With more than 4.8 million Shopify stores worldwide, this eCommerce platform has gone from strength to strength since its conception in 2006.
These stores vary in size, from start-ups shipping one parcel per week to juggernauts such as Gymshark, who, powered by Shopify Plus, process as many as 50,000 orders in a single day.
With such a broad spectrum of scale and opportunity for growth, retailers often find themselves in a position where they grow from 10 to 100 to 1000 parcels per day, and this is the point at which growing SMEs become mid-market retailers. During this growth stage, Shopify merchants reach growth ceilings, so they need to consider expanding their operations. This means technology, staff, premises, new product development, sales, and marketing efforts. This article will focus on scaling your Shopify order fulfilment operations.
What is eCommerce Fulfillment?
Outsourcing eCommerce fulfillment entrusts a third-party logistics company (3PL) with the intake, organization, storage, picking, reworking, packing, shipping, returns, and sometimes, customer service elements of your business operations. The eCommerce logistics company will have its warehouse space dedicated to giving online retailers access to benefits such as ‘pooled volume’ discounted shipping rates, thanks to all merchants’ shared collaborative buying power using that 3PL. Outsourcing order processing means you only need to pay for the space and staff time you need.
Why do Shopify Retailers Use or Don’t Use a 3PL
Many Shopify retailers decide to invest in their own warehousing and order processing teams, which, on the one hand, gives them greater control. Still, on the other hand, investment in operational growth can be very capital-intensive and means leadership can become entrenched in the day-to-day order processing, which means less focus on their Shopify store’s sales, marketing, and new product development.
Demand for eCommerce picking, packing, and distribution is rising, and Shopify retailers are increasingly opting to outsource order fulfillment with a specialist 3PL. The global ecommerce fulfillment services market was valued at $97bn in 2022 and is “expected to grow at a compound annual growth rate (CAGR) of 13.9% from 2023 to 2030”.
Critical Components of Shopify Order Fulfillment
A highly involved process, order fulfillment involves the following stages:
- Agree on pricing, KPIs (as agreed target deliverables), and OKRs (objectives and key results).
- Customer onboarding, involving fulfillment center walkaround, technology demonstrations, introduction to your account manager, and integration
- Your finished goods start being shipped from your suppliers and manufacturers to the 3PL warehouse(s)
- Your products are received by the ‘goods in’ team and then organized by the forklift team to place your items in agreed stock locations
- Order data comes in, creating a picking notification for each order, at which point the picking team collects your items, following a variety of picking methods. If an order contains multiple items, they are usually grouped by the packing team, ready for a shipping label, and injection into the courier networks (at this point, the customer receives a shipping notification with tracking details)
- Items are then placed onto pallets, shrink-wrapped, or inside Magnum containers, grouped by parcel carrier
- Parcels and packets are collected by the parcel carrier and distributed into the carrier networks, ready for final-mile delivery to the customer
- The customer, in some instances, may need to return their item or may have a customer service query. At this point, 3PLs can step in to help.
Best Practices for Shopify 3PL Outsourcing
With effective measurement, you will know whether outsourcing fulfillment was the right move or your day-to-day fulfillment performance. It’s, therefore, key to work with a technology-driven 3PL that gives you complete visibility of your inventory management, order processing, delivery, and customer experience metrics. This will help you monitor and measure agreed KPIs and OKRs.
When looking to work with a 3PL, assess their third-party client feedback (Google and Trustpilot) and also review specialist outsourcing feedback platforms such as Clutch and G2. Most importantly, they check customer success stories and contact clients for honest, unbiased perspectives.
Review multiple 3PL providers to determine benchmarks for shipping, storage, picking, and packing costs. One provider may be cheaper than another, but what about parcel damage claims processing, in-flight delivery options, and shipping insurance? As your business scales, will the 3PL remain competitive and offer you economies of scale?
Shopify Fulfillment Case Study – Cheeky Panda:
Initially, The Cheeky Panda, a retailer of bamboo toilet paper, fulfilled orders in-house, focusing mainly on B2B wholesale orders. The company decided to sell directly to consumers (D2C) online but needed more infrastructure to handle larger order volumes. This meant that when the pandemic hit in 2020, and more customers flocked online to buy goods, the company could not cope with increased demand, and it became impossible for the small team to fulfill thousands of orders per day in-house. The Cheeky Panda sought a solution to automate and streamline the order fulfillment process without investing in a dedicated warehouse and staff.
They discovered Zendbox, a 3PL that processes over three million orders annually. It connects eCommerce businesses’ sales channels, such as Shopify, eBay, and Amazon, with Zendbox’s virtual warehousing and inventory management technology. This helps retailers streamline their business operations, giving them greater visibility of their supply chain activity.
“The biggest benefit of working with Zendbox is that we have been able to reach our customers and have them engage with us directly. If a customer wanted to buy our products, they had to go through a retailer. Buying directly from The Cheeky Panda not only provides certainty to customers that the products they receive are authentic but also enables us as a brand to provide more personalized service. We’ve also been able to set up different services for our customers, like ‘Subscribe & Save’, which we couldn’t do before Zendbox.
“Outsourcing fulfillment to Zendbox has enabled The Cheeky Panda to grow organically without relying on a retailer. Particularly during the COVID-19 pandemic, we experienced a peak in sales, and the business grew significantly through eCommerce. Without their support to manage this demand, we would have faced a huge loss in sales and brand visibility.”
The Future of Shopify Fulfillment
From 2024 and beyond, retailers will demand greater efficiency from 3PLs and sustainable fulfillment practices. Consumers will order personalized experiences, from customized packaging to personalized gift notes and increasingly sophisticated in-flight delivery options. Therefore, it can be concluded that it isn’t necessarily scale that matters most with 3PLs, but the level of account management, attention to detail, and technology flexibility that will pay dividends.
