E-Commerce 101: Laying the Foundation for Your Digital Storefront

Published : October 8, 2014

ecommerce-101One of the tenets of design is the mantra, "form follows function." This is certainly also true in the third-party fulfillment (3PF) industry, especially when it comes to developing solutions for e-commerce.

Many e-commerce retailers have few clues, at least going in, about what a potential 3PF partner could do for them. How much volume do I need to be moving to justify a third-party fulfillment contract? Is it really worth it to outsource inventory management? Do I need to invest in new database software or build a new website just to be able to dovetail well with the 3PF provider's systems?

They're all great questions that bear on developing your digital storefront, and you should be asking them of any potential fulfillment partner.

What functionality does your site already feature?

Most e-commerce sites capture and store information about their buyers. Are you only capturing shipping and method of payment info, or are you also pulling in actionable data about consumer preferences and shopping habits? If the former, you are likely running a simple database system— maybe even depending upon something as rudimentary as an Excel spreadsheet— that could easily be exported to your 3PF partner on a regular basis.

If you are just starting up and you are considering a 3PF arrangement from the get-go, it would be a wise idea for you to work directly with your chosen e-commerce fulfillment provider's information technology (IT) group to see what mutually-beneficial software solutions may be available to you off the shelf. You might even work a software suite licensing agreement into your contract if your 3PF is running a customized software package.

Just remember, though, that this could cause technology headaches down the road if you ever were to switch providers or bring your fulfillment in-house.

What do I do if I have difficulties dovetailing my retail software with my 3PF partner's?

If you don't already have a system in place and cannot license or purchase an off-the-rack software package that is compatible with your potential 3PF partner, you have three options.

1. You could look for a new 3PF provider that operates on software you can easily obtain.

Remember, there are plenty of fulfillment companies out there. You'll want to find one that can meet not only your technology / compatibility needs, but that is also centrally located to the area you anticipate shipping most to, so that your shipping costs and order-to-door times are as minimal as possible. You'll also want to make sure that a partner can meet all your service needs: can it provide pack-and-ship service, a customer service call center, real-time inventory management, multi-channel sales support and real-time shipment tracking?

2. You could forego the 3PF arrangement entirely and bring inventory storage, shipping and management entirely in-house.

For most e-commerce retailers, however, the investment of time, capital, and personal can be prohibitive. Bringing fulfillment in-house can require a significant expenditure of investment capital for such necessities as buying or leasing storage facility space, building or leasing equipment, staffing and day-to-day energy costs. And unless you are moving large volume every single day, you would also not likely enjoy the same shipping rates that a 3PF partner would, so your shipping costs will be higher.

3. Your best option, however, would be to outsource.

Much like fulfillment, it’s not necessary that you manage technology development in-house. In fact, its probably less effective to try to create a specialized program on your own unless, of course, you happen to be a software company that specializes in building custom B2B solutions.

There are many services out there that can meet with you and with your 3PF's team upfront and engineer a software package that bridges the gap.

But what if I invested in a custom e-commerce software suite before I ever considered moving toward third-party fulfillment? I don't want to lose my investment.

Never fear! If you are already up and running, and your site is operating on its own customized data capture system, your web development team can huddle up with your new 3PF service's IT gurus and figure out if there are challenges to bridging the systems. You may be able to build out a crossover module.

In some cases, you may need to invest in a new software suite. Again, this is where bringing in a custom B2B software developer can be of immense benefit.

True, you'll have to spend additional cash, but generally a custom crossover module should cost far less than the initial systems build. Remember— the crossover program is simply reading data from one system, converting and delivering it to your 3PF's system. There's little data storage involved, so probably no or minimal additional hardware costs (servers, routers, monitors, etc). This package would live entirely in the cloud.

If you feel like technology challenges or low cash reserves are boxing you in, think tangentially! Work with your 3PF partner to develop a creative solution.

 In special circumstances (say if you were going to be shipping at high volume, or if you were to sign a long-term contract), you might negotiate up front with your 3PF partner to underwrite your software changeover so that you can match its system requirements. If you are moving enough inventory, the long-term prospect of steady cash flow could be a significant incentive to your potential partner. They might help you to help them.

Getting set up for third-party e-commerce fulfillment isn't as complicated as you may think.

As you know, having entered the digital marketplace, there's money to be made out there. You'll find plenty of willing partners out there who can help you to develop a sustainable, scalable business. Do your research.

Consult qualified technology and logistics experts, then get out there and move some product!

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Topics: Supply Chain Technology

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