The ecommerce fulfillment guide to grow your business

What is ecommerce fulfillment?

Fulfillment is the process of storing, packing, and shipping orders, as well as handling returns and exchanges. Some businesses manage fulfillment in-house, while others use a service like Fulfillment by Amazon or some combination of in-house and third-party fulfillment options.

Why is fulfillment important?

The right ecommerce fulfillment service can give your business a competitive edge. A fulfillment service can help you:
  • Manage customer orders
  • Send shipments on time
  • Obtain current information on products available
  • Want to attract Amazon Prime customers
Effective, reliable ecommerce fulfillment earns trust with customers and keeps them happy. What if product delivery doesn’t meet customers’ expectations, or items are damaged during transit? Fulfillment problems like these can hurt your ecommerce business.

How fast customers receive a product can make or break a sale. A study on U.S. shoppers found:
  • Free delivery is the most important factor for 83% of shoppers when ordering online
  • More than half (54%) have abandoned online shopping baskets because of delivery costs
Fine-tune the fulfillment process or work with a fulfillment service to grow your brand and keep customers happy.

Here’s what we’ll cover:
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4 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. FBA provides all these services for ecommerce businesses like yours. Through 2019 and 2020, Amazon invested more than $30 billion in logistics, tools, services, programs, and people to help small- and medium-sized businesses.

How do you find the right fulfillment service? Here are some factors to consider when looking for a third-party fulfillment service.

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. Amazon's Multi-Channel Fulfillment program can provide fulfillment for all your sales channels.

4. Fulfillment by Amazon

How FBA Works
Ecommerce customers expect reliable delivery and fast shipping timeframes. Many online retail businesses use Fulfillment by Amazon (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 Amazon Prime customers
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.
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Pro tip

Mix-and-match your fulfillment options

If you sell online in Amazon stores, you can choose to use FBA for some or all products. The right combination depends on the products and your business goals. You can use our specialized services like FBA Small and Light to cost-effectively ship lightweight items. Or take advantage of FBA Export to make international shipping easier.
FBA supports multi-channel fulfillment. This means you can sell products on your own website, then process and send orders through Amazon fulfillment centers.


How Dropshipping Works
Dropshipping involves outsourcing all or most of the supply chain process—from product sourcing or production through fulfillment. A manufacturer or third party could handle production, storage, shipping, and delivery 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 drop shipper before shipping the order;
  • Be responsible for accepting and processing customer returns of the products; and
  • Comply with all other terms of your seller agreement and applicable Amazon policies.
Learn more about dropshipping or Amazon’s Dropshipping Policy.
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What's the best ecommerce fulfillment solution?

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
    • If you sell across multiple sales channels, a shipping software like Veeqo may be ideal if you want to:
  • Eliminate your fulfillment headaches and get help scaling your business
  • Get sales channel integrations, inventory management and reporting tools all in one place
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Did you know?

You can use FBA even on orders from your own ecommerce website?

FBA Multi-Channel Fulfillment allows you to combine your online sales channels with Amazon’s fulfillment network and provide faster delivery, thanks to our fulfillment centers’ high-volume capacity.
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 center, 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.
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Did you know?

FBA has special rates for inbound shipments to Amazon’s fulfillment centers.

Amazon-partnered carriers offer deeply discounted rates for shipping inventory to Amazon.

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 FedEx, UPS, or the U.S. Postal Service is the next step in the order fulfillment process. For small orders, shipping may be as simple as a quick run to your local postal service or UPS 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: Notifying the customer

Although not strictly part of the ecommerce fulfillment process, it’s important to integrate a customer relationship management tool to give customers a tracking number and let them know when orders have shipped. Using email and shipment tracking reduces calls to your customer service center from customers wondering about order status.

Step 6: 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.

Clothing items are the most commonly returned online retail products, accounting for 75% of all returns. Don’t let the returns process discourage you. If you are new to ecommerce, it’s essential to keep high-return product categories in mind and have a policy and process for handling returns. With FBA, Amazon processes returns on your behalf.
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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 U.S., 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. In a recent survey, nearly 84% of people polled regarded shipping as an important part of their online shopping experience.

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.

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 center. 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 centers 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 center 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 centers.

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

The Marketplace Appstore offers software to improve your ecommerce logistics

Apps from Amazon and third-party software providers can help you automate pricing, manage inventory, conduct product research, improve customer response time, and more.


Do you want to sell internationally?

EEcommerce 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 centers 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.

The FBA Inventory Placement Service uses this method to get products to customers as quickly as possible.


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 center 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 centers can process subscription products. If your business sells subscription packets, be sure to check this component before you decide on a vendor.
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Did you know?

Grow your business with Amazon Subscription Boxes

Amazon Subscription Boxes enables qualified sellers to list, sell, and manage subscription box products through a trusted Amazon experience.


What do 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 center, 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.

Review Fulfillment by Amazon fees to estimate the cost of FBA fulfillment services.
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The right fulfillment partner may help your business thrive

A fulfillment service may allow you to grow your business with minimal risk and more flexibility. 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.