As per Wall Street Journal reports in 2015, 63 per cent of online customers considered 3-4 days shipping to be ‘quick’ and today’s 96 per cent consumers interpret ‘rapid delivery’ to indicate same-day delivery.
Meanwhile, as per PwC in the US, 88 per cent of shoppers are willing to pay for faster delivery or same-day delivery while another study by Zebra Technologies Corporation found close to 80 per cent of logistics companies expecting to provide same-day delivery.
The figures demonstrate how tech-savvy business decisions and lower last-mile delivery costs will be crucial to the expansion of enterprises.
Given the scenario, there’s a lot of talk lately about retailers using fulfilment centres or dark stores to fulfil online orders even as the brands continue to struggle to match customer expectations without a more localised approach to the key issue of fulfilment as it seems here that same day delivery may not be possible.
Fulfilment centres are equally relevant for unified commerce as well, helping connect the backend systems of online and offline stores with customer-facing channels via a single platform, creating harmony between important customer touch points. This harmony is created by syncing sales channels and consolidating backend operations, so that every part of customer experience feels like a direct extension of the brand/retail store.
But one has to first understand the basic difference (concept and functioning) between warehouses and fulfilment centres.
A fulfilment centre is intended to improve the customer experience related to the ordering and timely delivery of products, while a warehouse’s primary function is simply to store inventory and as it is used merely to store inventory; its utility is decreasing.
In contrast, a fulfilment centre is continually a busy place, right from receiving inventory, picking, packing to shipping and managing returns and all within a timeframe to reach customers at a reasonable time whereas a warehouse will typically schedule fewer pick-ups because it is more economical to ship out all of the things at once regardless of how quickly the consumers want them.
What’s more, in reality, the 3PL fulfilment centres also do not serve the entire purpose for e-commerce or bricks-and-mortar stores unless supported by Micro Fulfilment Centres at regional or Tier-1, Tier-2, Tier-3 level.
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Why are MFCs gaining momentum?
MFCs can fulfil e-commerce orders as well as local store pick-ups and are cost-effective for faster deliveries as replenishment happens at the local level.
MFCs are becoming increasingly popular in the retail industry due to their ability to reduce expenses and improve inventory management while the fulfilment company can also take advantage of the combined volume to gain significant discount on supplies, like shipping boxes and packaging materials, which it can then pass along to their clients.
Although receiving orders, choosing products, packaging boxes and shipping are important aspects of a company’s bottom line, these duties are outsourced to MFCs so that businesses can devote more time to other critical operations like marketing, customer care and strategic planning.
Retailers can also use micro-fulfilment if their seasonal goods need to be delivered to clients right away before demand declines. If you run a fashion store and release new collections frequently, your stock-keeping units need to be in the proper places to promptly complete orders and profit from passing trends.
With a micro-fulfilment plant, retailers have an additional supply of merchandise that can be made available to neighbouring storefronts on one hand and online orders can be allocated to the MFCs for faster dispatch and delivery even if there are many advantages like small inventory levels at the fulfilment centres make it easy to deliver orders at the local levels, due to familiarities with the place and the direction.
Being smaller in size, MFCs require lesser space and can be set up almost anywhere including retail stores, office buildings and even parking lots, which makes them a cost-effective option for retailers.
However, there are many challenges associated with MFCs apart from the general issues of finding the right location and integrating them into existing infrastructure.
To start with, understanding the demographics and the local culture and liking of the people in terms of colour, fit, price and styling of merchandise is essential before placing an order at those MFCs along with understanding the buying power of the local population while also enhancing the brands’ penetration or reach to every customer in the zone.
Since MFCs are small in size, there’s limited product assortment even if they also have to deal with the need to constantly replenish inventory and sometimes it is difficult to swiftly adjust to a given demand due to the unavailability of the merchandise. For instance, if an influencer posts about a given product and it becomes popular overnight, there may be unfulfilled orders as a result in the particular region or consumers might place simultaneous orders and anticipate to receive them all at once.
Nevertheless, at the micro fulfilment centre, if even one item is out of stock, it might result in a delivery delay or the retailer’s decision to cancel the order, both of which lower consumer happiness and foster distrust in the system.
We understand the difficulties of deciding on garment buying without the look and feel, colour and other associated factors and therefore some estimates put the typical rate of garment returns from online retailers at as high as 30–40 per cent, as the sector with the highest rate of returns and refunds is apparel.
Online clothing purchases had a 25 per cent return rate, according to a McKinsey Returns Management survey, which is 5 per cent greater than the average industry.
