International logistics has improved by leaps and bounds in recent times. If you have an eCommerce business, this is the perfect time to consider global expansion. Almost instantly, businesses wonder how they can fulfill internationally while continuing to stay profitable.
That’s exactly what we are going to cover in this article. We have for you 3 winning strategies that will help you immensely.
What is International Fulfillment?
International fulfillment is the capacity to fulfill orders to international markets without cutting down on speed, efficiency or. Achieving success with international fulfillment will not only increase the size of your market, but also give you a competitive edge.
For instance, if you are dropshipping from Aliexpress and generating sales in USA, you are automatically fulfilling internationally. But there’s a difference. In this case, the Aliexpress seller handles fulfillment and chances are, that it’s not the best option in terms of speed or efficiency.
This is where working with a skilled international fulfillment company comes into the picture. These guys are pros, who can optimize your order fulfillment to ensure prompt delivery of products to customers worldwide. In other words, outsourcing international fulfillment allows you to concentrate on core competencies while taking the hassles of logistics, compliance and fulfillment off your shoulders.
Three Types of International Fulfillment Solutions
Having said that, an international fulfillment company and an international fulfillment center are not the be-all, end-all of international fulfillment.
What matters the most is the strategy you choose to fulfill internationally. Here are the 3 most common, but tried and tested ones that brands use.
1. Store inventory in your primary/major market
If you are targeting just one country for ecommerce sales, then you can consider storing your inventory in fulfillment centers in that country. For instance, if you are solely targeting North America for sales, then look for a fulfillment company that has a network of fulfillment centers in North America.
This allows you to distribute your inventory intelligently. For example, if you have a lot of sales going to New York and not many going to California, then the latter is a low demand region, which means that your fulfillment strategy should focus on shipping from a warehouse in New York or as close to it, instead of one in California.
From a business’s perspective, this makes complete sense as it will help you reduce your fulfillment cost, and provide faster shipping. At the same time, you are not throwing all your eggs into one basket. You will continue to distribute a fraction of your inventory to other fulfillment centers too.
This strategy is only recommended for those who are targeting one primary market though.
- Lowers shipping costs by using intelligent inventory distribution based on sales metrics
- Improves shipping time since many fulfillment companies offer 2-day shipping if you have inventory stored in the same country
- 2-Day shipping can improve CTR rates if you run paid ads, thereby improving sales conversions
- Easier returns if the fulfillment company handles returns for you
- May not be suitable for all product types. Some products, which are heavier than 1 kg may actually increase your shipping costs due to freight charges
- May not be ideal if you have many SKUS and different product types.
- Inventory management may be tricky. You have to stay on top of inventory ordering as per sales trends and data
- Some fulfillment companies charge much higher for shipping than what it appears to be
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2. Fulfillment at Origin (China)
Fulfillment at Origin is a tried and tested business strategy that works flawlessly in many business scenarios. The rules are simple. You store inventory in a fulfillment center close to the source, which means the manufacturer and fulfill to all parts of the globe.
The first thing that would pop up in your mind, is how do you match the 2-day shipping that storing inventory locally provides? Well, 2-day shipping may not be possible to many parts of the world from China. But improved logistics networks and routes make it possible to reach key eCommerce markets in 5-10 days.
That’s not too bad considering that you will save a lot of money on freight, storage and inventory. We will touch more on this in the Pros & Cons section.
- Store only as much inventory as required. When you are storing inventory at origin, you are close to the manufacturer and can afford to carry a smaller inventory. If you are running out of stock, it can be replenished in days.
- Lower shipping costs and faster speeds due to the use of smart logistics routes and solutions. Shipping to many parts of the world is cheaper from China, as compared to domestic fulfillment. Europe is a primary example.
- Makes it easier to manage stores with many SKUs and product categories as you are stocking less inventory.
- Shipping speeds can be slower as we discussed. If your competition is stocking inventory locally and can offer 2-day shipping you might get outperformed.
- Returns cost more money. Because customers has to ship it all the way back to China unless you have a domestic address to process all the returns.
- The cost and ROI on some products will be better if you fulfill domestically, rather than from China
3. A combination of the two
A smarter way to fulfill internationally is to use a combination of these two fulfillment strategies. This means, you store some inventory in a domestic fulfillment center while part of your inventory remains in China, that you fulfill at origin.
You might be wondering how this works. Like we said, neither of these two options are ideal for all businesses or scenarios. There are some where fulfilling internationally by storing inventory locally will provide the best ROI. But there are others where you might be able to lower costs and speed up inventory replenishment by fulfilling at origin.
The main idea behind using a hybrid business model is to maximize profitability, reduce costs and make fulfillment simpler. Some businesses also use a combination of both these fulfillment strategies for different regions as well.
For instance, if they are targeting USA, they store inventory in fulfillment centers in USA and fulfill from there. However, if they are targeting Europe, they fulfill locally from China, because many parts of Europe, such as Poland, offers easy access from China.
- Allows you to choose the fulfillment solution based on regional requirements, cost and profitability
- Stores inventory at origin for faster inventory replenishment, while the other part is stored in a local fulfillment center for faster shipping in markets that demand it.
- Can be a winning solution that finds the perfect middle ground rather than choosing between the two extremes.
- It’s more expensive to store inventory in multiple locations. If you are storing inventory in 2 different places, it might stretch your resources thin and eat into profits.
- Can be more complex to manage as you are managing different routes and storage warehouses for different product categories/SKU. This will also make it difficult (not impossible) to analyze performance based on regions.
- If you fail to accurately forecast sales, you might end up with dead stock, or worse, stuck without inventory in peak sales season.
So which global fulfillment strategy is right for you?
To be honest, it depends entirely on your products, target market and business goals. You should always consider all variables before taking a decision.
But we would recommend using Fulfillment at Origin if:
- You are on a limited budget and have multiple SKUs
- Shipping your product type/dimensions to your target market is cheaper from China
- You want to lower your inventory costs
We would recommend storing inventory in an international fulfillment center if
- Shipping from China is too expensive and/or slow
- You want to leverage the potential of 2-day shipping in your target market
- You have limited SKUs and products
We would recommend choosing a hybrid strategy if –
- You are selling in multiple international markets. But local fulfillment is not ideal for all the markets.
- You want to maintain control over the supply chain, yet