Ecommerce fulfillment – the process of storing, picking, packing, and shipping products and delivering them to online shoppers’ doorsteps – is emerging as a top priority for retailers today.
Once considered a back-office supply chain function by many businesses, order fulfillment is now widely viewed as a core element of the online shopping experience and an area where retailers can carve out a significant competitive edge.
Indeed, if you get your order fulfillment right, you can get your ecommerce business on the right track. But ensuring your order fulfillment operations run smoothly from click to delivery – so that you can keep customers happy and also keep operating costs down – is a major challenge.
How are online retailers today coping with ecommerce fulfillment challenges and capitalizing on opportunities? How can you transform ecommerce fulfillment into a competitive differentiator for your business? What do you need to do to prepare for the future of ecommerce fulfillment?
To answer these and other critical questions, Amazon commissioned Forrester Consulting to conduct a survey of 300 ecommerce executives in the US and produce a study titled From click to delivery: Unleashing the power of ecommerce fulfillment.
Based on the findings of this study, we’ve identified five key trends that are shaping the future of ecommerce fulfillment:
#1: Online shoppers’ expectations for order fulfillment speed continue to accelerate
One trend that we see playing out in the ecommerce world is that online shoppers continue to demand increasingly faster order deliveries.
This tendency of customers to continuously raise their expectations is nothing new. In Amazon’s 2017 letter to shareholders, founder and then CEO Jeff Bezos wrote: “One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’.”
And this is precisely the case when it comes to order fulfillment speeds. According to the new Forrester study, ecommerce leaders say that five years ago, customers expected a click-to-delivery speed of 5.7 days on average, while customers today expect a click-to-delivery speed of 2.5 days on average, and five years from now customers will expect a click-to-delivery speed of 1.5 days on average.
Additionally, 85% of ecommerce executives state that their customers have become far more demanding over the last five years in terms of delivery speed expectations, and 80% predict that this trend will continue over the next five years.
How can your ecommerce business meet shoppers’ need for speed today and in the future? Simply put, you must invest in continuously improving your end-to-end logistics capabilities or engage a third-party logistics (3PL) provider – like Amazon Multi-Channel Fulfillment (MCF) – that has the network and expertise to ensure ongoing click-to-delivery excellence.
#2: Customers are purchasing products across a growing number of channels
Another trend that continues to have a huge impact on ecommerce fulfillment is multi-channel shopping. Today’s consumers are becoming increasingly accustomed to completing transactions online and are shopping across more and more sales channels including brand websites, ecommerce marketplaces, and social media stores.
The Forrester study reveals just how extensively multi-channel ecommerce has taken hold: Five years ago, online retailers sold through 4.3 channels on average, and this number has shot up to 5.4 channels today and is expected to reach 6.5 channels within the next five years.
To drive revenue growth in this complex retail landscape, you must be able to maintain:
- A multi-channel presence, ensuring that you can meet your shoppers wherever they are.
- A consistent, first-class order fulfillment experience, regardless of which channels shoppers use.
- Ecommerce integrations, which can connect your back-end systems and automate the order fulfillment process.
- Effective inventory management, so that you can keep your products in stock across all of your sales channels.
Many businesses find it hard to handle the challenges and complexity of multi-channel fulfillment, so they outsource their logistics operations to a 3PL – like MCF – that can help them effectively manage order delivery across any channel they sell on.
#3: Order fulfillment plays a major role in online shoppers’ purchasing decisions
The new Forrester study also sheds light on another fascinating phenomenon: Order fulfillment has a major effect on shoppers’ decisions to purchase and purchase again from online retailers.
Over 80% of ecommerce leaders say that shoppers’ purchasing decisions are influenced to a meaningful degree by the retailer’s delivery speed and costs (and the way these are communicated to shoppers).
Indeed, the Forrester study showed that order fulfillment has a huge impact across various stages of the customer journey including:
Conversion: 82% of ecommerce leaders state that offering faster order delivery speeds has enabled them to increase shopper conversion, according to the Forrester study.
Amazon – maybe more than any other company out there – understands how fast, reliable fulfillment can help drive greater customer conversion and business growth. As the CEO of Worldwide Amazon Stores Doug Herrington recently wrote in an article about Amazon’s record-breaking Prime delivery speeds: “One thing we’ve learned about customers over the years is the importance they place on delivery speed. The faster we can get products to customers, the more likely they are to buy them.”
And that’s why we enable online retailers to provide a fast, free delivery experience not only on Amazon.com, but also on brand websites through Buy with Prime. By offering fast, free delivery to shoppers on their websites with Buy with Prime, businesses have been able to dramatically increase conversion.
Retention: Effective order fulfillment can also help you turn online shoppers into loyal customers. By delighting shoppers with speedy, seamless order delivery and returns experiences, retailers can boost customer retention.
According to the Forrester research, nearly 80% of ecommerce executives say that order fulfillment and return experiences can significantly affect whether a customer purchases from a retailer again.
