Fulfilment Service in E-Commerce According to the GS1 Report

Currently, e-commerce is dominated by B2C relationships in terms of the number of transactions. In this model, a product is sold by a company and ordered by individual customers. Handling this process is much more difficult than in B2B and requires special procedures. Customers often make one-time purchases, so their loyalty is relatively low, and their expectations are constantly growing. If a product does not arrive on time, is incorrect or damaged, and to top it up, difficult to return, the customer is unlikely to make another purchase in the store. Therefore, it is not only about encouraging them to buy, but also about efficient customer service - primarily in logistics.

In e-commerce, there are three basic forms of logistics organization, which indicate the scope of processes carried out by an online seller: own logistics, drop-shipping and fulfilment - today, we will show you the models occurring in the last of them.
Fulfilment Service in E-Commerce According to the GS1 Report

What Is Fulfillment Service?

The fulfilment service involves an external company taking over part of the seller’s logistics processes. Most often, these are:

  • warehousing goods,

  • accepting orders,

  • picking,

  • packing parcels,

  • shipping products to the customer.

Goods ordered by the online store from suppliers are sent to the operator’s warehouse and then sent to customers. On behalf of the online store, operators manage processes, check inventory levels, accept orders from end customers, pack shipments, prepare sales documents (e.g. invoices, receipts) and shipping documents (e.g. bills of lading), attach user manuals, help with customs clearance, deal with the returns, cooperate with transport companies. They also support many sales and distribution channels (omnichannel). Such solutions are very flexible, because a specialist fulfilment operator is able to adapt to the variability of their customer’s demand depending on their needs. That includes increasing or decreasing warehouse space or the number of employees. The operator prepares reports on their activities to present to the customer regarding sales volume, the number of returns, complaints etc. Some companies even deal with repairs, refreshing and disposal of returned products.

Fulfilment Models

Fulfilment processes are similar for most operators. However, the nature of the products served and the expectations of customers may differ significantly. The provision of logistics services requires specific conditions, know-how in the organization and coordination of processes, suitable storage space, technologies and people in service. Based on the analysis of the activities of companies providing fulfilment services, they can be classified as follows:

1. Fulfilment offered as a key service.
2. Fulfilment offered by logistics companies (TSL and KEP).
3. Fulfilment as an additional service.
4. Fulfilment offered by sales platforms.

Fulfilment offered as a key service

This type of service is provided by companies for which e-commerce logistics is the key activity. There are several large organizations and many small operators there. Fulfilment provided by smaller companies is intended for stores that process from several dozen to several hundred orders per month. In the case of medium-sized companies, it’s estimated to be 1000–1500 shipments. Companies in this model are characterized by high flexibility and the ability to adapt to the specific character of the store, its products and the industry it operates in. Fulfilment operators provide services in the scope of: receiving, storage, picking and packaging, as well as a number of additional ones, i.e. support in inventory management, legal advice, tax and customs services. Delivery services are most often available both nationally and internationally (mainly EU countries). Many companies also provide the ability to view stock levels and prepare orders for customers.

Fulfilment Service Offered by Logistics Companies

Just a few years ago, e-commerce in Poland was treated marginally by representatives of the TSL industry. E-sellers were served (only regarding delivering parcels to customers) by CEP operators. However, it took a long time for them to adapt to the specifics of e-commerce. Logistics operators were not interested in serving online stores at all. The reasons were the high fragmentation, small amounts of stock for storage and distribution possible only by CEP operators. Logistics supporting online sales involves laborious preparation of a small number of packages containing different products on the same day. Such a process requires a lot of flexibility on the part of the operator. Serving traditional customers is much easier – picking goods, e.g. for retail chains, involves preparing a large number of identical-looking sets.

Another challenge in serving online sellers is the high variability of demand. It is affected by the seasonality of products and order pile-ups. Therefore, currently, there are only a few logistics operators who followed trends and enriched their offers with solutions designed specifically for online stores. In most cases, their experience was gathered in projects implemented for a very large number of customers, often as a supplement to other services already provided for a given company. Therefore, logistics operators do not usually serve small and medium-sized e-sellers.

Fulfilment Service Offered as an Additional Service

Fulfilment services are also provided in Poland by companies that initially used to deal with activities other than logistics. However, they would still operate within the e-commerce sector. As a result of their development, new online projects and the growing needs of customers, they started expanding their services to include fulfilment.

Fulfilment Service Offered by Sales Platforms

The third (and the smallest) group of fulfilment service providers are sales platforms. The leading marketplace and, at the same time, the world’s largest company in this sector that provides fulfilment is Amazon. Although its main activity is selling products online, recently, it has been dynamically developing their fulfilment services as well. That includes the Fulfilment by Amazon (FBA) program. Amazon enables a fast international expansion through a dense network of warehouses and customer service in the local language.

With a single account, the seller can list products and manage orders in European Amazon stores. Using the FBA model has a positive effect on product positioning. It also allows them to be purchased with one click by placing them in the Buy Box. It’s also an opportunity to offer free delivery or as a pass to exclusive programs such as Amazon Prime.

Other Platforms

But is Amazon the only one offering fulfilment services to its sellers? Not at all! In the coming weeks, we will have a closer look at logistics services offered by other marketplace platforms. Subscribe to our newsletter and expand your knowledge regarding #ecommerce #crossborder!

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This article was created in cooperation with GS1.