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Self-fulfillment vs. marketplace fulfillment: the best way to do order fulfillment

Great order fulfillment is critical in e-commerce. Why? Your customers want their order now, and they want to get it for free. If they don’t, they’ll shop elsewhere. [1] Furthermore, online marketplaces want their sellers to provide the best order fulfillment experience possible. You need to send your orders out as soon as possible, package them well, and get them delivered on time.

So, what’s the best way to do order fulfillment? You have a few choices.

One is to let the marketplace handle it. Or you can opt to do it yourself.


What is marketplace fulfillment?

Marketplace fulfillment is when the platform you’re selling on handles your order fulfillment process. This means they warehouse it, pick it, package it, ship it out, and take care of any returns. Some marketplaces, like Amazon, will even handle your customer service. All you have to do is send your products to the warehouse of the marketplace.


What is self-fulfillment?

Self-fulfillment or in-house fulfillment is when you take care of the entire order fulfillment yourself, from beginning to end. For example, you’ll need to find warehousing or storage, do inventory management, process orders, take care of packaging, get order items picked and packed, make sure it’s shipped out on time, handle any customer inquiries or complaints, and deal with any returns. When you’re small enough, self-fulfillment can be done out of your own home or any other space. However, once your business grows, you’ll need to invest in a warehouse.

This choice has a significant impact on your business; you need to choose carefully, so let’s go over some pros and cons of each option.


Marketplace fulfillment pros

1. It’s easy

Want the easiest, hands-off order fulfillment method? Then marketplace fulfillment is the way to go. All you have to do is bundle your items up according to their specifications and ship them off. Once they accept it, you’re done. There’s far less stress involved.

2. Cross-border access

With marketplace fulfillment, you can sell your products wherever the marketplace operates. Or where they are affiliated with international partners. This opens the door to international commerce without any extra fees, paperwork, or expansion investments.

3. Customer trust

If customers choose between buying an item directly fulfilled by the marketplace or from a seller, they are more likely to pick the marketplace. Marketplace fulfillment gives you a stamp of approval and is a great way to generate trust with consumers. [1]

4. Marketplace standards

Are you able to always ship products out within one or two business day(s)? [2] Marketplaces maintain high standards for order fulfillment, shipping, customer service, and returns. Using their fulfillment service guarantees that you meet their standards. Any issues with late shipments, delayed delivery, or lost items are no longer your concern.

5. Seller benefits

Marketplaces favor sellers who use their fulfillment services. This can be as simple as getting better product visibility. Typical perks include commission discounts, free ads, or promotion services. [1] [3]

6. Customer service

Marketplace fulfillment services usually include some form of customer service. This is an area that heavily affects your seller ranking. Therefore, it needs to be done right. Some marketplaces, like Amazon, take care of all customer service related to your order fulfillment. Once customer inquiries start to pick up, this service can save you many hours. [3]

7. Returns logistics

Correctly handling returns is essential for e-commerce success. First, you must approve, refund, and authorize return shipment labels promptly. Then, returned stock needs to be managed correctly. So, having the marketplace fulfillment service take care of this for you is a significant advantage. Read more about product flow here.

Marketplace fulfillment cons

1. Dependence

If the marketplace changes its terms and conditions, you’ll be the one that’s taking the hit. When Covid-19 hit, Amazon altered its fulfillment service terms. It prioritized baby, health, household, beauty, personal care, grocery, medical, and pet supply goods, along with certain kinds of scientific and industrial products. Other sellers were out of luck. [4] [5] [6]

Due to its labor conditions, Amazon faced regional fulfillment warehouse shutdowns [7] and changed its inventory limits right before Prime Day 2021. This drastically reduced what sellers could send in. Some went from 6,500 units to 1,500-unit limitation. FBA sellers were left with thousands of inventory units which they couldn’t send in. [8]

Remember that you are not the customer. They benefit from having you sell there, but your business is not their primary concern. Amazon’s goal is to maximize its platform sales.

2. High cost

Marketplace fulfillment brings some built-in costs which may not be worth it for you. You may be charged a subscription service to use it. There may also be inventory management, storage, restocking, relabeling, and disposal fees. [9] Furthermore, if your inventory isn’t being sold fast enough, the marketplace will charge you penalties.

3. Packaging Restrictions

It’s great to have your picking and packing taken care of. But it comes with certain restrictions. First, it eliminates the option for branded packaging. You can still design the packaging of the product itself. But anything shipment-related will carry the marketplace’s signature. You may also be restricted in product dimensions, weight or prevented from selling perishable goods. [10]

Self-fulfillment pros

1. Easy to start with

All you need to do is pack and ship your orders as they come in. Marketplaces require you to carefully package your inventory according to their standards, then bulk ship it out to them (which can get pricey). If you don’t meet their prep guidelines, they can refuse to accept it, block you as a seller, or throw your inventory in the trash. So if you’re selling a few products, self-fulfillment might be better for you.

2. Low initial investment

Marketplaces charge storage fees, seller fulfillment plan fees, and have other costs tacked on. You can avoid this with self-fulfillment, especially if you’re only selling a few items and can easily store them in your home or elsewhere. In that case, all you need to worry about is your packaging and shipment fees.

3. Package branding

Branding your packaging is one of the best ways to create a memorable customer experience. And when you’re fulfilling in-house, you can get as creative as you want.  But, unfortunately, this is something you miss out on when a marketplace fulfills items. Product packaging is a big deal. At least 40% of shoppers are more likely to repurchase from brands with premium packaging. [10] If you want to give your customers a great first impression, it is best to create share-worthy unboxing moments. Packaging that’s sustainable, minimalistic, story-driven, and engaging in and of itself works great too. [11]

4. Total control

Self-fulfillment gives you ultimate control. If you want to maintain your standards over warehousing, packaging, and shipments (sustainable options), this might be for you. This is an excellent option for more extensive pro sellers. Especially sellers with a brand to protect.


