allocate inventory

Shipping costs can be a concern for ecommerce businesses, and they can also affect your conversion rates. Third-party fulfillment companies often charge by the weight, volume, or dimensions of your product. Some services also offer prepaid return labels.

So in the right situations, it’s smart to have the local stores picking and packing, yet there may be a tipping point where it makes sense to have the centralized distribution. I refer to these retailers as “savvy” for a reason. They are smart enough to figure out what their best option is.

The global e-commerce fulfillment services market size was valued at USD 86,449.97 million in 2021 and is expected to grow at a compound annual growth rate (CAGR) of 9.5% from 2022 to 2030. The proliferation of electronic commerce and the resulting rise in the number of online buyers, especially in emerging economies is anticipated to fuel market growth. Fulfillment service centers enable online merchants to outsource services including bundling, warehousing, shipping, and other value-added services, such as return management and urgent parcel service. A fulfillment center is ideal for merchants that do not have robust warehousing capabilities to manage inventory directly and do not want to invest additional efforts in shipping.

As an operations and business model, ship-from-store makes no sense at all. It just adds extra layers of handling and that adds up to costs. The only sense it makes is to use it to balance out-of-balance inventories that are in stores. Efficiency comes from consolidating inventory, automated picking and bulk shipping. Ship-from-store is contrary to all these steps.

All this is much easier for online retailers located close to their customers. For many, strategically setting up, or working with, a network of fulfillment centers across the country is a good way to achieve this same goal.

Working around shoppers to find items is also arduous. In some cases, associates get caught fulfilling orders instead of helping customers. Designated pickers also answer questions from shoppers, a mandatory delay preventing quick online order turnarounds. To address traffic distraction, Macy’s associates pull the bulk of online orders before the store opens, according to the Wall Street Journal. Retailers also need to set up sophisticated packaging and shipment departments in their stores.

Savvy retailers understand their distribution opportunities. They can see the benefit of having local distribution (in-store) versus a distribution center. In some markets it may make sense to have one over the other.

Some prominent players in the e-commerce fulfillment services market include: Free report customization (equivalent to up to 8 analysts' working days) with purchase. Addition or alteration to country, regional & segment scope.