What is Omnichannel Fulfillment? Explanation, Strategy, and Tips

We have seen countless examples of brands branching out to newer sales channels. The ecommerce-only brands have started adopting physical retail. Traditional consumer grands, that have always sold through big-box retail, are getting into ecommerce. The signal is clear — omnichannel is the way to go.

The omnichannel fulfillment model has quickly evolved from a fringe fulfillment option to a necessity for businesses looking to improve the efficiency and profitability of their commerce operations. This approach is a marriage of convenience and flexibility, achieved by seamlessly integrating the in-store and online shopping experience and leaving the final choice to the customers.

In this blog, we’ll explore what omnichannel fulfillment is, followed by a deep dive into its benefits, developing an implementation roadmap, and leveraging specialized fulfillment arrangements.

What is Omnichannel Fulfillment?

Omnichannel fulfillment is a centralized order fulfillment strategy for picking, packing, and shipping orders across various sales channels, retail stores, and online marketplaces. Unlike traditional fulfillment, omnichannel order fulfillment utilizes a unified set of resources, including workforce, equipment, inventory, and facilities spread across different locations and outlets. This approach ensures a consistent and efficient customer experience, regardless of how and where a customer interacts with a brand.

For businesses to take advantage of omnichannel ecommerce fulfillment, they need a centralized inventory and order management system to synchronize data from multiple channels and provide a unified view of truth. Omnichannel order fulfillment can operate out of warehouses or fulfillment centers, third-party locations, or in-store, from where the products can be shipped or designated for curbside pickup.

Let's look at a few successful omnichannel fulfillment examples:

• DSW (Designer Shoe Warehouse): DSW is an American footwear retailer with a significant online and in-store presence. Recognized for its omnichannel efforts, DSW allows customers to shop for an expanded range of colors, styles, and sizes via mobile devices and digital displays in-store. Their in-store mobile application lets customers browse rewards certificates, wishlists, and personalized offers. DSW's ecommerce platform has also been updated to offer more relevant search results and personalized content. They also plan to offer customers the option to buy online and pick up in-store, enhancing the shopping experience​​.
• Urban Outfitters: This international American clothing company prioritizes digital integration in its omnichannel strategy. To enhance user engagement, it has created a user-friendly website with diverse media, such as slideshows and videos. Urban Outfitters also extends its brand reach through initiatives like the “UO Live” music series, a video streaming channel, and a music-focused Instagram page, which features exclusive releases and contests. This approach allows the brand to offer a comprehensive omnichannel experience, seamlessly blending online and in-store elements​​.
• Zara: Zara's omnichannel strategy includes an ecommerce website, a mobile app, and over 2,000 brick-and-mortar stores globally. Their approach emphasizes a fast fashion model responsive to changing trends and integrates technology such as RFID tagging to enhance the customer experience and supply chain efficiency. Zara also allows customers to purchase products online and pick them up in-store, adding convenience to the shopping process​​.

Some of the key channels where we have seen omnichannel fulfillment services excel are:

1. Ecommerce Marketplaces: Omnichannel ecommerce fulfillment for marketplaces like Amazon, eBay, and Etsy often involves managing inventory across multiple platforms to ensure accurate real-time stock levels. Speed and reliable deliveries are crucial here, as is compliance with each marketplace's specific rules and standards for sellers. Prompt customer service and returns management also play a pivotal role in maintaining a positive brand image on these platforms.
2. Owned Ecommerce Channels: For a brand's own ecommerce website, omnichannel order fulfillment focuses on providing a seamless, branded experience from browsing to delivery. This includes personalized customer service, efficient order processing, and fast shipping. As a brand, it’s a reasonable approach to maintain more control over customer data and interactions, allowing for greater personalization and targeted marketing.
3. Wholesale and Distribution: Fulfillment in wholesale and distribution involves managing large volume orders and delivering to business clients or retail partners. This usually means dealing with bigger shipments like pallets or cartons, requiring different logistics and storage solutions compared to direct-to-consumer channels. Efficiency, accuracy, and timely delivery are critical, as delays can disrupt the supply chain for multiple downstream entities.
4. Owned Physical Retail: The omnichannel fulfillment model integrates the in-store experience with online channels in owned retail stores. This might involve using stores as local distribution hubs for online orders (ship-from-store) or enabling customers to pick up or return online purchases in-store. Inventory visibility and accuracy are vital to ensure that what's shown online matches the in-store stock.
5. Big Box Retail: Omnichannel order fulfillment for big box retailers like Walmart and Home Depot often includes adhering to strict delivery schedules and compliance requirements, managing large-scale shipments, and ensuring product availability to meet the demands of these high-volume retailers. Businesses need efficient supply chain management and a firm grip on logistics to maintain consistent stock levels and meet the stringent requirements of big-box retailers.

Omnichannel vs. Multichannel Fulfillment

People often confuse omnichannel and multichannel fulfillment for one another. While they are similar in many ways, including the end outcome, there are many factors that distinguish the two. 

Omnichannel Fulfillment implies a unified and centralized strategy to manage fulfillment for various channels concurrently. It usually consists of a centralized approach to inventory operations and order fulfillment and may use the same set of resources to manage each channel.

