-house. So they switch to third-party warehousing and fulfillment.
With outsourced fulfillment, the process for ecommerce businesses becomes simpler. All you need to do is ensure your fulfillment provider has enough inventory to cover orders. In many cases, orders can be sent directly to fulfillment services, which will handle packing and shipping.
For Shopify stores, the Shopify Fulfillment Network offers a dedicated network of fulfillment centers that lower shipping costs and times. There are also several apps to streamline your third-party logistics.
Dropshipping means ecommerce merchants operate separately from the fulfillment process. Instead of producing or storing inventory, the store forwards all orders to a manufacturer or distributor, who dropships the product directly to the customer.
This fulfillment method helps ecommerce stores establish themselves and avoid upfront costs. But it can reduce merchants’ control over shipping and customer service—and can mean longer delivery times.
The ecommerce fulfillment process
While every fulfillment center operates differently, they all perform similar tasks, controlling order preparation and shipping. Fulfillment centers also double as warehouse spaces for inventory storage, so you can keep more product.
From receiving orders to packaging products, the ecommerce fulfillment process has many moving parts. Here are the basic stages:
1. Receiving orders and inventory storage
Once they receive a customer order, outsourced fulfillment centers need quick access to your inventory. To do this, they store products in highly organized warehouses.
Every product is given a stock keeping unit (SKU) number and has a specific storage location in the warehouse. Fulfillment centers also closely track inventory levels and work with merchants to keep products in stock.
2. Packing and shipping
Submitted orders are picked and packed for shipping. Many fulfillment centers have agreements with shipping carriers to manage packages in bulk.
The centers then share shipping confirmation and tracking information with merchants or directly with customers.
Most large online retailers consider delivery speed to be the most important fulfillment factor for customers. To help packages reach their destinations quickly, some fulfillment providers have centers in multiple locations, allowing them to pre-distribute stock.
If you’re scaling fast and looking to optimize your fulfillment strategy, work with a provider that offers a central view of your data and smart inventory allocation across multiple warehouses to give yourself the most flexibility.
3. Returns management
In 2022, the value of online shoppers’ returns totaled more than a quarter of what they originally spent. With returns rising, many logistics companies will process returns and issue refunds on your behalf.
Typically, customers will send a return directly to the fulfillment center, where the company inspects it for damage and validates any customer feedback. They’ll then replace the product or issue a refund, so you may never have to get involved. If the returned product is in sellable condition, they’ll restock and ship it in future orders.
7 best ecommerce fulfillment services
If you’re looking to work with a fulfillment company, figuring out where to start can be daunting. To help, we’ve compiled a list of seven top ecommerce fulfillment services and their best features.
1. Shopify Fulfillment Network
Shopify’s fulfillment network is built for businesses with a Shopify store. It lets merchants keep their product offerings under one roof.
For customers, Shopify offers two-day delivery times and end-to-end order tracking. Shopify also doesn’t charge merchants upfront fees for the first six months. During that time, products can be stored without storage fees, and delivery fees are only taken when products are purchased.
Finding a logistics company that will work with you on custom packaging can be challenging. The Shopify Fulfillment Network supports customized packaging, so you can add bespoke packaging inserts such as stickers or samples to surprise your customers.
Shopify Fulfillment Network features
- Affordable two-day shipping
- Delivery date displays on your product pages
- Custom packing slips to improve brand strength
- Seamless inventory management based on customer data
Shopify Fulfillment Network price
- Only pay when your inventory is sold
- Costs based on product weight
- Multiple item orders receive discounted rates
- Free storage for six months
- $2.25 per cubic foot storage fee for products not sold within six months
For US brands, ShipNetwork has more than 10 fulfillment centers nationwide. ShipNetwork boasts a 100% next-day ship rate, ensuring delivery within two days.
- 100% order accuracy guaranteed
- Subscription fulfillment to make subscription boxes easier to sell and distribute
- Return management services for unwanted products
Interested brands can request a quote to learn more about ShipNetwork’s pricing.
3. Fulfillment by Amazon (FBA)
Brands that do most of their selling on Amazon may decide the most straightforward process is to have Amazon handle their fulfillment needs.
With Fulfillment by Amazon (FBA), new sellers can access promotions like free shipping to fulfillment centers, free storage, free liquidations, and free return processing.
By sending your products to Amazon’s fulfillment centers, you’ll automatically have access to free Amazon Prime two-day shipping, helping customers feel even better about purchasing your products.
