Fulfillment Companies Help Ecommerce Entrepreneurs
Most entrepreneurs who have ventured into the ecommerce space have done so due to the superior aspects of ecommerce over traditional sales in terms of the need for extraneous assets to the sales process. Traditionally, in order to sell something to a consumer you needed to secure a physical space where customers could look at the item, then conduct the sale of that item through a process involving employees. The factors that went into the pricing structure of each and every item sold traditionally involved the cost of the materials that make up the item, an also all of the extraneous elements that go into the sales process. The rent or mortgage on the physical space that you call a store, the utilities that heat the space and keep the light on, the equipment used in the actual transaction like cash registers and credit card terminals, and the employees working in these spaces all need to be factored into the final sale price of each item if the store is to turn a profit. When ecommerce was born, all of these were suddenly able to be eliminated, and a sale was able to be made using nothing but a website and the software that was necessary to take a payment. These were accomplished through "shopping carts" which are essentially inventory management and sales software for websites. Customers can purchase items at any time of day and from anywhere in the world due to the fact that the transaction is not being conducted by employees, and is instead being automated.
One aspect of the ecommerce system that was not able to be automated effectively until now is the shipping and fulfillment aspect. There still needed to be employees in physical warehouse spaces pulling the orders placed on the website from inventory and preparing it for transport to the customer address. This frustrated many ecommerce entrepreneurs as they were not truly virtual, and still needed to speculate on warehouse space needs and employee management. How much space that is necessary for the physical fulfillment of the orders needed to be estimated and factored into long leases of warehouse space and employees needed to be hired and trained with estimated sales figures. A mistake in over purchasing warehouse space could lead to a business failure if sales do not meet expectations, and under purchasing can lead to unhappy customers not getting order in time due to shortages of manpower. This is where the concept of fulfillment companies was born. These companies are third-party businesses who lease space as needed to the entrepreneur and warehouse the inventory in a cooperative environment with other business inventories. This gives the business the ability to only pay for what they need at any one point in time, and to grow or shrink as necessary without a long-term contract. The employees of the fulfillment company process customer orders placed on the websites using a software that communicates with the shopping cart and routes the order to the appropriate place. The employees of the fulfillment company are utilized in exchange for a per-order fee and a warehouse charge, removing the responsibilities of employee management from the ecommerce merchant. This process allows the entrepreneur to be completely virtual, and to sell items without the actual employees or managed spaces that are traditionally figured into sales prices. This allows ecommerce merchants to sell items for less expense than traditional merchants, and represents a true advantage over them moving forward. The world of commerce has changed, and the fulfillment company has brought a semi-virtual world into its full evolution of virtual business.
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