How to pick an e-commerce fulfillment service based on your size
The rise of e-commerce has led to a shift in brand expectations including what services they value and how they view fulfillment partners.
Let’s break down e-commerce brands into three different segments: new brands, growing brands, and established brands. New brands are preparing to release their first product, growing brands are experiencing rapid growth, and established brands are looking to scale their operation to multiple facilities across several selling channels.
Each of these segments has different expectations of fulfillment providers and different needs to meet their business demands. Let’s dive in.
New brands need independent, supportive logistics partners
Brands preparing to launch their first product don’t know how many orders they will receive or what their customer demographics will look like. They’re often overwhelmed by the idea of choosing a fulfillment provider. They may not even know what a 3PL is or does.
New brands expect any logistics provider they work with to deliver the same service that they’ve experienced as a consumer with Amazon and digitally native brands they admire. They want to provide customers with fast shipping for free. They likely have put off looking for a fulfillment provider while building other areas of their business and will need a partner who can quickly integrate with their Shopify store and kick off operations with minimal input.
They want to move fast and are attracted to simple pricing structures and operations they can understand despite their limited operational experience. They will need support and expect partners to provide account management services and real-time, on-demand dashboards to provide transparency on inventory and orders.
Growing brands look to find better solutions
Brands that have obtained a certain level of success and are increasing order volumes in excess of 50% year-over-year reach a point where they evaluate their fulfillment services. They start to suspect they are overpaying for their fulfillment services, have experienced some pain with their first provider, and are looking for a new one that can support their current and future growth in volume, sales channels, and product offerings.
Growing brands have high expectations. They want a provider who will solve the problems they are currently facing around order accuracy, performance, and operational know-how. They want a team that empathizes with their challenges and opportunities. They want this for less than they are currently paying and have been told there are better deals and options.
These brands are able to predict order volumes but still see significant spikes day-over-day, week-over-week, and month-over-month. They are focused on outbound shipping and will be excited about competitive parcel rates larger providers can provide. They have started to explore other sales channels including wholesale, international, and in-person retail. They have come to rely on the account management services providers offer, viewing them more as an internal team member than a third party. They rely heavily on their provider's dashboard to manage orders and reporting to monitor the performance of the operation and likely circulate this data within their own organization.
Established brands optimize for reach
Established brands have experienced tremendous success and likely expanded beyond e-commerce. They are becoming household names and while order volumes have steadied, volume is significant. They have multiple sales channels, operate out of multiple distribution facilities that are strategically located, and have team members who lead each supply chain function internally.
Their expectations are extremely high. They want to optimize every aspect of their supply chain and gain a complete understanding of their provider's operation including each touch point, cost center, and margins you are charging them. Saving a few cents is material to their operating budget.
These e-commerce businesses have expanded internationally, work with multiple wholesale partners, and may have brick-and-mortar locations. They will look for partners who can support a multi-facility, global distribution network now and in the future. They have an internal resource that works with the provider daily. They rely less on reporting from their provider as they have built internal dashboards to track the performance of the operation.
Selecting a fulfillment provider
When it comes to which type of fulfillment provider brands decide to use, the driving force tends to be the founder’s network, the brand’s growth stage, their product profile (number of SKUs and product category), and sales channels.
Network influence
When new brands are looking for a fulfillment provider the first thing they do is ask their network for recommendations. This often leads venture or private equity-backed brands to select a fulfillment provider who has also raised capital. Brand founders who are serial entrepreneurs tend to select smaller, regional fulfillment providers. On the other hand, brands founded by industry veterans tend to find their way into larger, more established providers.
Growth stage
New brands in particular tend to gravitate toward the new wave providers for two reasons: speed and technology. They are moving quickly and value responsiveness, simple onboarding, and technology integrations. They are also attracted by the do-it-all approach the new wave providers take as they haven’t established their technology stack yet. Working with a more traditional provider at this stage would require engineering resources and time, something they likely do not have.
Growing brands no longer trust the first provider recommended to them and are less swayed by well-constructed marketing strategies. Instead, they look at their competition and brands that they aspire to be one day and see what provider they’re using. They then try and replicate, either by exploring that specific provider or a similar one. These providers typically are good operators and can overcome the technology hurdle, which is increasingly shrinking.
Established brands are skeptical of new providers and will mostly stick with traditional providers. They have been burned in the past by switching providers too quickly (“the grass is always greener” fallacy) and take their time to fully vet partners they believe can support them for several years to come.
Brand profile
A more straightforward differentiator is the products and sales channels. Not all providers can handle large bulky goods or integrate with the wholesale channels the brand is using, for example. Increasingly, providers are starting to specialize in product categories to differentiate themselves and create a more effective, cost-efficient operation.
As brands establish their product catalog, they can find providers more suited to support their specific fulfillment needs and shift away from a primary focus on partnership or selling channels.
Whether you're a new brand seeking independent support, a growing brand in search of better solutions, or an established brand optimizing for reach and efficiency, choosing the right e-commerce fulfillment provider is important to help your business succeed and see operational efficiency. Evaluating factors such as network influence, growth stage, and brand profile will guide you toward making informed decisions. Remember, a well-aligned fulfillment partner can significantly contribute to the success and scalability of your e-commerce business.
