A subcategory of B2B fulfillment, retail fulfillment entails sending products in bulk to a retail store or store’s distribution hub that are then individually sold to consumers.
Retail fulfillment is a niche area of logistics that is intricate, complex and more different than DTC (direct-to-consumer) fulfillment. Sending products to retailers requires a higher level of quality control, timing, accuracy, and attention to detail. To ensure a smooth experience you need the right tools to connect with each retailer individually.
The benefits of selling to retailers are worth the difficulty. Most growing ecommerce brands see retail fulfillment as a big step of their growth journey.
Retail fulfillment has higher stakes than DTC fulfillment for a few reasons: order volume is higher, each retailer has a different set of rules and expectations, plus retailers deal with a wide variety of consumers so they need to find brands with products that match their consumer needs.
What’s the Difference Between Retail Fulfillment and B2B Fulfillment?
Retail fulfillment is not synonymous with B2B fulfillment, which is a broader term for shipping products in bulk to any business. B2B fulfillment is simply shipping boxes from one business address to another business address. It could mean sending products to a retail store, or to a corporate office for employees to use, like sending servers to an Apple campus for example.
Retail fulfillment is a subset of B2B. Traditionally it meant products would end up on the shelves of brick-and-mortar stores, but with the rise of ecommerce it can also mean products end up on the pages of a retailer’s online shop or marketplace.
Today if a merchant sends their products to a retailer, their shipment may go to any of the following places:
- Retail store (large or small; independent or a big box store)
- Retail hub where products then get broken up and sent to individual stores
- Retail distribution center where products may get fulfilled for online orders or sent to stores
Shipping to a smaller independent retailer (like a boutique or a mom-and-pop shop, but not a big box store), is known as B2R, shortened from business-to-retailer.
The Complete Retail Fulfillment Process
There are many very specific steps involved in fulfilling products to retailers. Each store has its own set of requirements and standards. Brands need to be very organized to meet these retailer demands.
1. The Retail Relationship and Contract
Securing an account with a new retailer can be a big effort. It requires having connections in the field or networking to get connected. While you are sourcing leads for new retail channels it is important to keep a few things in mind:
- Product/market fit — Will the consumers who frequent this store want your product? Are there certain product lines you have that are a better or worse fit?
- Growth — Can your fulfillment operations support growth if this retailer asks you to be in more stores, or add more of your products to their shelves?
2. The Routing Guide
You’re in business! You successfully secured an account with a retail store. What’s next is a ton of conversations about how to get your products to their physical locations.
As part of your contract with a retailer, they will provide you with a routing guide. This is the retailer’s pre-determined set of rules and regulations that dictate how your products will get to their stores. A routing guide will include everything from how many products can be on a pallet, to the specific times and ways a truck can load into their warehouses. It will also include information on labeling, communication, and any other specifications the retailer wants to ensure you follow.
Smaller retailers—boutique shops or independent stores, for example—don’t usually have a formal routing guide. They may have some specific pack-out detail—like how many units per case, how many units that they’ll take in a carton, or the size of the carton they prefer—but many of those attributes are determined by the merchant and the merchant’s marketing team.
3. Purchase and Fulfilling Orders
Once you have the routing guide you must work with your fulfillment team (whether in-house or a third-party provider) to get all the details right. You’ll likely do some test orders within your fulfillment environment, or possibly one to the retailer to get everything right on a small scale before launching your products in their stores full-time.
Once you have more than one retail account, you may need to hire an operations person specifically to handle those. It can be a complex job to manage the detailed orders for multiple retailers.
You’ll need to coordinate how your products are packaged, labeled, and transported. Communication between your team, the retailer’s team, and any third-party providers who help get your products to the retailer (a 3PL, transportation provider, etc.) need to communicate with each other. This communication needs to be quick, accurate, and updated in real-time based on any changes or new information.
Get straight on how the purchase orders are submitted. How is the retailer letting your team know the volume and timing of a new shipment? Most retailers still use EDI (electronic data interchange) but some use other mediums that have their own set of specific instructions.
Working with an EDI system can be cumbersome if you’re not used to it. Setting up a new EDI connection requires a lot of coordination between the merchant, retailer (sometimes also known as a “trading partner”), and the EDI technology provider. The setup and testing process can be complicated and may take weeks, sometimes months, to complete. A 3PL with experience in retail fulfillment will have the EDI connections (whether industry standards or unique channels for independent stores) to make sure communication is as smooth as possible.
