June 30, 2011, 12:00 AM

Fulfillment Services

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Of those who do not sell overseas, about 25% are put off by regulatory and logistical complexities. That includes issues related to fulfillment, such as restrictions on shipping certain kinds of products like nutritional supplements. But with nearly 63% of respondents who do not currently sell overseas planning to within the next two years, those obstacles will have to be overcome.

Warehouses and taxes

Another potential obstacle for e-commerce fulfillment involves taxes. Some states are trying to tie distribution facilities to the collection of online sales taxes—that is, requiring that an online retailer that maintains a warehouse in a state, even if operated by a subsidiary, to collect and remit taxes on purchases made by residents of that state.

Amazon announced that it would close its distribution center in Texas and cancel plans for others after the state legislature passed such a bill this year. California was considering similar legislation this summer.

Other states are more focused on luring new jobs. South Carolina recently passed a law exempting Amazon from having to collect sales taxes from state residents in exchange for the No. 1 online retailer's commitment to invest at least $125 million and bring in 2,000 new jobs as it builds new fulfillment centers in the state.

In all kinds of ways, fulfillment has become a big money issue for online retailers.


Comments | 4 Responses

  • Your article is very interesting not only from the point of view of large ecommerce retailers, but also for small to medium sized enterprises who are leveraging outsourced fulfilment services not terribly different;y than their much larger competitors. As a fulfillment company sales director, I see the International Shipping piece as the greatest oppornityfor the our small to medium sized clients o expand their businesses globally and grow as a result. We are working very hard to get shipping right to emerging markets so that we can help our clients gain traction in those markets. It takes patience and in some cases is more of an art than a science to establish shipping methods that are cost effective, but the rewards for our clients are enormous and represent the opportunity to capture marketshare for the products. I hope that the larger e-commerce retailers will help create the means for smaller companies to follow suite more easiliy.

  • Very informative article & well written... As a product fulfillment center, I'd like to add some points to what you wrote, & mention a couple of other reason as to why customers are looking for a fulfillment center as a solution. Warehouse & Taxes: Lots of customers are not aware that by using a fulfillment center in another state you are required to pay that state taxes. Like inventory, sales & corporate taxes… For smaller sellers with low volume & low overall prices this is not a big issue. But for bigger Sellers that might not be familiar with all the local taxes in that state, only to later to be slapped a big bill. Here are 2 examples to bring out above point: 1: A company needing fulfillment that's based in NJ, is using a fulfillment center in Texas. The company notifies them one day about a bill for $8,500 in state inventory tax. So he left that fulfillment center, but still had to pay the bill. So know your facts before you commit. Most fulfillment centers won’t bother mentioning to you the fine print before, & won't take responsibility if an issue arises later on; they will just pass it along to you. 2: A company selling small toys is using fulfillment by Amazon, but FBA decides to move his inventory from warehouse to warehouse without notifying him. His problem with FBA fulfillment by Amazon doing this is they don't notify him that they are moving his inventory, ( and might not have to according to their terms). But... He's left figuring out with his accountants each month how much sales & other taxes he owes in each state they moved it to. Which turned into a fulfillment by Amazon nightmare for him, because when the state comes to collect their taxes from FBA, Amazon will send them to you. Fulfillment by Amazon won't help you with this nor do they tell you about this before signing up, nor would they even bother notifying you that they are moving around your inventory.

  • Another important factor to point for people looking for a product or e-commerce fulfillment center is location: If you're company is based in CA, & you are using a fulfillment center in CA, you shipping costs will be double, compared to using a fulfillment center in the west coast for west coast orders, & a east coast fulfillment center for east coast orders. Fulfillment is for all year around not just Holiday season: During holiday season fulfillment centers see an increase in sales, & requests for their services. Having a plan is especially important for e-commerce sellers, since you never know when you might see a surge sales, which at that point it might get out of control. Even a one day delay for a customer during a holiday season, or all year around can be a lost customer. The most successful e-commerce companies these days are the ones that sell a product & ship it fast. People don't like waiting, & don't like hearing about delays. They want buy & get it quickly!!!! Getting overburdened with orders can be a big problem for companies all year around too, especially start ups. In my experience in fulfillment I've seen companies take their business online, where they grew very quickly, only to see their business go backward, because....... They couldn’t manage their daily order fulfillment, which turned into a 2 pronged problem. A: Unsatisfied customers, delayed orders & insufficient inventory. B: Losing focus, instead of being busy focusing on sales, marketing, & product development, they were spending their day running around their warehouse trying to get their daily orders out. At that point they started looking for solutions, which the 1st option was outsourcing their daily order processing to a fulfillment center specializing in e-commerce product fulfillment. It was a solution that worked but came a bit late, since at that point the company was seeing a huge downturn in sales & losses due to their incompetence & lack of foresight into thinking how they will manage their daily orders. "Focus on what your good in, you're product line, not packing & shipping"

  • Savings on software: The saving will quickly add up when using a fulfillment center, you will save on rent, employees, hardware, software, security systems, utilities, shipping rates & shipping supplies. For most med sized companies the 2 biggest savers will be rent & software. Rent: When you rent a warehouse you pay per month if you use it or not, if it’s half full or empty, you pay for the space in between the aisles & above the aisles. With a fulfillment center you pay for what you use, no more. Most usually calculate it by exact daily usage rate. So you pay only for what you used per that day. Some like fulfillment by Amazon charge you high prices for storage, then charge you a average monthly rate. So do your research… Software: Any company selling a product online needs software & hardware. Software for inventory & for shipping, receiving, etc.. Hardware, computers, printers, scanners, (machinery for packing)… Please respond to this post with your comments. Joe @ Fulfillrite Product Fulfillment

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