As such, a fulfilment centre proves to be the best buddy in such cases. Moreover, having a third-party MFC can help accept returned goods and follow the specific guidelines to deal with the returned products, either by re-entering them into the inventory or sending the merchandise to some of the regional centres where it is needed or disposing them of.
WareIQ, a Y-combinator-backed start-up that was founded in 2019, has developed quickly to become the top supplier of full-stack e-commerce fulfilment services for some of the most well-known companies in India where several online platforms and marketplaces can be integrated easily even if amongst its vertical marketplaces, Nykaa plays a major role.
Similarly, Eshopbox is another game changer in the field of e-commerce fulfilment centres, which provides massive assistance to big brands in online fashion and lifestyle like Ajio, Tata Cliq and Myntra.
Expressing his satisfaction with the fulfilment services provided by Eshopbox, the Category Lead of Raymond, Dhanendra Rathore stated that storing their inventory in Eshopbox fulfilment centres has increased their product reach to customers across India.
Meanwhile, Blinkit intends to grow its network and add up to 40 per cent more micro fulfilment centres across the country — currently, there are 400 dark stores operated by Blinkit in India — while in an interview given to the Press Trust of India, Blinkit’s CEO Albinder Dhindsa stated that they have identified new neighbourhoods as having good potential in new and existing cities and based on the information their systems produce, the management bandwidth and the time required for supply generation, they are looking for prospects for store openings in high-potential areas.
Final words
An MFC strategy benefits expansion in important strategic areas for retailers and e-commerce sellers to provide one-day or next-day delivery affordably.
How tech-driven logistics companies are helping the apparel retail industry
Fashion and apparel contribute 40 per cent of Quickshift’s revenue, the largest from any category. And the company has grown four times in the last 18 months and expects to maintain this pace. Quickshift’s focus has now grown beyond e-commerce to retail supplies too. With the inventory stored and visible at QS’s FC, brands can supply to their retail outlets and thus they need not maintain separate inventories for e-commerce and retail.
Quickshift has specifically designed processes to cater to this industry’s issues and claims that over 90 per cent of orders are serviced within 2 days of placing orders and close to 99 per cent within 5 days. A faster turnaround time helps in reducing returns. Having own FC helps its brand partners especially in peak festival times to manage last-minute requests. These FCs are equipped to undertake ‘Ironing and re-packaging’ for open returns that are then again re-stocked as live inventory.
Prodipto Roy, Co-Founder of the company informed Apparel Resources (AR), “Since the beginning, Quickshift has had a clear and distinct focus on apparel and fashion as a category. After mobiles, this is the largest GMV category in e-commerce trade, contributing around 20 per cent of the total trade and is further expected to grow at a CAGR of 22 per cent (Y-o-Y from 2022-26).”
Further, looking at the opportunity of selling apparel in the global market, Quickshift has established QS-Axis, its integrated process for drop shipping individual courier packages to its global customers from India at their destination addresses taking care of all processes related to logistics, custom clearances, air-line bookings and freight, documentation, etc.
Shiprocket is a technology-driven logistics company based in India that provides e-commerce businesses with a range of services to manage their supply chain and shipping needs. The company aims to simplify the shipping process and make it more affordable for small and medium-sized businesses. The company uses advanced algorithms and data analytics to optimise the shipping process, reduce shipping costs and improve delivery times.
WarelQ is a technology-enabled warehousing and fulfilment company and offers a comprehensive range of e-commerce fulfilment services, including warehousing, order processing, pick and pack and last-mile delivery. It has more than 20 fulfilment centres and the company is expanding its operations rapidly. It also offers cross-border fulfilment services as well that allow businesses to expand their reach globally.
Eshopbox, an Indian-based e-commerce fulfilment and technology company, provides end-to-end e-commerce solutions for brands and retailers, including warehousing, order management, packaging, shipping and returns management. Fashion is one of the primary verticals that Eshopbox specialises in. The company offers customised e-commerce solutions to fashion brands to help them manage their online sales channels efficiently. It has seven fulfilment centres.
TradeLink Technologies is an end-to-end logistics company that specialises in providing end- to-end logistics solutions for businesses. It has a strong focus on technology and innovation, and its logistics solutions are designed to help businesses streamline their operations, reduce costs and improve efficiency across a range of industries, including e-commerce, retail and manufacturing. Some of the popular fashion brands and retailers are clients of the company.
E-commerce Express is a logistics and fulfilment company that specialises in providing e- commerce services to online retailers. Its offerings typically include storage and warehousing, order fulfilment, shipping and delivery and return management. The company offers a range of services to help businesses streamline their e-commerce operations and provide a seamless experience to its customers.
