In the ever-evolving retailing landscape, efficient and effective retail fulfillment processes dictate business success. For most businesses, a warehouse management system provides visibility into the major chunk of inwarding and outwarding workflows. But with very little control over what follows orders getting shipped, it’s a fact that in-store stock management differs vastly from managing inventory at warehouses.
In a retail store, customers can examine products, interact with salespersons and compare prices and deals. With returns and exchanges, not every product makes it back on the original shelf, driving the chances of misplacing them and consequently- delaying updating the inventory. Moreover, businesses with multiple retail outlets need to ensure sufficient stock uniformly or reshuffle products according to the outlet that’s seeing increased footfall and demand. Without an automated inventory planning and order management software, updating in-store inventory gets trickier as you go along.
In this post, we’ll go into what retail fulfillment entails and the types and strategies to help you stay an empowered decision-maker. Read on!
What is Retail Fulfillment?
Retail fulfillment is a sub niche of B2B fulfillment that entails all processes of assembling and shipping a customer’s order. In retail fulfillment, products are sent in bulk to a retail store or a store’s distribution hub from where it trickles down to customers and are individually sold. Also known as in store fulfillment, retail fulfillment makes use of an omnichannel fulfillment strategy to fulfill orders from physical stores in place of a warehouse.
The concept of retail or in store fulfillment is that outlets are in close proximity to customers, eliminating the need to store inventory in traditional warehouses, saving you warehouse real estate and requiring less lead time for fulfilling orders and shipping them. With the rise in eCommerce, retail fulfillment now even fulfills online orders from marketplaces through click-and-collect and flexible payment options. But it does mean that businesses need greater visibility, dexterity, timing and on-the-ground coordination to ensure what’s online matches what’s available in person. It differs from DTC (direct-to-customer) fulfillment in that when merchants send their products to retailers, it ends up in
- Retail stores
- Retail hubs from where they’re distributed to individual stores.
- Distribution centers for fulfilling online orders or sent to stores.
With higher order volume, different rules and expectations per retailer and demand varying by consumer, retail fulfillment has higher stakes than D2C fulfillment. But the benefits outstrip the challenges because it lets more market players in and offers customers diversified options from a price point and value perspective.
Differences between Retail and B2B Fulfillment
Retail fulfillment is often mistaken to mean the same as B2B fulfillment, but it is actually a subset which can either serve as the bridge between merchants and customers, or directly sell to the buyer without waiting for merchants to deliver products.
Types of Retail fulfillment
There are 4 types of Retail fulfillment, namely;
In-House Fulfillment Model
Self-fulfillment or In-house fulfillment model sees eCommerce sellers fulfilling orders on their own without help from a 3PL. The steps include
- Receiving the order
- Picking and packaging
- Delivering and
- Tracking the package to its final destination
- Economical to start with: If buyers order multiple products to the same address, the cost of delivery goes down.
- More control over the entire process: small businesses can accept fewer orders, customize them according to indicated preferences and focus on great customer experience.
- Door-step branding: self-fulfillment lets customers interact directly with the business and remain consistent in obtaining and working on feedback given.
- Additional charges: the cost of labor, storage and delivery go up especially during peak season.
- Needs dedicated resources: Sellers need sufficient internal resources whose time and bandwidth go into ensuring orders go out as promised.
- More time-intensive: Good retail fulfillment takes time especially with promises of delivering pan-nation so scaling up can take time.
- Limited growth potential: self-fulfillment can consume considerable bandwidth leaving out other priorities such as product innovation, technology investment and marketing.
2. Dropshipping Model
In dropshipping, sellers do not keep inventory in warehouses, but assign orders received from sales channels to a fulfillment center.:
- Less space occupation: The seller does not need to pay for inventory storage in order to accept and confirm orders. They can advertise their wares online without needing physical stores.
- No inventory management: The inventory is offsite and subject to supplier relationships from whom you’ll need to reorder quantities in order to list availability and accept future orders.
- More flexibility: it is suitable for small and midsized sellers who can work remotely and globally.
- Lack of Personalization: Since the products aren’t handled directly, there’s not a lot of room or opportunity for self-branding.
- Absence of quality control checks: the seller has to rely on the supplier’s quality control checks and the blame for a poor quality product that gets shipped still goes back to the seller and not the dropshipper.
- Reduced profit margins: as a cost-effective fulfillment model, the competition is high with several small scale sellers opting for it, thereby reducing profit margins.
- OEM reliance: Work rates, timing and contracts are dictated by the original equipment manufacturer (OEM).
3. Third-party Fulfillment (3PL)
In Third-Party fulfillment or 3PL, a logistics company takes responsibility for receiving inventory, keeping a close eye on stock levels, packaging and shipping. 3PL is suitable for large sized businesses that experience demand swings and seasonal sales, without the need to invest in new warehouses. 3PL providers typically take care of warehousing, inventory management, picking and packing processes, kitting, shipping and returns.
- Scalable: Companies can grow and upscale operations without worrying about labor and fleet management.
- Time efficient: Companies save considerable time and remove operational complexity.
- Market penetration: Companies can exercise control over new market opportunities and explore strategic expansion to seize the lucrative ones
- Loss of control: inventory and service quality are not in the hands of the seller.
- More expensive: outsourcing to a 3PL requires the retailer to own deep pockets.
