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How To Leverage Retail Fulfillment For Higher Profit Margins

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Retail fulfillment is the process of receiving and processing orders from customers and then delivering the products to them. It is a critical part of any retail business, and can have a major impact on a company’s bottom line.

What is retail fulfillment?

Retail fulfillment is the process of receiving, storing, and delivering products to customers. It involves a lot of activities, including but not limited to receiving goods from suppliers, stocking shelves, fulfilling online orders, and managing returns.

The retail fulfillment process is important because it ultimately determines the customer’s experience. A well-run operation will ensure that products are delivered on time and in good condition; a poorly managed one can lead to delays, damaged goods, and unhappy customers.

There are several factors to consider when setting up a retail fulfillment operation, including the type of products being sold, the volume of orders, the geographic areas being served, and the delivery methods being used. Choosing the right mix of these factors is critical to ensuring a smooth and efficient operation.

Done correctly, retail fulfillment can be a major competitive advantage. It can help retailers win market share by providing a better customer experience than their rivals. It can also help them save money by reducing inventory costs and maximizing space use.

If not managed properly, however, retail fulfillment can also be a major source of frustration. Inefficient operations can lead to high costs, missed sales opportunities, and angry customers. It is therefore important that retailers carefully consider all aspects of their fulfillment operations before launching them.

Importance of retail fulfillment

As noted, e fulfillment ultimately determines the customer’s experience with a retailer. While a well-run retail fulfillment operation can be a major competitive advantage, a poorly-run one can be a major source of frustration.

There are several factors to consider when setting up a retail fulfillment operation, including the type of products being sold, the volume of orders, the geographic areas being served, and the delivery methods being used. Done correctly, retail fulfillment can provide significant benefits, including:

  • Increased customer satisfaction: When customers receive their orders promptly and without problems, they are more likely to be satisfied with their overall experience with the retailer. This can lead to increased sales and repeat business.
  • Improved customer loyalty: Good retail fulfillment can turn one-time buyers into lifelong customers. If customers know they can rely on a retailer to deliver their orders on time and as expected, they are more likely to continue doing business with that retailer, even if there are occasional hiccups.
  • Reduced costs: An efficient retail fulfillment operation can help reduce many of the costs associated with selling online, including inventory, shipping, and returns processing.
  • Improved margins: By reducing cost and increasing sales, good retail fulfillment can help improve a retailer’s overall margins.

Manage your inventory with confidence

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Optimize your retail fulfillment process

Factors to consider when optimizing a retail fulfillment operation, includes the type of products being sold, the volume of orders, the geographic areas being served, and the delivery methods being used.

  • Product type. Some products are delicate, and require special handling. Others are time-sensitive and need to be delivered as quickly as possible. Still others are large or bulky and difficult to store or ship. By understanding the characteristics of the products being sold, retailers can make sure that their fulfillment operations are properly equipped to handle them.
  • Order volume Another important factor to consider in optimizing a retail fulfillment operation is order volume. A retailer that sells a high volume of orders will need a fulfillment solution capable of handling a large number of daily orders, while a low-volume operation might be able to get by with a simpler solution.
  • Geography. The geographic areas being served by a retail operation can also impact fulfillment requirements. International shipments may need to go through customs and may in other ways be subject to different regulations than domestic shipments. 
  • Delivery methods. Finally, delivery methods play a role in how a retail operation fulfills orders. Common delivery methods include shipping (via ground, air, or sea), local pickup and delivery (for customers who live near the retailer), and in-store pickup (for customers who want to avoid shipping charges). Each delivery method has its own advantages and disadvantages, which should be considered when choosing the best option for a given order.

💡 PRO TIP: Set up local pickup in Shopify to start offering in-store pickup as a delivery option at checkout. Pay less on last-mile delivery, speed up fulfillment times on local orders, and drive more foot traffic to your stores.

Retail fulfillment process

  • Receiving inventory
  • Warehousing
  • Picking and packing
  • Shipping orders
  • Processing returns

Retail fulfillment involves several different activities. By understanding and optimizing each step of the process, you can ensure that your business is running as efficiently as possible.

Receiving inventory

Receiving inventory is the first step in the retail fulfillment process. It is critical that this step be carried out correctly, in order to avoid delays or errors further down the line.

