As we approach the subject of eCommerce outsourcing, the first question of course is, what is eCommerce outsourcing? As with almost anything, there is more than one viewpoint on what outsourcing is or more than one type of outsourcing.
One example of outsourcing eCommerce services is an eCommerce company that hires a marketing company to do their marketing rather than doing it themselves. There are eCommerce digital marketing companies that exist just to serve the needs of eCommerce businesses. This would be one viewpoint or one type of eCommerce outsourcing.
The second viewpoint or type would be when they hire a third-party company, most likely a full-service 3PL to manage several tasks including warehousing and fulfillment, customer support and customer service, repair and returns, and many back-office functions including accounting, plus shipping and so on. This would be another meaning of the term, outsourcing.
When businesses are eCommerce outsourcing companies, they can outsource many tasks, and outsource their manufacturing. Many businesses have the product that they sell manufactured for them. We see that manufacturing is done offshore, nearshore, and onshore, and other services are provided by vendors or companies offshore as well. We will discuss those differences later in this writing.
One vital task for eCommerce companies that do not manufacture their products is locating products to sell. For example, an eCommerce company can outsource eCommerce services to vendors or an individual doing eCommerce services such as searching for the best products to sell. Some vendors are skilled at this task, and the company might find it beneficial to hire expertise.
Another task that can be outsourced is marketing, including social media marketing and digital marketing automation. Why would eCommerce outsourcing companies do this? They may not have employees on staff who have the necessary skills, they may feel that they need to work on and improve their brand image, or they may not have the content for social media marketing. Numerous marketing companies exist primarily to provide eCommerce services.
An obvious task for an online company to outsource eCommerce services would be website building and web application development. If a company is a new start-up of course they would need web development, and most of the time people turn to experts for this. Even for eCommerce outsourcing companies that are well established, web development and web applications are usually outsourced.
Now we come to the tasks of the business that can be viewed as third-party outsourcing. The company can decide to outsource its warehousing, inventory management, operations, order fulfillment, customer service, business processing, returns, repair and refurbishment, and shipping services to a fulfillment company that provides full services. Many businesses outsource to full-service fulfillment companies, including businesses selling to other businesses (B2B) and those selling to individual consumers (B2C).
If a person starts an e-business, they will likely handle everything themselves, but as a company grows, the needs change. Medium to large size online businesses outsource to fulfillment companies as a way of getting many processes handled and being able to focus on product sourcing, sales, and development of the company.
Outsourcing can make a company more competitive whether outsourcing to companies offshore, nearshore, or onshore. Outsourcing, especially to a fulfillment company, can very much improve an eCommerce company’s speed and efficiency. Fulfillment companies also can be a great benefit when it comes to flexibility, helping the business scale up or down and deal with seasonal changes. All of these benefits serve to answer the title question, what are the benefits of eCommerce outsourcing in 2023?
Looking into new eCommerce businesses, we see that starting such a company has become very attractive and many people globally have been drawn to venture into online business. Unfortunately, studies show that nearly 90% of online businesses fail in the first 120 days, leaving 10% to keep going and attempt administrative and operational tasks.
eCommerce companies that do achieve early success are the ones that concentrate on product sourcing. The product must be a quality one at an attractive price that is in demand. The company must be very responsive to customer feedback and gradually move into eCommerce outsourcing for optimum growth.
The new online business may have areas where hiring a specialist providing eCommerce services will help them with rapid growth. When rapid growth begins, the company will need to be able to scale up quickly. If the in-house team is falling behind, even if it is of core competency, the company may want to outsource at least part of the core task.
A company must have time for strategic planning when in a growth stage. Some of the more mundane tasks could be outsourced to leave time for planning and innovation. The good news is that there is a pool of talent and there are skilled vendors who can handle the many and various needs of eCommerce outsourcing companies.
Outsourcing eCommerce services can be categorized into offshore, nearshore, and onshore depending on the vendor’s geographic location.
