The Indian online retail market is looking at a lot of fast changes this year – with the recently approved 100% FDI for foreign investment in the online marketplaces, one can now expect new entrants into the market, bringing with them a new level of competition. With so many potential marketplaces for the seller to choose from, the order fulfilment services that the marketplaces are willing to provide is going to make a huge difference in making this choice.
The process of order fulfilment begins from the point of sale, till the product is delivered to the customer. This is a mammoth task, especially if you are considering thousands of orders per day. This includes managing inventory, cataloguing, picking, packing, transport and delivery. Marketplace fulfilment is when the online marketplace provides assistance to the seller in fulfilling the order. At the same time, there is always the option of self fulfilment, if you would like to have much more control over the process. So which mode of order fulfilment is the better, in the long run, self or marketplace? Let’s find out.
Marketplace Fulfilment
Online retail marketplaces like Flipkart and Amazon provide assistance in order fulfilment to sellers at a charge. Flipkart has Flipkart Advantage, Amazon has Fulfilment by Amazon and Snapdeal has Snapdeal Plus. Most marketplace fulfilment models have a tiered payment structure that can be scaled up or down according to the seller’s requirements. In a way, the battle between these three online retail giants is a battle of real estate, because the higher the number of marketplace-owned warehouses near a city, the better control it has over the flow of products. We previously wrote about the different services that Flipkart, Amazon and Snapdeal provide in terms of market fulfilment here. Let us now look at the pros and cons of marketplace fulfilment as compared to self fulfilment.
Pros
1. Scalability
The seller can very easily scale their operation up or down on the marketplace model of fulfilment because they don’t need to worry about warehouse space as such. The seller can temporarily change their services plan to accommodate for the high sales during the festive season, and then scale back to their usual plan without much of a hassle.
2. Seller Privileges
Signing up for a marketplace fulfilment plan can definitely be advantageous for the seller because you then become a priority seller for the marketplace. You get higher visibility in the marketplace, easier access to promotions and discounts and an overall positive impact on your product rankings and sales.
3. Customer preference
Customers generally prefer the marketplace fulfilment model, and it is easy to understand why. Services like Flipkart Advantage and Fulfilment by Amazon comes with a trustworthy tag that the company wants to maintain. For the customer, it is the question of accountability, and marketplace fulfilment provides that.
Cons
1. Assembly Line Restrictions
With the marketplace model come a bunch of restrictions – packages cannot exceed a certain size or weight or volume. The packing is rarely customised, either decoratively or for safety purposes.
2. High Cost
Marketplace model can be expensive, especially since the rates are subject to change according to season, and may vary exceptionally from one courier company to the other.
3. Lack of Control
For someone who values the product delivery as an important site of interaction between the seller and the customer, the marketplace model will provide no control over the process. Your job as a seller is then just to make sure that products are in stock, but a bad delivery or a delivery mishap will still affect you the same.
Self Fulfilment
Self fulfilment is to take care of the order fulfilment yourself. This may mean partnering up with various 3rd party service providers, be it packers or logistics companies or couriers, etc. This can be a tedious but equally, rewarding process if done right. Let’s look at its pros and cons.
Pros
1. Total Control over the Shipment
Self fulfilment gives you complete control over the delivery and logistics process. This means that you can actually compare various 3rd party service providers according to cost and quality of service, for different regions geographically to come up with cost and efficiency specific solutions for fulfilment.
2. Cost Effective for Small Ventures
If your area of operations is small, then self fulfilment might be the way to go. Most marketplace fulfilment models tend t overcharge as compared to logistics or courier companies. With a small scale of business, partnering with a courier company or even finding alternative sources of delivery can become extremely cost effective.
3. Packaging Customizability
If you are into selling niche or novelty products, you might be interested in the presentation of your package. Self fulfilment means that you can really customise everything including the packaging material, style of packaging, etc. to reflect your brand identity and make the product delivery a great marketing opportunity.
Cons
1. High Investment
Self fulfilment requires a high initial investment in terms of the warehouse acquisition and maintenance cost, first and foremost.
2. Low Reach
If you are looking to expand your business and penetrating into other geographical markets, self fulfilment would require you to set up a network warehouse and logistical operations in different parts of the region. This is a slow, tedious and a costly process, and is difficult to expand.
3. Lack of Scalability
It is difficult for an individual seller to match the apparatus that a typical marketplace can deploy in terms of inventory and warehouse space. Scaling up and down, therefore, becomes a difficult job for self fulfilment.
Verdict
The fulfilment decision is actually a number’s game, and to take a call you need to weigh all your options. Depending upon your product and its intended market, you might want to customise and tweak the process of fulfilment. While on the other hand, you might want to get rid of the hassle altogether and hand it off to the marketplace. The right thing to do is a cost analysis of both scenarios while accounting for certain factors like scalability and then take a call. A hybrid model, which can be a mix of marketplace fulfilment, self fulfilment and 3rd Party collaborations seems like a good way to make the most of your fulfilment process.
To know more, get in touch with Browntape. We are India’s leading ecommerce experts, and we are always happy to help!