  • Make sure you have enough storage space to accommodate new stock. You don’t want it to be crammed in, as this can make it difficult to find items when you need them.
  • Inspect each item as it comes in, and check for damage. If there is any damage, make note of it so you can claim against the supplier if necessary.
  • Keep track of what has been received, so that you can keep your records up to date and know what you have in stock at all times. This can be done using a simple spreadsheet or an inventory management system.

Warehousing

By having a designated space to store inventory, businesses can keep track of what they have on hand and ensure that items are properly protected. When selecting a warehouse, it is important to consider the size of the space, the type of inventory being stored, and the climate control needs.

💡 PRO TIP: When you use different platforms to run your online and retail stores, inventory discrepancies are more likely to happen. This can lead to more frequent inventory counts to reconcile differences and ensure stock levels are accurate.

Picking and packing

Picking and packing involves selecting the right products and packaging them correctly for shipping. This step is important in ensuring that products arrive safely at their destination and are able to be used by customers.

  • Make sure to select the correct product. This may seem obvious, but it is important to double-check that the product you are selecting is the one that the customer ordered.
  • Pay attention to detail when packaging the product. Make sure that it is securely wrapped and labeled correctly.
  • Use proper shipping materials. Choose a box or envelope that will protect the product during transit.

Shipping orders

Shipping orders involves selecting the right products and packaging them correctly for shipping. This step is important in ensuring that products arrive safely at their destination and are able to be used by customers. 

Processing returns

When a customer returns an item, businesses should first check to see if the return is covered by their return policy. If it is not, businesses should still inspect the item for damage, keep track of what has been returned, and provide the customer with a receipt.

It is important to note that some items may not be able to be returned due to hygiene reasons. For example, items such as underwear or swimwear may not be able to be returned if they have been worn. In these cases, businesses should provide the customer with a store credit instead of a refund.

By following these simple tips, businesses can ensure that their return process is smooth and efficient.

💡 PRO TIP: With Shopify POS, you can accept exchanges for purchases made online or at another store location and your inventory will be updated instantly–no manual reconciliation required.

Retail fulfillment models

In addition to the process described above, there are several alternative retail fulfillment models businesses can use to distribute their products. The most common are dropshipping, consignment, and direct-to-consumer (DTC).

In dropshipping, the retailer does not keep any inventory on hand. Instead, they simply take orders from customers and then purchase the products from a third-party supplier, who ships them directly to the customer. Dropshipping is often used by businesses that sell products that are difficult or expensive to store, such as electronics or furniture.

Consignment is when the retailer agrees to sell products on behalf of another party, usually a manufacturer or wholesaler. The retailer only pays for the product once it has been sold to the customer. This arrangement is often used for high-end or luxury items, where the retailer wants to provide a level of service that can’t be replicated by mass-market retailers.

In direct-to-consumer retailing, businesses sell their products directly to consumers, without going through any middlemen. This model is often used by companies that have a direct relationship with their customers and want to offer a more personalized shopping experience. It can also be used by companies that want to control every aspect of their product’s distribution and marketing.

Third-party logistics (3PL)

Third-party logistics (3PL) is a type of supply chain management in which businesses outsource their logistics and fulfillment operations to a third-party provider. This provider manages the storage, transportation, and delivery of the company’s products.

The use of 3PL providers has become increasingly popular in recent years, as businesses look for ways to reduce costs and improve efficiency. 3PL providers often have access to resources and technologies that businesses would not be able to afford on their own.

There are many potential benefits of using a 3PL provider, including improved customer service, increased flexibility, and lower costs. However, there are also some risks associated with outsourcing logistics, such as losing control over the quality of the service and having to rely on another company to meet your customers’ needs.

When choosing a 3PL provider, it is important to consider your specific needs and objectives. Make sure to select a provider that has experience in your industry and that you feel confident can meet your expectations.

Self-fulfillment

Self-fulfillment is what retailers do when they take on the responsibility of fulfilling orders themselves, without outsourcing to a third-party logistics provider. This model can be used to improve customer service and control costs. However, it can also be more time-consuming and expensive than using a 3PL provider. 

Omnichannel fulfillment (BOPIS, local pickup, etc.)

Omnichannel fulfillment is a term used to describe the ability of businesses to meet customer needs through a variety of channels. The most common omnichannel fulfillment options are buy online, pick up in store (BOPIS), and local pickup.

