Package Management

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PACKAGE MANAGEMENT

A key difference between online business ventures and more traditional retail operations is how customers actually go about getting the merchandise they purchase. In some cases, customers can simply download what they have bought. For example, many online software companies allow customers to download software programs as soon as they pay. Online magazines permit clients to download articles once they agree to pay a fee. Similarly, online brokerages allow clients to make trades online after they deposit money and complete registration forms. In many cases, however, online businesses sell merchandise that must be packaged and shipped to clients. How businesses manage this process can have a direct impact on customer satisfaction.

In the late 1990s, when e-commerce was just beginning to take hold, many online ventures were more concerned with securing new customers than with making a profit. As a result, many offered free shipping. By the early 2000s, however, profitability became a key concern for Internet-based businesses. Companies found that they simply had to pass shipping charges along to customers if they were going to stay afloat.

Some firms even began to view shipping as a way to secure additional profits, marking up shipping prices. According Entrepreneur in February 2002, "Online marketing analysts offer several suggestions on how to handle shipping and handling fees. Because the majority of consumers review these costs prior to making a purchase, it's advisable to consider these charges as a break-even proposition instead of a way to make money." The reason is simple: customers know enough about shipping charges to know when firms are tacking on extra dollars to boost profits. The article cited a Datamonitor study that indicated nearly 70 percent of online purchases were abandoned before completion in 2001. Datamonitor said many customers abandoned their purchases because they believed shipping and handling costs were too high.

In some cases, it makes sense for businesses to base shipping charges on package weight, particularly if the products shipped tend to be heavy. In other cases, shipping fees can be based on the amount of money a customer spends; this model allows a business to offer free shipping to those who spend over a certain amount, a method for enticing customers to purchase more than they might have first intended. However, this model might prove problematic if a customer spending $200 on lightweight draperies gets charged the same shipping and handling fees as a customer spending $200 on a heavy wooden table.

Along with determining what to charge, you must also decide to either handle packing and shipping internally or to contract a fulfillment company to manage the process. Quite often, this decision depends upon the number of packages you ship, as well as the cost of the merchandise. If you are planning to sell large quantities of goods to a handful of businesses, you might find that using a fulfillment center proves cost effective because merchandise can be shipped at bulk rates. However, if you're selling inexpensive items, such as used CDs, to a wide variety of individual consumers, using a fulfillment center might prove too expensive as the per-item fulfillment cost might actually be higher than what you are charging for a CD. If you are shipping a small number of goods, you might also find that fulfillment centers are not very cost effective. Industry experts recommend keeping fulfillment costs under 10 to 15 percent of merchandise sales. In some cases, outsourcing might allow you achieve this goal, while in other cases, handling package management yourself might be the better choice. You will need to research both options to determine which best suits your business.

If you decide to undertake your own package management, you'll need to work with a shipping company like FedEx or UPS. You can download software from both of these firms that will allow your customers to track their shipments online. You will be responsible for keeping track of orders, packaging goods, and either taking them to a branch location or drop box, or scheduling pickups.

Should you choose to outsource package management tasks, you will find that a wide variety of fulfillment companies offer services ranging from packaging, shipping, and return processing to inventory management, stock replenishment, and credit-card transaction processing. If you are already using a Web-hosting company, you can check to see if it offers any package management services. While these services can be somewhat limited, depending on the hosting company, they are quite often more than adequate for small online merchants.

Companies specializing in fulfillment for smaller online businesses include Ifulfillment.com, Fulfillmentplus.net, and Ifulfill.com. Each of these firms offers different services and charges different fees.

Ifulfillment.com serves both business-to-consumer (B2C) and business-to-business (B2B) ventures. Along with standard order fulfillment, inventory management, and return processing, the firm also offers package management services for perishable items such as frozen food, flowers, and wine. To get an idea of what fulfillment services might cost, the firm's Web site contains a Quote Wizard that allows users to input weekly sales figures, the average number of goods shipped per order, and similar information.

Fulfillmentplus.net also offers a wide range of order-fulfillment services. It differentiates itself from rivals by allowing customers to personalize orders by selecting options like gift wrapping and greeting cards.

Meanwhile, IFulfill.com offers comprehensive services that handle the fulfillment process from the moment customers click on a "Buy Now" button until the merchandise is at their doorstep. Like its rivals, IFulfill.com offers more limited service options for budget-conscious customers. The firm's Fulfillment Only Service is designed for small online merchants looking for package-management services only.

Before contacting a fulfillment company, it's a good idea to decide which services you would like outsource. Figuring this out ahead of time will allow you to focus your research efforts. As a June 2000 issue of Entrepreneur.com advises, "Before you select a fulfillment company, be sure you've gathered all the information needed to make the best choice.. you'll want to make sure the fulfillment company of choice delivers products in a timely manner, quickly responds to you and your customers, and handles returns efficiently."