What Is "Online Fulfillment" And How Can It Benefit My Business?

The birth and eventual maturation of ecommerce has taken the world from a point where people were afraid to shop online due to security questions to a point where more people now shop online than in traditional stores. While the maturation of the industry is obviously based in a combination of convenience, confidence in the system and lower prices, the evolution of the actual mechanisms and technologies surrounding ecommerce is still changing and growing. In the early stages, online merchants had to have shopping cart systems constructed for their site, footing large bills in order to make the system of online purchases work on their websites. The growing call for cheaper solutions led to the packaging of shopping cart software into easily configured add-ons to standard website code, allowing anyone with a website to easily add the ability to purchase things through the site. This was the standard for years, combined with an encryption mechanism and a processing account that allowed the credit cards and payment methods to be processed for the merchant in exchange for a small fee per transaction. This combination allowed nearly anyone to easily open an online shop and sell merchandise.
Online shopping allows for lower prices to be charged to the customer because there was far less overhead that needed to be paid for. Traditional "brick and mortar" stores involved rent, utilities, improvements, employee salaries and numerous other expenses that all needed to be covered through each transaction. These costs are added to the actual wholesale purchase price of the merchandise and the desired profit percentage, finally equaling the price that needed to be paid by the customer in order for a profit to be recorded. Ecommerce removed many of these expenses, as employees were no longer necessary for the sales process, and physical locations were no longer needed to display the merchandise for sale. The only expenses that needed to be covered were the costs associated with maintaining the website and the costs associated with the "fulfillment."
Online fulfillment is the actual process of receiving an order placed through a website and physically going to a space where the inventory is held, picking the products ordered by the customer from that inventory, and then packing and shipping that order to the customer. Ecommerce merchants could not get around the necessities of a warehouse space and employees in this capacity, which necessitated certain expenses to be figured into every transaction in the same way that traditional stores needed to. While there was significantly less cost involved, there was still costs. Once "online fulfillment companies" started realizing that they could take this burden away from the ecommerce merchant themselves, a new industry was born.
Online fulfillment companies are third party businesses who utilize software to communicate directly with your shopping cart system. When an order is placed on your website, the online fulfillment company receives that order and then utilizes it's own employees to fulfill the order. Your inventory is housed in their warehouses and is processed by their employees, allowing you to not shoulder the responsibilities and costs associated with these elements. There is no necessity to risk projecting incorrectly your warehouse space needs in the future, or shoulder the costs of employee training, turnover and maintenance. All of these responsibilities are shouldered by the online fulfillment company in exchange for a small processing fee per order they fulfill and any ancillary storage fees in their warehouses. These costs will generally be significantly less than if you did it yourself due to the fact that you are paying only for what you use, instead of completely setting up your own system.

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