Self-fulfillment cons

1. More work and time

It’s easy to ship a handful of products out and manage it yourself. But once you’re doing serious numbers, the work stacks up quickly. You’ll need to store your products (or deal with warehousing), manage your stock levels, package your items, bundle orders off to be shipped, deal with customer service, take care of returns, etc. It’s all up to you. And vacations? Forget it. Your e-commerce customers own your time now.

2. Gets expensive, fast

Anything beyond picking and packing a small number of orders is going to be expensive. Packaging material is expensive. Shipping orders out yourself is costly if you don’t qualify for bulk shipping discounts. Plus, it would help if you had shipping insurance to cover your products. Once you can’t store items at your place, you’ll need to invest in warehousing or storage or a full-fledged fulfillment and distribution center of your own. You also need to invest in software and tools. For example, there are stock and inventory management software, barcode scanning solutions, warehouse software, and shipping software.

3. More pressure

Marketplaces have high standards. With self-fulfillment, you’re solely responsible for meeting these. No matter when your customer makes a purchase or where they order from, your job is to get their products out to them within the marketplace’s timeframe. If you don’t or make order picking mistakes, you’ll face their consequences. If you go the self-fulfillment route, make sure you can sustain the work involved. A handy tool like E-Tailize can help you keep an eye on everything happening in your marketplaces.

4. Harder to scale

More sales equal more problems. You can’t just run a new marketing campaign without doing prep work to scale your self-fulfillment infrastructure. On the other hand, if your sales slump, you’ll still be responsible for maintaining your fulfillment setup. This makes it tough to do things like one-off campaigns or take advantage of viral moments. It also makes it more complicated if your sales aren’t consistent year-round (like selling seasonal items.) With self-fulfillment, you need to do intensive sales forecasting work and prepare your backend infrastructure in advance.

5. Limitations regarding reach

Your inventory needs to get to customers within a specific timeframe. If your inventory is stored in only one location, delivering orders outside your shipping zone can be challenging. And international sales bring their challenges. Even if you aren’t listing on global markets, you still need to prepare for one-off foreign purchases.


Which order fulfillment service should you use?

You may have noticed that marketplace fulfillment has a few more advantages than drawbacks. And self-fulfillment brings more challenges. That doesn’t mean that one is necessarily better than the other. There are risks associated with both options. You’ll have to work out which one is best for your e-commerce operations at this time.

Self-fulfillment may be right when:

  • You’re just starting with a few sales
  • You’re only testing the waters
  • You want to learn in-depth about the order fulfillment process
  • You have large-scale operations and wish to retain utmost control, security, and brand consistency

Marketplace fulfillment may be the right option if:

  • You want to put energy elsewhere
  • You have regular and stable sales
  • You’re selling across marketplaces and can spread the risk

Whichever order fulfillment route you choose, E-Tailize will help you centrally manage it.

E-Tailize can be your central hub for delivering extended data analysis (spot data gaps), operational visibility, streamlined control, and customer insights, whether you opt for automatic or manual self-fulfillment.

Sources 

[1] “Shipped by NewEgg,” NewEgg, [Online]. Available: https://www.newegg.com/sellers/index.php/shipped-by-newegg/.
[2] “How long do you have to ship an order?,” [Online]. Available: https://sellercentral.amazon.com/forums/t/how-long-do-you-have-to-ship-an-order/38923.
[3] “Try FBA,” Amazon, [Online]. Available: https://sell.amazon.com/fulfillment-by-amazon/try-fba. [Accessed August 2021].
[4] “Navigating the Amazon FBA Coronavirus Shutdown,” SellerLabs, 19 March 2020. [Online]. Available: https://www.sellerlabs.com/blog/navigating-amazon-fba-coronavirus/. [Accessed August 2021].
[5] “Temporarily prioritizing products coming into our fulfillment centers,” [Online]. Available: https://sellercentral.amazon.com/gp/help/external/help.html?itemID=GF37V7QBB8WSVF43&tag=bisafetynet2-20&. [Accessed August 2021].
[6] “Amazon limiting shipments of certain types of products due to COVID-19 pandemic,” TechCrunch, 17 March 2020. [Online]. Available: https://techcrunch.com/2020/03/17/amazon-limiting-shipments-to-certain-types-of-products-due-to-covid-19-pandemic/. [Accessed August 2021].
[7] “Amazon ordered to close Canadian facility hit by COVID-19 outbreak,” LA Times, 12 March 2021. [Online]. Available: https://www.latimes.com/business/technology/story/2021-03-12/amazon-ordered-to-close-canadian-facility-hit-by-covid-19-outbreak. [Accessed August 2021].
[8] “Amazon Hobbles Merchants’ Prime Day Preparations With Inventory Restrictions,” 27 May 2021. [Online]. Available: https://www.forbes.com/sites/kirimasters/2021/05/27/amazon-hobbles-merchants-prime-day-preparations-with-inventory-restrictions/. [Accessed August 2021].
[9] “Shipped by NewEgg,” [Online]. Available: https://www.newegg.com/sellers/index.php/shipped-by-newegg/. [Accessed August 2021].
[10] “Product Packaging: How Top Brands Design Memorable Unboxing Experiences to Delight Their Customers,” Shopify, 10 February 2021. [Online]. Available: https://www.shopify.ca/blog/ecommerce-packaging. [Accessed August 2021].
[11] “4 E-Commerce Packaging Trends Helping Brands Win on Customer Experience,” INC., [Online]. Available: https://www.inc.com/maria-haggerty/4-e-commerce-packaging-trends-helping-brands-win-on-customer-experience.html. [Accessed August 2021].

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