Offshore outsourcing is when an eCommerce business locates vendors that are outside of the country in which they exist, far away from the buying company. Online businesses may offshore manufacturing due to cost savings on labor and other expenses. Many businesses outsource offshore other tasks as well.
Customer care, technical support, and information technology vendors are available offshore, and often companies utilize these vendors for cost savings on labor. The remote work culture is growing and businesses look for talent not only in their home country but across continents. Larger online businesses, concerned about their brand and customer loyalty, more often than not will utilize an onshore full-service fulfillment company for customer care and service.
Nearshore refers to utilizing vendors in a nearby country. Nearshore can be beneficial as it eliminates the need to deal with time zone differences and cultural barriers. It also allows for more accessibility for teleconferences or travel if face-to-face meetings are needed. Nearshore manufacturing for US-based companies is often done in Mexico as shipping from Mexico into the US provides cost savings and there also is the advantage of sharing the same time zone with the United States.
Trucks and railroads carry manufactured goods into US territory, so that’s an advantage. A second advantage is that it’s relatively easy to travel to the manufacturing locations. Another reason manufacturing and fulfillment may be nearshored is the existence of a free trade agreement. And finally, the cost of labor in Mexico is a reason online businesses located in the US will nearshore to Mexico.
When businesses do onshore outsourcing, they recruit services within the same country. Regarding customer service and customer care, the benefits of onshore outsourcing will be that contact center associates share similar experiences with the consumers and are aware of local customs and issues. Also, concerning IT, data privacy, security, and sensitive information are more easily monitored and retained in a home country.
Onshoring is considered the most expensive labor option with the exception being when the eCommerce business utilizes an onshore full-service fulfillment company that provides customer service. Larger well-established online businesses may choose to offshore manufacturing, accomplish their technology in-house, and onshore fulfillment services including customer care, inventory management, and back-office business processes.
There is such a wide variety of online businesses and most businesses, from start-ups to brick-and-mortar stores that offer eCommerce options, outsource some of their processes. This article promises to cover the benefits of eCommerce outsourcing in 2023. The benefits are very wide-ranging and should be fairly clear.
Cost savings are a benefit, especially concerning labor. Also, if the particular skill is not available in-house, outsourcing makes sense. Whether to outsource to a location offshore, nearshore, or onshore depends on the benefits and detriments of each.
Well-established businesses often create a ‘partner’ relationship with an onshore fulfillment company, as full-service fulfillment companies provide much more than warehousing and fulfillment services. The list is long… full service covers everything from customer service to company office processing.
The fulfillment company will work with the eCommerce business as if they are an arm of the business. When a fulfillment company does establish this partner relationship, it is most likely going to be onshore with several locations near ports.
The benefits of eCommerce outsourcing services for a new or small eCommerce business are somewhat different than a larger, established eCommerce business outsourcing to a fulfillment company, which handles numerous tasks. Both examples will see the eCommerce business benefiting financially by outsourcing manufacturing offshore or nearshore. Onshore labor costs will be higher, yet many companies prefer onshore manufacturing for reasons of quality control, convenience, and dedication to the workforce, finding the advantages greater than the cost savings.
We mentioned most outsourced tasks earlier in this writing, and now we will look at benefits. For smaller or new online businesses, those tasks include hiring an individual or vendor to do product sourcing, which could save money or could improve the quality of their products. Some outsourcing is due to the eCommerce company not having the expertise on staff, whether that is web development, technology, creating apps, and so forth, so hiring expertise has its benefits even though there is a cost involved.
Marketing, social media, and digital marketing are often outsourced. The eCommerce company would have to weigh the benefits against the cost and conclude that outsourcing marketing is a benefit overall. Customer service is often outsourced. The cost can be reduced by going offshore or nearshore for this service due to labor costs. The cost savings of offshore or nearshore call centers should be weighed against customer preferences for onshore customer service.
Other tasks that require specific skills such as accounting and other business processes will be outsourced as a necessity. When eCommerce outsourcing companies reach a certain size, fulfillment will likely be outsourced. In 2023, due to the abundance of vendors and skilled workers available, outsourcing is not just a benefit, but a necessity for the smaller, new eCommerce business.