Amazon FBA features
- 24/7 customer support from the Amazon FBA team
- Inventory performance dashboard to monitor and understand purchase behavior
- Returns management
Amazon FBA price
Amazon’s fulfillment costs are based on the product’s size and weight.
Connect your store to ShipBob’s software, import your product catalog, then send ShipBob your inventory.
- Omni-fulfillment for customers purchasing across marketplaces (i.e., Amazon, eBay, Shopify stores)
- Customizable shipping materials
- Wholesale and dropshipping order fulfillment
Interested brands can request a quote to get specific pricing. Check out ShipBob’s pricing page for answers to frequently asked pricing questions.
5. Red Stag Fulfillment
With its 30-day free trial, Red Stag is a good option for businesses new to third-party ecommerce fulfillment. Red Stag also commits to 100% customer order accuracy, and even has same-day fulfillment, ensuring products get on their way to your customers as soon as possible.
Red Stag features
- Shopify shopping cart integration
- Warehouse and inventory monitoring
- An over 90% monthly inventory damage reduction compared to other fulfillment centers
Red Stag price
Red Stag Fulfillment offers a 30-day risk-free trial. To get more information about pricing, fill out the form on its pricing page.
ShipHero also has a Shopify app integration. With nine warehouses across the US and Canada, it will distribute your products throughout its warehouses depending on the most common locations of your customers.
Orders are shipped from the warehouse closest to each customer, meaning faster, smoother delivery.
- Use inventory management to promote products that aren’t selling
- In-package snapshots
- PostHero integration tracks packages from warehouse to destination
Costs are dependent on package size and shipping method (i.e., shipping rates will increase with expedited shipping). They range anywhere from $5.60 to $87.78 per product. Storage pricing starts at 65¢ per cubic foot.
For international fulfillment, ShipMonk is the only solution on this list with European warehouse locations (in the UK and Czech Republic). There are also warehouses in Canada and Mexico.
Like ShipHero and ShipBob, ShipMonk has a Shopify app integration, so Shopify merchants can link fulfillment services directly to their ecommerce platform.
- Over 100 integrations let ShipMonk fit into nearly any existing business process
- Transparent billing and reports
- Fulfillment for ecommerce, retail, subscription boxes, crowdfunding, and more
ShipMonk’s pricing page includes a calculator to estimate your own fees. Interested brands can fill out the form for a personalized quote.
How to choose a fulfillment services provider
Know what to look for when choosing the right ecommerce fulfillment provider for your business:
Similar industry experience
Every fulfillment company functions differently. Many providers package their services for niche businesses or select industries. There are a wealth of fulfillment companies out there, many with a unique focus.
Similar existing clients
Try to find a logistics company that already works with ecommerce businesses and, if possible, those in a similar niche to yours.
Prior ecommerce fulfillment experience means the company can offer strategic guidance as you grow and will likely be better equipped to deal with ecommerce challenges.
Before committing to an agreement, chat with your potential fulfillment partner about the needs of your business. Don’t be afraid to ask questions or request references.
Look beyond price
One of the most common shipping problems is cost. While looking at the price tag and choosing a fulfillment services company based on budget is tempting, finding a company that’s a good fit is just as important.
Poor fulfillment causes unhappy customers, which can cost far more in the long run. As a result, pricing should be one of the factors in your decision-making, but not the only one.
Technology and integrations
If you sell on multiple ecommerce platforms, look for a fulfillment provider that can handle orders coming in from different sources.
Many fulfillment services develop bespoke fulfillment software. For example, the Shopify Fulfillment Network uses machine learning to provide recommendations for distributing inventory to centers located near customers. Shopify’s smart replenishment feature tells you which SKUs to restock at which fulfillment center based on sales, days on hand, and seasonal trends.
Other factors to consider when choosing an ecommerce fulfillment provider
Data and analytics
Harnessed correctly, data is a powerful tool in ecommerce. Look for services with real-time analytics tracking, so you can make informed decisions about inventory allocation.
Fulfillment center locations
Placing your stock closer to your customers will reduce shipping times and costs. You may be able to offer same-day delivery in some circumstances.
Inventory shrinkage allowance
Some 3PLs charge fees for inventory shrinkage—the term for damaged, stolen, or lost products. Others offer zero shrinkage policies.
The benefits of using third-party logistics
The advantages of switching to a third-party logistics (3PL) provider go deeper than time and cost savings. These companies are fulfillment experts that can help scale your ecommerce business.
Increased warehouse flexibility
Instead of committing to fixed contracts for warehouse space, many logistics companies offer flexible pricing, adapting to your needs as you grow or go through a slow sales period.
