Are Online Marketplace Fulfillment Services for You?

By John Haber, Founder & CEO, Spend Management Experts — May 18, 2017

Fulfillment services are undergoing a makeover. Worldwide growth of e-commerce has resulted in demand for faster delivery service. To meet these changes, retailers are making significant investments into their supply chains.

Among the biggest transformations is in the warehouse or fulfillment center. Investments in automation are being made on a regular basis as retailers race to not only fill bulk orders for physical stores and individual orders for consumers, but also manage returns efficiently and quickly.

As investments are made to warehouses, competition to fulfill the orders is also undergoing a change. Enter Amazon, Newegg, Snapdeal, Flipkart, Alibaba, Sears and Walmart, which are among a growing number of providers offering online marketplaces that have the capabilities of actually fulfilling retailers' orders.

According to e-commerce consulting agency, i95Dev, a marketplace is a "multi-vendor online store that enables consumers to shop for a variety of products and brands from multiple vendors across multiple locations. Marketplaces make it convenient for businesses to list and sell their products by taking care of all the operational aspects and providing customers options while ensuring quality."

Fulfillment by Amazon
Fulfillment by Amazon (FBA) is perhaps the best known of these online marketplace fulfillment services.  FBA is a program through which third-party sellers can leverage Amazon's expansive fulfillment infrastructure to warehouse items, pack and ship orders to customers, and provide customer service for orders. One of the biggest benefits for FBA sellers is that they are eligible for Amazon Prime and Super Saver Shipping, which gives them access to Amazon customers who historically spend more money more often.

Perhaps one of the biggest drawbacks to the program is the practice of commingling. When using FBA, sellers can opt out of labeling the inventory they ship to Amazon fulfillment centers, and instead send their items to Amazon as stickerless inventory. Amazon will then "commingle" its inventory, meaning they mix it together in one big pool with the same item from many other sellers. A few drawbacks on this practice:

  • Possible counterfeit or mislabeled products being added to the pool.
  • Commingling mixes products with the same manufacturer ID from different third-party merchants selling on Amazon, along with those that Amazon sells, and from brands directly supplying Amazon.
Newegg
In 2013 electronics e-retailer, Newegg, introduced its fulfillment service that includes pick, pack and ship. According to the company, its service can ship 99 percent of orders within 24 hours of validating payments for those purchases, and caters to businesses that sell laptops and computer parts, video equipment and components, and other electronic goods.

To attract more sellers, Newegg launched Newegg Premier Seller program which includes:
  • Increased product exposure with exclusive Premier-eligible marketing opportunities such as e-blasts and homepage promotions.
  • Improved overall seller operational performance and customer satisfaction.
  • Enhanced qualifying product listing with the distinctive "Premier" badge indicating Newegg's most trusted sellers.
According to its press release, interested sellers are screened and evaluated based on key performance indicators, including a customer satisfaction rating of 4 or greater. Additionally, sellers must keep 100 percent of their inventory in stock, and ship 90 percent of their orders within 24 hours (and ship 100% of all orders within 48 hours).

Brick & mortar retailers and online marketplace fulfillment options
It's not only e-retailers that are offering online marketplace fulfillment solutions. Some brick-and-mortar retailers such as Walmart already have an online marketplace and are rumored to be considering fulfillment service offerings.

According to various sources,  Walmart's online marketplace hosts more than 1,000 sellers, and while the company officially notes it has made no decision to open its fulfillment service to third parties, it is building out its online capabilities at a rapid clip which could possibly rival FBA capabilities.

Currently, merchants must be invited or submit a request to sell on the marketplace. The company particularly seeks sellers of private-label products and electronics, apparel and accessories, and home and sporting goods. The website's search results show marketplace items from outside sellers alongside Walmart's own products.

Another brick-and-mortar retailer that has ventured into fulfillment services is the beleaguered retailer Sears. It introduced "Fulfilled by Sears" for third-party merchants to sell their products on Sears Marketplace at Sears.com in 2013. According to the press release, in addition to selling products on Sears Marketplace and outsourcing fulfillment duties to the retailer, third-party merchants also can advertise on Sears Marketplace and allow buyers to pick up merchandise the same day at their local Sears store. Taking advantage of its physical stores as points of pick up is an excellent idea, but today Sears is more focused on its financial viability, and as such has remained fairly silent in its online marketplace fulfillment offerings.

The 3PLs
Even though fulfillment options are increasing, one should not necessarily dismiss third-party logistics (3PL) providers. Besides traditional services such as pick and pack, packaging, inventory and returns management, 3PLs also can provide customized value-added services for clients. Often industry-specific, apparel value-added services can include garment on hangers for transport, labeling price stickers and security tags, steam pressing, folding and more.

Much like other options, the costs to outsource to a 3PL can add up quickly. Typically companies that utilize 3PLs are larger and sell on multiple platforms. An important note for companies that are thinking about 3PLs: identifying the right 3PL partner is critical for success.

Finding the right fulfillment solution
Although we only highlighted a few of the many options for fulfillment services, finding the right solution can be a daunting task. Conducting research and comparing fees is recommended. The amount of space in the warehouse, how long the items sit in a warehouse, special packaging needs, and shipping costs are among the many fees to consider.

In addition, who is the targeted consumer? If expanding into India is a strategic goal, consider Flipkart and/or Snapdeal, two of the largest e-retailers in India that offer similar services to Amazon's FBA. If an Asian expansion is planned, research one of Alibaba's sites or Japan's Rakuten, both of which are large e-retailers that also offer online marketplace fulfillment services and cross-border shipping.

Most importantly, don't forget the 3PLs such as DHL, XPO Logistics and UPS SCS. It may be more cost effective to utilize the services of a 3PL versus an online marketplace fulfillment solution. It's all about doing your homework and prioritizing your needs.


John Haber is founder & CEO of Spend Management Experts, a transportation spend management consultancy.

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