Multichannel Fulfillment on the other hand, is about fulfilling for all your different channels, without necessarily involving a unified or centralized strategy. For example - a seller/brand may handle the DTC fulfillment in-house, while outsourcing wholesale/distribution to a 3PL, and marketplace fulfillment to a service like Amazon FBA. This breaks down the fulfillment operations into individual segments and often fosters higher specialization. 

There is no one size fits all approach when discussing Omnichannel Fulfillment vs. Multichannel Fulfillment. While Omnichannel helps attain better efficiency at scale and helps lower costs, a Multichannel approach may foster higher specialization and cater to each channel’s unique dynamics. 

Benefits of Omnichannel Fulfillment Strategy

Omnichannel fulfillment services allow modern ecommerce warehouse management businesses to leverage multiple sales channels and grow their operations. So, let’s break down the many benefits of omnichannel fulfillment and see how it helps businesses stay competitive.

Better Resource Utilization

By deploying the same set of resources across all channels, businesses can eliminate the need for additional investments in real estate, workforce, or software. This approach provides the fastest path to value, improving overall resource utilization.

For example, businesses can use an integrated inventory control and tracking system to redistribute and reallocate inventory across multiple channels. Organizations spread across multiple locations can skip building separate fulfillment infrastructures for each sales channel​​.

Lower Costs

An omnichannel approach lowers unit costs per order due to higher synergies between individual channels. Fixed costs are distributed across different channels, further minimizing the need for dedicated resources and lowering overall order fulfillment costs.

For example, with omnichannel fulfillment services, businesses can choose from both stores and fulfillment centers for delivery and pickup. Access to multiple channels offers various benefits, such as inventory accuracy, lower picking costs, increased inventory productivity, and quicker speed to the customer. According to McKinsey's research, in-store picking costs 1.5 to 2 times higher on a cost-per-pick basis than at distribution and fulfillment centers. The omnichannel fulfillment model allows businesses to align their choice of sales channels with interim business objectives.

Consistent Brand Experience

Omnichannel ecommerce fulfillment provides more control over the ecommerce fulfillment process across various channels. This control enhances brand consistency and improves customer experience. 

Businesses can combine their stocks for both online and offline sales channels using an omnichannel logistics approach, offering customers unparalleled access to inventory across all channels, real-time tracking options, and speedy order fulfillment. 

This results in a seamless shopping experience, leading to greater customer satisfaction, increased customer loyalty, and higher sales. A study by HBR revealed an estimated 73% of respondents prefer shopping through multiple channels, and omnichannel customers spend 10% more online and 4% more in-store than single-channel customers.

Enhanced Data and Analytics

Omnichannel order fulfillment provides businesses with comprehensive insights into the customer’s purchasing behavior and preferences across all sales channels. By integrating data from online and offline channels, companies can gain a more holistic view of their customer journey. 

This enhanced data analysis allows for more accurate demand forecasting, personalized marketing, and targeted inventory management. It helps businesses make informed decisions, tailor their offerings to meet customer needs more effectively, and identify opportunities for growth and improvement. The rich data from an omnichannel approach can be a powerful tool for strategic planning and optimization of customer engagement.

How to Implement an Omnichannel Fulfillment Strategy

Omnichannel order fulfillment is crucial to align ecommerce operations with evolving consumer behaviors. Understanding the customer journey is the most important thing when developing a strategy to implement omnichannel fulfillment.

Now, let’s look at what it takes to implement an omnichannel fulfillment strategy that can meet modern customer expectations.

Sales and Distribution Plan

The primary goal of any sales and distribution plan is to reach the maximum number of customers through various channels while ensuring optimal resource utilization and profitability.

In an ideal situation, the first step is to determine the right mix of sales channels. This might include online marketplaces like Amazon, company-owned ecommerce websites, physical retail stores, B2B channels, and social media platforms. 

You can choose a channel depending on your target audience, product type, and market trends and decide how much volume to allocate to each channel. This requires a strategic understanding of each channel's demand patterns, customer preferences, and sales potential. For instance, a higher volume might be allocated to ecommerce for consumer electronics due to a larger online customer base. In comparison, luxury items might see more volume in physical retail stores for a personalized shopping experience.

Each channel requires a different level of resources. Online channels need more investment in digital marketing and IT infrastructure, while physical stores require staffing, maintenance, and inventory. For instance, a high-traffic ecommerce website may require robust server support and cybersecurity measures, whereas a physical store might need more sales personnel and in-store branding. 

As the merchant, you'll have to estimate the expected returns from each channel by analyzing historical sales data, market trends, and customer buying patterns.

Each channel comes with its complexities. Online marketplaces have their own set of rules, fees, and competition, and managing your ecommerce platform requires technical know-how. Physical retail involves logistics like store location, layout, and inventory management. For example, selling on Amazon might require adapting to their fulfillment processes, while selling through your website allows more control but demands more effort in traffic generation.

