February 10, 2017, 4:19 PM

FedEx Fulfillment aims to be the right fit for small and medium online sellers

The shipping and logistics firm jumps into e-commerce fulfillment with a service targeting merchants who sell on online marketplaces and other channels. Experts say it’s high time for such an offering, and it provides an alternative to Fulfillment by Amazon.

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An online retailer that aims to sell busy women the perfect bag, with just the right amount of room for whatever gear she’s toting, quickly found itself out of space and time to fulfill online orders.

The founders of Dagne Dover, which launched its upscale line of handbags and totes in 2013, initially handled order fulfillment in their office, quickly hired a local vendor in New York City and then outgrew that service within two years as sales surged, says Deepa Gandhi, Dagne Dover co-founder and chief operating officer. The online-only retailer in early 2016 connected with a team working on a fulfillment pilot program launched by FedEx Corp.’s Supply Chain unit. FedEx this week launched FedEx Fulfillment, aimed at handling e-commerce fulfillment and delivery services for small and medium businesses.

“At every level, from the warehouse team on up, they function like Dagne Dover employees,” Gandhi says. “We have a high price point, and they understand that. It’s been a very collaborative process, and they’re utilizing us as a resource to learn the priorities of a direct-to-consumer brand.” The retailers’ signature tote series ranges from $129 to $495.

Dagne Dover is one of what FedEx Fulfillment hopes will be many merchants—from startups to midsize retailers selling across multiple sites and online marketplaces—using its new service, Dan Coll, FedEx Supply Chain’s senior manager of e-commerce fulfillment, tells Internet Retailer. In 2015, FedEx bought logistics firm Genco as a part of a push into e-commerce and later renamed the unit FedEx Supply Chain. That unit has 130 warehouses and distribution centers in North America, totaling 35 million square feet, and FedEx says it processes 358 million returns annually and 580,000 direct-to-consumer shipments daily.

“Primarily, we targeted enterprise-level accounts before, handling five of the top 10 retailers in Internet Retailer’s Top 500,” Coll says. “We realize small and medium businesses want their inventory in as few locations as possible that give them the greatest ability to get their products to customers in two days or less via FedEx SmartPost or Ground.” SmartPost is a service in which FedEx typically hands parcels off to the U.S. Postal Service for final delivery. In addition to picking, packing and shipping e-commerce orders for merchants, FedEx Fulfillment manages returns and can handle international e-commerce requirements in the 220 countries where FedEx operates through FedEx CrossBorder, which tackles checkout and delivery involving more than 80 currencies, provides 15 payment options, manages multiple delivery options, and offers credit card fraud protection.

FedEx joins a space filled with other logistics providers and Amazon.com Inc.’s Fulfillment by Amazon service, in which merchants selling on Amazon’s marketplace pay Amazon to store and ship their goods. Sellers that use FBA get their products flagged as eligible for Prime shipping, the free two-day service included with consumers’ $99 annual Amazon Prime membership. In January, Amazon said more than 2 billion items from marketplace sellers were shipped through FBA in 2016, double the volume of 1 billion items in 2015.

The FedEx Fulfillment software, accessed online in a Software as a Service model, integrates with multiple e-commerce platforms, including ones from Magento Inc. and Shopify Inc., which are used by more than 200 retailers in the Internet Retailer 2016 Top 1000. “Our infrastructure is meant to be flexible so it can handle [retailers’] multiple types of infrastructure,” Coll says. “It offers 24/7 access, analytics and inventory management across facilities and for goods sold in different channels. It’s all managed in one platform.”

Dagne Dover, which runs on Shopify, has been using FedEx Fulfillment for a little over six months, while FedEx Fulfillment was in test mode. The online-only retailer sells directly from DagneDover.com. Gandhi says the FedEx platform integrated easily with Shopify and that the retailer pay a monthly fee, though she would not disclose it. Coll says pricing depends on a merchant’s needs, and each service package is customized.

“Orders on our site are pushed through the FedEx interface and within 24 hours, a majority of our orders have shipped,” Gandhi says. The bags, manufactured in Asia, arrive in the United States via ocean and air freight and are shipped directly to a FedEx facility outside of Indianapolis. FedEx Fulfillment checks in the inventory and an account manager gives Dagne Dover updates in real time on the products, she says.

“At the point of shipping to our customers, FedEx employees handle what products need to be picked and packed,” Gandhi says. “They unpack them from poly bags and repackage [the purses] into a dust bag, which then goes into a beautiful white box custom-made for us. They put cards in an envelope for the customers and include the packing list and bubble wrap and ship perfectly to customers.”

Coll says custom packaging and branded solutions are a key part of FedEx Fulfillment. “As our customers are trying to grow and compete, we want their logo and brand to shine. When it leaves a FedEx Fulfillment facility, it’s in the merchant’s branded packaging,” he says.

FedEx Fulfillment is long overdue, says Satish Jindel, founder of SJ Consulting Group and president of software developer ShipMatrix Inc. As with Fulfillment by Amazon, FedEx’s service will be in demand because online retailers want to focus on their core business and not get bogged down in the details of picking, packing and shipping, he says.

David Spitz, CEO of ChannelAdvisor Corp., agrees. “Very few retailers have the financial capacity or expertise to make logistics and fulfillment their core competency and keep up with consumer expectations. We think more brands and retailers should outsource logistics,” he says. “Two-day shipping is table stakes, and we think eventually one-day and even same-day shipping becomes the norm.”

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