The benefits of outsourcing to a 3PL can be significant. Most medium to large, established online businesses outsource to a third-party fulfillment company. The decision as to which company depends on the needs of the company and the services provided by the fulfillment company.
Sometimes businesses will prefer a nearshore company if the labor cost benefits are needed or if there is a specific tax benefit. Often, eCommerce companies partner with onshore companies for shipping and customer service benefits. This relationship can be a major advantage.
Third-party fulfillment companies have varying specialties. They serve clients of different sizes and with different needs. To decide if a fulfillment company is suitable for an online company, one must put in the effort and examine the options. eCommerce companies wishing to move their business to acquire expertise in more tasks will look for a full-service fulfillment company.
Outsourcing several tasks to a 3rd party fulfillment full-service company is very common among medium to large-sized eCommerce businesses. The benefits cover everything from cost savings on shipping, utilizing specialized skills, convenience and speed, onshore customer care and services, inventory management, beneficial business partner relationship, and several other services.
One of the most important aspects of the fulfillment company must be its technology, and interface with the business. The online business will need fully automated data integrations supporting everything from inbound product receipts to inventory transactions and order processing.
The fulfillment company with these best-of-breed systems will have an in-house IT team. eCommerce businesses need a client portal that provides real-time access to data including inventory availability, order status, order processing, shipping and tracking, returns… virtually everything having to do with the movement of their products through the warehouse to the customer. And they will need reporting and analytics.
The fulfillment company will warehouse, pick and pack, assemble, custom package, accept returns and repair or recycle, handle the products, and prepare them for shipping and all of this will be tracked for the business to see. The shipping portion is considered to be one of the greatest advantages of utilizing a 3PL. There are cost savings to utilizing the fulfillment company as well as an advantage in speed of processing and shipping. A fulfillment company will have relationships with all the shipping providers and a great deal of experience in rate shopping and logistics management.
Another advantage of a 3PL is that the company has facilities on both coasts or several locations to have the advantage of locating products closer to customers. Also, the fulfillment company will audit transactions to make sure fees are properly charged. So, shipping is a major advantage of outsourcing to the full-service 3PL.
We have two more advantages of eCommerce outsourcing to a full-service 3PL, and those are eCommerce customer service and inventory management, especially returns management. Onshore customer care is preferable to shoppers, as speaking with a customer care agent, especially for a high-end e-business, has an advantage over the brand image. Having problems solved efficiently and personally is what builds a brand, as well as high-quality products of course, special packaging, and timely delivery.
Returns management is also vitally important to businesses as returns can be costly if not properly handled. The full-service fulfillment company will evaluate returns, re-package if appropriate, repair if appropriate, and recycle if appropriate. All the while the customer care team will respond to the customer and handle the issues as desired by the business.
We conclude that there are tremendous advantages to eCommerce outsourcing and very little disadvantage. The main disadvantage would be not having complete control of all of the business necessities. This emphasizes the importance of finding the right business partners. Relationships are vital and effort is required to find the right one without having to suffer failure.
AMS Fulfillment is a full-service company that places great emphasis on being the “operational arm” of their clients. For 20 years, years of growth and expansion, AMS has taken the partnership approach and it has worked out very well, both for AMS and AMS’ clients. Headquartered in Valencia, California, AMS expanded into a bi-coastal presence several years ago. AMS warehouses are close to shipping ports on both coasts and close to the major shipping services as well.
AMS Fulfillment is a full-service fulfillment company staffed with many fulfillment professionals who have been with AMS for years. AMS offers all the best-of-breed services that a full-service company provides. Additionally, they offer one advantage that very few fulfillment companies can provide.
AMS is a B Corporation. AMS is legally bound to care for the environment, such as recycling and using eco-friendly packaging. They must also ensure their employees have access to education, benefits, and safety standards. Additionally, they are committed to serving their local community and acting as a partner to their clients. Please feel free to Contact Us at AMS Fulfillment for more information.