Bring on the experts
All ecommerce businesses will face supply chain issues at some point. Each 3PL has a team of logistics experts and support staff to help you along the way. They manage all the labor required for receiving, inventory management, and order processing and shipping—giving you a level of agility you might not achieve so easily on your own.
Use your time better
Chances are you didn’t start a business because you’re good at packing boxes. Your time is better spent on managing and optimizing across the company rather than focused on the logistics of order fulfillment. When you let someone else take care of logistical details, you can focus on the areas where you can have a greater impact on your bottom line.
When Noah Chaimberg, the brain behind Heatonist, outsourced order fulfillment to the Shopify Fulfillment Network, he was able to focus on business goals and growth. This allowed him to concentrate on marketing and becoming one of the most prolific purveyors of hot sauce in the world.
When is the right time to switch to outsourced fulfillment?
Most companies start by fulfilling their own orders and add a third-party solution as they scale. But when you’re bootstrapping your business, knowing when to start outsourcing is hard.
It turns out your business doesn’t need to reach a specific size to use a fulfillment service. Here are some signs that it’s time to consider a 3PL:
Cyclical or uneven sales
If the number of orders you process fluctuates throughout the year, it probably doesn’t make sense to commit to running and staffing a warehouse. An order fulfillment company will be able to adapt to your needs.
Likewise, unexpected spikes in sales can compromise your delivery promise. An expert can handle times when your daily order volume peaks, so you can maintain a consistent and efficient customer experience.
That’s what happened to Elizabeth Grojean, founder of Baloo Living, a store that sells weighted blankets. After unplanned press coverage left her scrambling to fulfill orders, she used the Shopify Fulfillment Network to find a more reliable and adaptable solution.
You’re too busy
If you’re so busy dealing with order fulfillment that you don’t have time to focus on growth, it’s probably time to start outsourcing it. As a business owner, you need to be able to devote time to sales and marketing, expanding to other ecommerce platforms and sales channels, sourcing new products and ideas, and otherwise improving your business.
Lack of infrastructure
Expanding to new areas can limit growth due to logistical hurdles like increased costs and longer shipping times. When you outsource to a global fulfillment partner, they can leverage their multiple locations to keep up with customer demand.
Third-party warehousing and fulfillment isn’t suitable for everyone. But if you find yourself in one of these situations, it could be time to start chatting with logistics companies.
Ecommerce fulfillment challenges
No single solution is perfect for every business. There are times when using an ecommerce fulfillment services provider doesn’t make sense, no matter the size of your business.
Who shouldn’t work with a third-party logistics company?
Businesses with limited cash flow
If extra funds aren’t available, you may need to bootstrap business growth and invest your own time in customer service.
During fulfillment giant Amazon’s early days, employees would spend their evenings hand-picking and packing customers’ book orders.
Highly specialized businesses
Fulfillment centers may be unable to accommodate customizable products, highly fragile objects, or sensitive materials.
Businesses with limited daily order volume
If you’re only receiving a handful of orders daily, it’s likely too soon to consider outsourcing fulfillment. At this stage, it’s still manageable in-house by yourself or an employee.
When you hit five to 10 shipments per day, it might be time to begin your search for a 3PL.
Moving forward with your ecommerce fulfillment partner
Outsourced ecommerce order fulfillment makes sense for businesses with big goals and fluctuating sales. If you don’t have the time or resources to pack and ship orders in-house, an expert third party can help you optimize your fulfillment process and offer premium customer service.
Ecommerce fulfillment FAQ
What is an order fulfillment process?
An order fulfillment process refers to the steps a business takes to receive and send customer orders. It involves receiving products, storing them in warehouses, picking and packaging, and shipping and logistics.
What is the best fulfillment service?
For ecommerce merchants, the best fulfillment service is the Shopify Fulfillment Network (SFN). Shopify’s distribution to centers located around the US means online sellers can promise two-day shipping to customers. Predictable pricing covers inventory management and delivery. Plus, there’s free storage for every unit sold within six months, with no upfront costs.
How do I fulfill an online order?
- Receive a customer order and process it.
- Package the order.
- Label and ship the order.
- Track the package to its destination.
How much does ecommerce fulfillment cost?
Fulfillment services typically charge by the hour, per unit, or per pallet. Providers add up costs for receiving orders, picking and packing, shipping, kitting or bundling, returns, and other services. They may also apply recurring fees for inventory storage.
What is direct order fulfillment?
Direct fulfillment is when a store or manufacturer ships orders directly to customers (D2C) rather than sending bulk shipments to retailers.