#4: Many ecommerce businesses struggle to manage order fulfillment operations
Although order fulfillment is such an essential part of the online shopping experience and can fuel greater shopper conversion, retention, and top-line growth, many retailers have difficulties handling their pick, pack, and ship operations.
The Forrester study showed that today’s ecommerce businesses face numerous order fulfillment challenges, including:
- On-time delivery: Many retailers are struggling to keep delivery promises to customers. On average, only 86% of orders are delivered on time, and 63% of retailers say that at least one in 10 of their orders is delivered late.
- Peak season performance: On-time delivery becomes an even bigger challenge during busy peak shopping periods like the end-of-year holiday season, which typically accounts for a large percentage of annual sales revenue and requires extra capacity (in terms of both storage and workforce) to handle the seasonal spike in orders. In fact, 64% of ecommerce businesses are unable to consistently deliver during peak times as fast as they believe their customers expect.
- Data management: Many online retailers face difficulties collecting and analyzing order fulfillment data, and using it to drive improvements. Although 82% of ecommerce leaders think that robust fulfillment data and insights can help them increase the efficiency of their operations, most are unable to track and utilize their data to make informed business decisions. Only about 50% of ecommerce businesses are tracking critical KPIs such as on-time delivery rate, average cost per order, and inventory turnover rate.
To tackle these and other order fulfillment challenges, online retailers must have the right logistics network, systems, processes, and people in place. And – as many businesses lack these resources and capabilities in house – they turn to 3PL providers for help.
#5: 3PL providers and cutting-edge technologies are transforming ecommerce fulfillment
A growing number of online retailers are realizing that – as order fulfillment is not their core competency – it would require a major investment of capital, time, and effort for them to be able to optimize their click-to-delivery operations and consistently meet shoppers’ ever-increasing expectations. Instead of trying to develop order fulfillment expertise in-house, many businesses today are opting to outsource.
According to the new Forrester research, nearly two-thirds of ecommerce businesses managing fulfillment in-house today plan to outsource these operations to a 3PL provider in the future, and 91% are at least interested in outsourcing.
Why are so many online retailers looking to engage 3PLs? The Forrester study reveals that there are a few main reasons:
Business benefits: Retailers that outsource their order fulfillment to a 3PL have been able to achieve substantial business benefits, such as a 29% improvement in on-time delivery rate and pick-to-ship cycle time, a 28% reduction in cost per order, as well as a decrease of nearly a day in their delivery time, on average. It should be noted that retailers that outsource their order fulfillment to best-in-class 3PLs (or – as the Forrester report calls them – “high maturity” 3PLs) have experienced even greater improvements.
Additionally, 79% of ecommerce leaders stated that outsourcing to a 3PL has freed up their time – so they can focus on other aspects of their business that are truly their area of expertise.
Access to state-of-the-art technologies: According to the Forrester study, 82% of ecommerce leaders state that advances in order fulfillment through cutting-edge technologies like AI and robotics will significantly improve their company’s ability to serve customers. Many 3PL providers utilize these innovations – and, in fact, gaining access to these technologies is the top reason why ecommerce executives decide to outsource.
Indeed, the breakthrough logistics technologies employed by many 3PLs have the power to truly revolutionize order fulfillment operations. By working with MCF, for example, your business will benefit from Amazon’s latest and greatest innovations including:
- AI-powered warehouse robots such as Sparrow, a robotic arm that can detect, select, and handle inventory, Proteus, Amazon’s first autonomous mobile robot, and Titan, a robot that can lift and carry items up to 2,500 pounds. According to a recent article, Amazon is actually the world’s largest manufacturer of industrial robotics, and uses more than 750,000 robots globally to fulfill customer orders.
- Amazon’s Supply Chain Optimization Technology (SCOT), which utilizes deep learning and huge datasets to accurately forecast demand and automatically decide how to distribute inventory across Amazon’s fulfillment network so it’s as close as possible to customers.
- Route design and optimization software systems, which use machine learning and generative AI to determine the best route for Amazon drivers to take to deliver packages to customers’ doorsteps.
- Ability to scale: For ecommerce leaders, the second most important reason for outsourcing fulfillment (right behind gaining access to the latest technologies) was having the capability to expand their business across new channels, markets, or product lines. A 3PL provider – with its expansive network and extensive expertise – can empower you to scale your growth and handle the increased supply chain complexity that business expansion brings.
For these and other reasons, an increasing number of ecommerce businesses are looking to outsource their order fulfillment operations to a 3PL.
Conclusion
Is your business ready for the future of ecommerce fulfillment? Will you be able to meet shoppers’ ever-increasing expectations for order delivery speed across various channels, manage dynamic supply chain challenges, and make order fulfillment a driver of competitive advantage?
In the years to come, the ecommerce landscape will change, but one thing will undoubtedly remain the same: Order fulfillment will continue to be an essential element of the online shopping experience for customers and a critical capability for retailers.
The new Forrester study – From click to delivery: Unleashing the power of ecommerce fulfillment – provides invaluable insights on how, by leveraging the power of 3PL providers and cutting-edge technologies, you can set your business up for success in order fulfillment today and in the future.