5. Shipment Delivery and Pick Up
Transportation is a huge part of retail fulfillment.
Most retailers will require you to get your products to their store or distribution hub in a very specific manner and timeframe. Within the routing guide the retailer will describe how your products should be loaded into their docks. Often they will give time slots when you need to bring your products to their facilities.
Some retailers will want to control the transportation of products so they will have a system to pick up products at your facility or distribution center. Labeling and packing specifications will be outlined in the routing guides. Having the products ready on time is very important for a smooth pickup.
6. Retail Ratings, Issues, and Chargebacks
All merchants are measured based on their fulfillment practices. If you do not meet a retailer’s requirements (for example, if your products are not delivered within the required time slot) the retailer may penalize you, often in the form of fees, also called chargebacks. Sometimes chargebacks are calculated as a percentage of your product sales, or as a flat fee.
Examples of issues where a chargeback might be issued include:
- Missing a pickup or delivery time slot
- Mislabeling or mis-packing the products
- Sending the wrong quantity or items
- Not sending the proper confirmation information via EDI (example: not sending an ASN)
Getting chargebacks and penalties depend on your relationship with the retailer. Some stores may wave chargebacks if the issue is the first time, but big box stores like Target or Amazon might be stricter. If you receive a per-item penalty for a large order, you’ll be looking at a very large bill. Knowing in advance what you can get chargebacks for, and how they are issues, will be a big differentiator.
Sometimes retailers like Amazon have a ranking system. If you accumulate too many penalties, you might lose positioning within their marketplace. Boutique retailers do not often work on this system.
How a 3PL Supports Retail Fulfillment
When a seller outsources their fulfillment to a 3PL there are many details to be worked through before any orders are shipped. Retail fulfillment requires more front-loaded set up than B2C fulfillment.
If you ship B2C, your 3PL will help set up specific business rules on how they will accept orders coming from your ecommerce channels (site, Shopify page, etc.) and mapping those orders to a B2C account.
If you ship to other businesses (simply put, from the fulfillment center address to any business address) there will be very different systems set up for your account.
- First the 3PL will want to identify what type of business you need to ship to. That means determining which verticals you ship within and what is needed for each one.
- Second, the 3PL will need to know about your inventory, and more specifically how your inventory needs to be managed as it relates to those verticals.
How a 3PL Can Smooth Out Your Retail Fulfillment
Often selling to a retailer means a brand’s order volume will increase by a big percentage instantly. If you’re used to fulfilling 1,000 units per month and with a new retail contract that goes up to 3,000 units per month, that order of magnitude growth can be tricky to manage.
One of the best ways to ensure order accuracy when scaling like this is to enlist the help of fulfillment professionals. A 3PL with retail fulfillment experience is one of the best ways a merchant can succeed in this area of ecommerce fulfillment. Working with a 3PL means you don’t have to be an expert at the many routing guides, EDI connections, and specificities of each individual retailer.
By outsourcing retail fulfillment to a reputable 3PL, you’ll likely benefit from their already established connections. If your 3PL is sending products to Best Buy already, chances are they’re going to get your orders perfect the first time you start shipping there. A 3PL probably won’t help you get a retail account, but they will be instrumental in helping you keep it.
Netting a new retail account often happens in one of three ways: A. The retailer seeks out a specific product. They reach out to the merchant. B. The merchant has a retailer in mind and targets that account by contacting the buyer. C. Retail fulfillment experts who move from merchant to merchant may take retail relationships with them to a new company.
What is the Business Impact of Great Retail Fulfillment?
Retail fulfillment is a huge step up for ecommerce businesses. A brand can only grow so much by doing DTC fulfillment, because that means one new customer at a time.
With retail you get access to customers who are more diverse than you would otherwise reach. A retailer also helps people get introduced to your products in a different way than you market yourself.
By getting your products sold in retail stores, your brand will benefit by having bulk orders upfront (larger cash flow), name brand recognition for your core customers (We’re in Target now!), and increasing the overall volume of orders.
The most important aspect of retail fulfillment? The quality of order fulfillment. Many retailers have very high standards, and they deal with many merchants. Having your orders on-time, accurate, and in line with their specifications is paramount to a continued relationship. If you’re in good graces and your products are selling well, you may even be able to increase your order to more stores.
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.
Tags: Retail Fulfillment