BOPIS is a popular option for customers who want the convenience of shopping online but don’t want to wait for their items to be shipped. With BOPIS, customers can place their order online and then pick it up at a store location. This option is often used by customers who need their items quickly and don’t mind paying a bit extra for the convenience.

With local pickup, customers can place their order online and then pick it up at a nearby location, such as a grocery store or gas station. This option is often used by customers who live in rural areas or who don’t have access to reliable shipping services.

The benefits of omnichannel fulfillment include improved customer satisfaction and increased sales. However, there are also some challenges associated with it, such as the need for coordination between multiple channels and the risk of inventory shortages. When deciding whether to use omnichannel fulfillment, businesses should carefully consider their specific needs and objectives.

💡 PRO TIP: Shopify local delivery is a set of flexible tools that let you offer shoppers local delivery options at checkout. Set delivery zones, add pricing conditions for each zone, manage and prepare orders for delivery, and create optimized delivery routes for drivers from Shopify.

How to improve retail fulfillment

In order to improve retail fulfillment, businesses need to focus on a few key areas: streamlining their inventory management, reducing shipping costs, and providing excellent customer service.

Inventory management is a crucial part of retail fulfillment. Businesses need to have a system in place that can track inventory levels and replenish stock as needed. This can be done with a simple spreadsheet or an advanced inventory management system. Either way, businesses need to make sure they are keeping accurate records of what they have in stock and reordering items as needed.

Reducing shipping costs is another important aspect of retail fulfillment. One way to do this is to use flat-rate shipping for all orders. This means that the business charges a fixed price for shipping regardless of the weight or size of the order. Another approach is to offer free shipping for orders over a certain amount. This encourages customers to spend more money on their order, which offsets the cost of shipping.

Finally, excellent customer service is essential for retail fulfillment. Customers should be able to contact the business easily if they have any questions or problems with their order.

Additionally, businesses should make sure they are fulfilling orders promptly and accurately. If there are any delays or issues with an order, the business should communicate this to the customer right away.If you’re looking to improve your retail fulfillment, local pickup, 3PL support, and inventory management can all be helpful.

Local pickup

Local pickup can be a great option for businesses that want to improve their retail fulfillment. When customers choose local pickup, they can pick up their order at the business’s location. 

This is convenient for customers because they don’t have to wait for their order to be shipped, and it allows businesses to avoid the high costs of shipping.

Local pickup can also be a great option for businesses that want to provide excellent customer service. 

When customers pick up their orders at the business’s location, they can ask questions and get help with any problems they may have. Additionally, businesses can make sure that orders are fulfilled promptly and accurately. If there are any delays or issues with an order, the business can communicate this to the customer right away.

Consider 3PL support

Third-party logistics (3PL) providers can be a great option for businesses that want to improve their retail fulfillment. 3PL providers offer a variety of services that can streamline inventory management, reduce shipping costs, and provide excellent customer service.

3PL providers can help businesses streamline their inventory management by offering real-time inventory tracking and automatic replenishment. This can save businesses time and effort that would otherwise be spent on manual inventory management tasks. In addition, 3PL providers can often provide lower prices on inventory than businesses could get on their own.

Leverage inventory management software

Inventory management software can help businesses streamline their inventory management and reduce shipping costs. There are a variety of inventory management software programs available, each with its own set of features. businesses need to find the program that best meets their needs.

Some of the features that businesses should look for in an inventory management software program include the ability to track inventory levels, replenish stock as needed, and ship orders quickly and efficiently. The software should also be easy to use and integrate with other business systems.

💡 PRO TIP: Shopify POS comes with tools to help you control and manage your inventory across multiple store locations, your online store, and warehouse. Forecast demand, set low-stock alerts, create purchase orders, know which items are selling or sitting on shelves, count inventory, and more.

Improve your retail fulfillment process

Excellent customer service is essential for retail fulfillment. Customers should be able to contact the business easily if they have any questions or problems with their order. Additionally, businesses should make sure they are fulfilling orders promptly and accurately. If there are any delays or issues with an order, the business should communicate this to the customer right away.

Try Shopify POS for omnichannel selling

Bring your in-store and online sales together with Shopify POS. Gain insights about your business from one view so you can work smarter, move faster, and think bigger.

This originally appeared on the Shopify Retail Blog and is made available here to cast a wider net of discovery.

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