The global e-commerce market is projected to expand at a compound annual growth rate of 14.7% over the next five years — while not quite matching the explosive growth we saw at the start of the pandemic, that’s still a healthy level.
But with all of that growth, e-commerce brands are struggling to keep up. As many brands discovered, setting up websites to take online orders is only half the battle. Actually delivering those orders to customers is an entirely separate endeavor.
Fulfillment has emerged as one of the largest — if not the largest — obstacles facing e-commerce companies, which are contending with a mountain of new online orders.
And failing to deliver can hold serious consequences for brands looking to attract new customers and retain old ones: According to a survey by e-commerce platform FarEye, 85% of respondents said they would switch retailers after having just one poor delivery experience.
“To obtain and increase customer loyalty, brands need to deliver on their customer promises. Every. Single. Time. Great customer service isn’t enough. It’s table stakes. To truly stand out and grow, you need to earn your customer’s trust and, ultimately, their loyalty,” explained Mike Simpson, vice president of e-commerce at 3PL NFI Industries.
“The ability for you to get products into the end consumer’s hands accurately and quickly ultimately determines the perception of your brand. Incorrect orders and/or slow deliveries will negatively impact your customer satisfaction and ultimately customer loyalty,” he said.
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Simpson and NFI’s e-commerce division want to understand why brands struggle with fulfillment. The firm recently published research breaking down the biggest challenges companies face when trying to outsource their fulfillment to a third-party provider.
The survey found that scaling fulfillment to keep up with demand is the largest pain point, but that was far from the only obstacle respondents mentioned. Here’s a full breakdown of the research.
Vast majority of brands struggle to scale
Perhaps unsurprisingly, more than 9 in 10 (90.91%) respondents said scaling was among their three biggest fulfillment challenges. In particular, brands mentioned difficulty finding a partner with the capability to scale.
“When we evaluate fulfillment providers, we check whether they have the ability to help us scale into new markets,” one brand explained.
Many respondents said that they had to switch fulfillment providers because they didn’t have the market reach they had hoped for. And that goes for the global market as well — more than 75% of brands cited reaching international customers as a major challenge.
“We are looking forward to expand into international markets. We need a fulfillment provider that can support us,” said one respondent.
Brands in search of automation and labor
Though the report didn’t provide a specific percentage of respondents citing automation as a pain point, it noted that many brands are switching to fulfillment providers that have optimized their networks using technology.
“We outsourced our fulfillment to a different provider as we wanted to scale and needed someone who had already invested in fulfillment tech,” one company explained.
“We want to partner with a brand that’s invested in growing their technology and automation,” remarked another.
Automation in the warehouse is becoming a hot market, with fulfillment providers bringing in tech like machine learning, AI and autonomous mobile robots (AMRs) to speed up the process.
While the adoption of newer tech like AMRs remains low (around 20% by most estimates), more than half (56%) of materials handling companies use a warehouse management software (WMS) and another 36% use supply chain management and planning software, according to a survey by Peerless Research Group.
Knowing what you’re paying for
More than 8 in 10 brands feel that they’ve been gypped by their outsourced fulfillment provider. According to the survey, 85% of respondents felt that a lack of transparency in pricing and unfair rates were among the three biggest frustrations they had with fulfillment providers.
The research clarified that a lack of transparency typically refers to unexpected fees or hidden costs charged at the time of billing without the brand’s prior knowledge. Because there is no conventional pricing structure for 3PLs, some partners might charge a flat fee for services like pick and pack, while others might break that category into smaller charges.
Companies cited “fair pricing, transparency and competitive rates” as being key to their decision-making processes. Their preference is for providers that have a “simple pricing structure that takes into account the nature of our business.”
Customer service leaves more to be desired
In the age of supply chain disruptions we live in, having agility and flexibility is key to avoiding delays. However, 7 in 10 e-commerce brands said that a lack of good customer service from 3PLs was their fourth-largest challenge when outsourcing fulfillment.
Bad customer service isn’t just about a company’s supply chain manager being placed on hold for an hour — it can ultimately create poor experiences for the end consumer down the line because the brand is unable to act quickly.
“Losing a lifelong customer due to a fulfillment provider’s poor service is one of our biggest fears,” one respondent worried.
Watch: How to Build A Strong Micro-Fulfillment Model
“We chose our current fulfillment service provider as they were able to help us serve our customers better,” added another.
As they say in the sports world, availability is the best ability. A 3PL could have all the capabilities in the world, but if there’s nobody to answer the phone when trouble arises, does it matter?
Daily communication is a necessity for e-commerce brands, as one company explained: “We changed fulfillment providers as our current provider is diligent and provides ways to access open order reports daily. They listen to requests and needs and are willing to communicate anytime over call or email.”
A need for more education and knowledge-sharing
While not as pressing of an issue as others on the list, a lack of fulfillment education was a pain point for more than half (55%) of respondents. Particularly for growing companies, navigating the e-commerce space can be tricky without understanding the nuances of fulfillment.
For many growing and established players, a little advice can go a long way. For example, brands said that an article or guide on how to properly label their products before sending them to a 3PL would be helpful.
“Fulfillment providers should offer client coaching in terms of what brands can do differently or better to help them succeed, save on inbound and production costs, streamline the receiving or put away process, etc.,” one respondent suggested.
Data and analytics sharing also fall under this umbrella. E-commerce brands and 3PLs need to be able to communicate which parts of the network are underperforming and why, and having reliable access to that information can be a difference maker.
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