Shipping products to retailers is much more complex than shipping direct-to-consumer. Retailers have a steep set of requirements that merchants need to meet in order to maintain their contract.
For a small ecommerce brand just starting out with retail accounts, there many new hurdles to jump when it comes to this new sales channel. Here are the biggest three pitfalls to avoid, and how a 3PL or experienced fulfillment provider will help navigate these aspects of retail before they become a problem.
How is Retail Fulfillment Different Than B2B Fulfillment?
First there is a big distinction between fulfilling products to businesses, versus single consumers. This is the difference between B2B and B2C fulfillment. At first glance, the differentiators are two main aspects: the destination and the volume of products being shipped. But from a fulfillment perspective, the differences between these two types of fulfillment are vast.
- B2C fulfillment is much simpler because it entails managing single incoming orders and shipping products directly to each consumer.
- With B2B fulfillment (business-to-business), products are going to retailers, wholesalers, or other businesses to either use the products or then sell directly to consumers.
The subcategory of B2B fulfillment, known as retail fulfillment, means products are shipped specifically to stores or retail distribution centers where the products will then be broken into smaller batches to be sent to individual stores or sold to customers. Retail fulfillment is also sometimes called B2R. Macy’s, Dick’s Sporting Goods, and Best Buy are some examples of retail stores.
With the 2020 ecommerce boom, many digitally native brands have seen tremendous DTC growth. Now that they’ve netted a big following, retail ecommerce is expected to be the next sales channel most brands go after. If you’re a high-growth brand, looking for retail fulfillment support, be sure you partner with a 3PL with experience in the field. Not all fulfillment providers have the same retail experience.
Read more about the distinction between B2B and B2C fulfillment.
The Biggest Pitfalls of Retail Fulfillment
1. Mis-Understanding the Importance of Routing Guides
- The issue: Merchants often overlook the fact that the routing guides are needed to prepare an order, so they send it to their 3PL late in the process causing unforeseen delays.
- Solution: Routing guides should be one of the first things that is communicated from a merchant to their 3PL when they onboard a new retail account. A merchant needs to request the routing guide from the retailer, understand what it entails, and vet the process with their 3PL.
What is a routing guide?
Retailers have specific instructions on how products are packaged, labeled, and shipped to retail locations (stores or distribution centers, for example). The routing guides are the critical “instructions” that the shipper (merchant or 3PL) need to follow.
How does a 3PL ensure they meet the routing guide requirements?
Because a routing guide is very precise and has a lot of detailed information, the operations team of both the 3PL and the merchant need to work together to create a summary of the most important requirements. A routing guide summary should be created and approved before the first order drops. Every single detail needs to be correct—it’s best to go through multiple iterations and test orders to ensure everything is mapped out perfectly before launch day.
Why is it important to factor in lead times for each requirement?
Sometimes there are special aspects of a routing guide that will require multiple departments to get right. Special labeling, for example, which most retailers require, means most orders must go through the production department to get labels before going through the remainder of the fulfillment process. This can take several days. Merchants need to be aware of the lead times for each routing guide requirement in order to set up realistic shipping dates with their retail account.
2. Scheduling Issues and Missed Pick-ups with Retailers
- The issue #1: Scheduling pick-ups, especially during peak season, can be a challenge as order volume is high across all transportation providers. Retailers struggle to coordinate pick-up times and they may happen later than expected or require a quick turnaround time.
- The issue #2: As transportation companies get overwhelmed, even if pick-ups are scheduled, sometimes the transportation provider just doesn’t show up and the pick-up has to be rescheduled.
- The solution: Knowing your lead time is key. The merchant has full control over the timing and scheduling. There are so many last-second orders during the holiday season, merchants need to be prepared for pick-up issues by adding it to their peak season planning.
What are pick-ups from retailers?
Most retailers require the use of their shipping service. This means the retailer’s shipping service will pick up their own orders, giving them more control over the cost, service, and shipping schedule.
These retailer pick-ups are sometimes called “will call” orders because the transportation provider is working for the retailer and the freight is on their account.
What is the order lead time?
When a purchase order (PO) is placed from a retailer, it takes anywhere from a few hours to a few days to fulfill it and get ready it ready to ship. The time between when the order is placed, and the time it ships out is the order lead time. Merchants need to be aware of this to ensure they can get their products to retailers in a reasonable amount of time.
How are pickups usually scheduled?
Your 3PL will often manage the pickups since they are fulfilling the orders and responsible for getting the products ready for the transportation provider. Once your order is ready the 3PL can route it to the retailer. It’s then up to the retailer to assign a carrier and coordinate a pickup with the 3PL—which could be that day or a few days later.
3. Getting Slapped with a Huge Bill from Chargebacks
- The issue: Merchants can accrue very steep fines if they aren’t careful to follow the routing guides exactly. For example, if an order has a labeling discrepancy, the retailer may issue a per-unit or per-order fine, called a chargeback that can be costly.
- The solution: Know your routing guides and follow them systematically. If you do have an issue, try and work with your buyer or retail account to have it waived—everyone makes mistakes occasionally, just don’t make it a habit.
What is a chargeback?
Retailers will issue financial penalties when there is an issue with an order or when the routing guide isn’t followed. These penalties are called chargebacks and can range from hundreds of dollars to tens of thousands of dollars. Each retailer will issue charge backs differently—some are stricter than others when allowing issues to go or issuing a chargeback. standard of requirements, outlined in their routing guides.
How much do chargebacks cost?
Flat fee? Percentage of your product sales? Per order? Lump sum? Chargebacks really depend on the retailer and the issue that incurred the chargeback. Some penalties can be for small things, and be a small cost. Others can be a per-unit penalty, which if you’re shipping thousands of units at a time, can add up to tens of thousands of dollars very quickly.
As an example, if you are a merchant and you send products with incorrect labels, if each label is counted as an issuable chargeback, your bill might be $50,000 or more.
Smaller boutiques and independent retailers will often wave the fees if it’s an issue that only happens once. Especially if you have a good relationship with that account, they’ll understand that mistakes happen occasionally. Larger, more corporate retailers are known to be stricter, and will issue chargebacks, no matter the cost to you.
Working with a 3PL to Overcome Retail Fulfillment Issues
One of the best things you can do to ensure smooth fulfillment is to partner with an experienced fulfillment provider. It’s important to work with a partner who can meet the needs of your brand, now and as you grow. Not all 3PLs have retail fulfillment experience, and the ones that do might specialize in specific retail verticals, like consumer electronics, health and beauty, or food and beverage.
When you outsource fulfillment to a 3PL, you are giving up a lot of the control over some of your accounts. But when you start shipping to retailers, your order volume will increase exponentially. Plus each retailer you add will have their own set of strict requirements. It’s best to outsource to professionals whose job it is to make sure your products get to the right places in the right way, every time.
There are many benefits to working with a third party logistics company (3PL), especially one that specializes in retail fulfillment. If you are seeking logistics support we’d love to hear from you. You can read DCL’s list of services to learn more, or check out the many companies we work with to ensure great logistics support. Send us a note to connect about how we can help your company grow.