Fulfillment Services Level The Playing Fields
Businesses traditionally can only service their localized market, as customers had to travel to their physical location on order to purchase the items that were for sale. The advent of online commerce and shopping changed this landscape forever when it came to fruition once encryption made it safe to utilize a credit card for online purchases, and the world of ecommerce was born. Ecommerce provided customers with the ability to shop from their homes or any location they could receive an internet connection from, providing them with enough information within a website to feel comfortable making a purchase. This enabled consumers to purchase items for discounted prices as there was no need for merchants to build in the costs that were typically associated with their physical locations. There was no longer the need to pay store employees, maintain rents or mortgages on retail spaces, pay insurance costs or utilities. These savings allowed items to be sold for cheaper prices, which then fueled the takeover of the retail space by online merchants. In many cases, consumers went as far as to travel to physical stores to see products, then buy them from their computers in ecommerce shops at a discounted price.
The world of ecommerce is an exercise in reduction of associated costs. By eliminating as much of the operating expenses as possible, ecommerce merchants can make their products more attractive to consumers by lowering prices to rock bottom. The only expenses involved with the physical operations of ecommerce stores at this stage are the fulfillment services, where an actual warehouse needs to be employed and employees need to manage inventory and pack orders for shipment. This not only adds expenses to the operations in that the warehouse size must be estimated based on sales projections and employees must also be managed to meet expectations, but the physical locations of the warehouses are then problematic in creating extra costs that involve shipping. If a warehouse is located in one country and the customer is in another country, the shipping charges associated with the transport of that order from the warehouse to the customer are generally high, and counterbalance the savings that is to be had by purchasing online.
Through the utilization of third-party fulfillment services, online merchants can position their inventory in any place that they are selling to customers, thus eliminating the extra charges associated with shipping form their actual locations. These services utilize software to communicate with the merchant's shopping cart system, receiving the orders that are placed and fulfilling them from inventory which is stored at their location. The merchant generally pays for each item shipped as well as a warehousing fee that is based on the amount of space used. This enables the merchant to fluidly grow or downsize as necessary because they are not the only entity within that warehouse, and are only paying for the space that they need. This also gives the merchant the ability to offer the lowest shipping prices available, as the starting point of the fulfillment process can be close to each individual customer. If multiple warehouses are utilized in strategic locations throughout the area that is sold into, the merchant can offer the cheapest shipping prices on each and every order placed.
This type of system allows for an ecommerce merchant to finally be completely virtual, and incur none of the expenses associated with traditional retail. Through elimination of these expenses, consumers can purchase from worldwide stores, not pay markups for shipping or for transport, and ultimately be able to buy products for the lowest prices available. This system benefits consumers and merchants alike, and levels the playing fields in the retail space.
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