4. In Store Pickup
Buy-Online, PickUp In Store (BOPIS) or Click-and-collect, are options provided to customers to buy online and follow through by picking it up at a retail outlet nearest to them. This strategy saves retailers shipping fees and wastes no time in ensuring that the product is lined up for pick up the minute the customer walks in. It does require a sync between the information made available online versus actual inventory.
The concept gained popularity during the pandemic, with click-and-collect sales in the U.S alone projected to reach $109.36Bn in 2024. This marks a 37% YoY increase! BOPIS procedures involves
- Customers shopping online and placing orders through a website or marketplace.
- Retailers receiving the order and preparing it for store dispatch.
- Customers pick up at the appointed store.
- Lowers cart abandonment: BOPIS has zero shipping fees and reduces cart abandonment rates by confirming that the item won’t run out offline.
- Quicker transactions: Generates more revenue from increased in-store traffic
- Longer queues: peak time and seasonal goods can create in store congestion.
- All hands on deck: Staffing costs tend to go up with more store staff needed at tills to register PoS.
What happens during Retail Fulfillment Processes?
There are usually 5 steps in retail fulfillment, which are
The supplier sends you the inventory which has to be checked against quantities, details and SKU upon arrival. Once the inventory is confirmed to be corrected in quality and quantity, the next step is to store them in distribution centers.
Store in warehouses/distribution centers
The items are barcoded and recorded into the inventory management system from where they are organized into bins, pallets or shelves for easier identification. The sorting system usually depends on the order type, customer location and shipping mode opted for (Same-day, express, standard etc).
Pro Tip: optimize the warehouse design to reduce travel time and expedite scans using
- U-shape: the U layout places the receiving and shipping next to each other on two ends of the U-bend and works best for small warehouses.
- I-shape: the receiving and shipping are on opposite ends with storage placed at the center. This reduces congestion by keeping the traffic moving linearly.
- L-shape: This perpendicular layout keeps the storage in a corner and shipping and receiving on each end of the L. It is best suited for businesses that do cross-docking.
Picking and packing
Picking and packing are the natural order in which retail fulfillment processes flow, and is a key phase to ensure that the products reach your store undamaged. There are some points to think about in order to increase efficiency and reduce picking time;
- Optimize the picking route
Travel time accounts for 55% of the total order picking time, so rather than paying your pickers to walk, repurpose the layout into zones, batches or intervals based on the size of the warehouse. This way, your pickers know where to go and can take the shortest path to retrieve the correct item using barcode scanning through HHT. This minimizes the risk of picking up the wrong item. A mobile based warehouse management system can even recommend picking routes according to worker schedules.
- Use correct packaging
Given that there’s very little you can do once a shipment is out of your hands -don’t skimp on packaging quality. It protects your goods during transit, promotes the brand and reduces shipping costs.
Depending on the chosen fulfillment model, your online orders can be shipped to be made available in-store or at the distribution hub.With an order management and tracking solution, you can set preferences after aggregating courier partners and pick a cost-effective and dependable provider.
Returns, or reverse logistics are inevitable, and processing them a necessary evil. The reasons for returns range from a simple dislike to being unable to use them. The good news is, returned items can be quality-checked before restoring to inventory, especially if they’re returned on account of a size or price mismatch and are still serviceable.
Pro tip: encourage customers to ask for another item. Depending on the return process,you can even encourage them to keep it and reward them with store credit or gift voucher for every donation drop off.
Tips to Make the Most out of Retail Fulfillment
1.Define the The Retail Relationship and Contract
Working with retailers requires extensive research. Ask yourself the following questions before starting out;
- Product/market fit — Are customers going to this particular store your ICP?
- Growth —can you add more and new products to the retailer’s store and sync your scaleup plans with their offline expansion?
2. Ask for The Routing Guide
Once you secure an account with a retail store, the next step is to refer to a routing guide to determine how the retailer intends to stock your products in their stores. It will include guidelines on the quantity of products fitting into a pallet, transportation timings and labeling. A routing guide usually applies to larger retailers due to the order volume they typically receive.
3. Choose the right fulfillment model
How big is your business presently, and where are you on your expansion plans? These questions help you decide the best fulfillment model from the 4 talked about earlier. You can run a test order and simulate the fulfillment environment through an automated omnichannel solution like EasyEcom before launching products offline. If you opt for a 3PL, for example, you can plug shipping and warehouse aggregators to unify communication while ensuring that the necessary information is made available based on user roles.
4. Work with Electronic Data Interchange Providers
Setting up a new EDI connection requires a thorough understanding of raising Purchase Orders, GRNs, invoices and labels. The key here is to convey the right information to the right parties, driving transparency. Work with a reputable EDI technology provider and retailer to set up and test the process over several weeks until there’s 100% confidence.
5. Avoid Penalties
All retailers specify their fees (sometimes known as chargebacks) in the event you fail to meet their delivery window. The chargeback is calculated as a percentage of sales or as a flat fee and arises when you mislabel or misrepresent the item, send the wrong quantity or miss a slot. Refer to the routing guide to avoid defaulting!
Retail fulfillment can be a rewarding experience for sellers wishing to stand out for their ability to personalize and delight customers. With the right fulfillment model automated through an intelligent inventory and warehouse management system, you can not only save time and optimize the spend but can also increase the profit margin.
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