Designing the Facility

Designing a warehouse or fulfillment center for the omnichannel fulfillment model requires a layout that can handle varying order profiles, sizes, and shipping requirements. Here’s what you need to do to get started:

1. Storage Space Segmentation: The facility should have segmented storage areas for different types of storage. For example, fulfillment centers should have pallet storage for bulk items and bin storage for smaller, individual items common to B2C orders. This segregation allows warehouse workers to adapt to the unique requirements of each channel and perform automated warehouse picking and packing tasks in warehouse faster and more efficiently.
2. Dedicated Packing Stations: Set up dedicated packing stations equipped to handle different packaging needs. For B2C orders, your stations should be capable of handling individual parcel packaging. In contrast, B2B fulfillment may need larger stations designed for palletizing and preparing bulk shipments.
3. Adaptable Docking Areas: Omnichannel fulfillment centers should have adaptable docking areas to accommodate different types of carriers, from small parcel delivery vans to large freight trucks. This flexibility is crucial for efficient loading and unloading of goods, minimizing bottlenecks, and ensuring timely dispatch.
4. Scalable and Flexible Design: The overall design should be scalable and flexible to allow businesses to adapt to changing business needs — be it seasonal demand fluctuations or expanding product lines. For example, modular storage systems and mobile packing stations can provide adaptability.

Integrating Sales and Procurement Channels

Businesses can streamline their operations and enhance the overall customer experience by effectively integrating sales and procurement channels. This integration allows for efficient management of inventory, orders, products, and consignments, which is the bread and butter of today's fast-paced retail environment.

• Unified Inventory Management: By integrating channels, businesses can maintain a unified view of inventory across all sales platforms. This real-time inventory visibility is vital for avoiding stockouts and overstocking, which can impact customer satisfaction and profitability. For instance, in B2C channels like marketplaces and DTC platforms such as Shopify, real-time inventory updates help maintain accurate stock levels on all customer-facing platforms, reducing the likelihood of order cancellations due to stock unavailability.
• Streamlined Order Processing: Integrated warehouse management systems (WMS) ensure that orders from various channels are processed centrally. In B2B contexts, tools like Electronic Data Interchange (EDI) and Enterprise Resource Planning (ERP) systems facilitate seamless order processing and fulfillment. In B2C, integrated platforms can synchronize orders from various marketplaces and direct-to-consumer platforms, ensuring consistent and timely order fulfillment.
• Enhanced Customer Experience: Real-time data lets businesses provide customers with up-to-date information regarding product availability, order status, and shipping details. Retail management systems with integrated Point of Sale (POS) systems can lead to improved customer service in both online and offline channels.
• Data-driven Decision-making: Integrating sales and procurement channels provides a wealth of data that can be used for informed decision-making. This includes insights into customer buying patterns, inventory turnover rates, and sales trends, which can guide strategic business decisions.

Creating Flexible Operating Workflows

Specialized workflows help omnichannel fulfillment centers and warehouses navigate inbound, storage, and outbound processes across multiple sales channels.

Inbound Logistics

The inbound process should be designed to handle products arriving from suppliers efficiently. For DTC channels, this might involve receiving in warehouse a variety of smaller items in individual units. B2B inbound logistics often deal with larger quantities, such as full pallets or bulk shipments, which are then broken down for distribution or stored in bulk.

Storage Workflows

Storage workflows generally vary based on the product type and sales channel. DTC inventory often requires more pick-friendly storage solutions to facilitate quick picking of individual items or cases. In contrast, B2B storage should focus more on bulk storage solutions like pallet racking systems to accommodate bulk quantities.

Outbound Processes for Ecommerce and Wholesale

The outbound process is crucial as it directly impacts customer satisfaction. For DTC, packaging and ecommerce shipping often focus on individual items to deliver a personalized customer experience. B2B fulfillment typically involves shipping in larger quantities like cartons or pallets, emphasizing efficiency and cost-effectiveness above all else.

Reverse Logistics

Returns workflows are also very channel-specific. DTC returns often require a more customer-centric approach, with easy-to-follow return procedures and quality checks of returned items before restocking. In B2B returns, the focus might be more on efficiently processing larger volumes of returned goods, involving more complex logistics and contractual considerations.

Specialized Omnichannel Fulfillment Solutions

For businesses that are not in a position to set up their own omnichannel fulfillment services, there are specialized arrangements available that can effectively bridge this gap. These options present a viable way to implement an effective omnichannel strategy without requiring extensive in-house logistics infrastructure. These alternatives provide the flexibility and efficiency needed for commercial success:

3PL

Many large 3PLs offer specialized solutions for both B2B and B2C fulfillment. When considering whether to use in-house fulfillment or partner with a 3PL, businesses should consider several key factors beforehand.

Most businesses weighing the pros and cons of omnichannel order fulfillment must align the interim milestones with long-term business objectives to decide whether a 3PL would be the best option for their business model.

In-store fulfillment

In-store fulfillment is suitable for companies expanding into e-commerce and already having a physical retail presence. Utilizing existing retail stores as mini-fulfillment centers can allow these businesses to use retail stores to fulfill online orders, reducing the need for additional warehouse space. 

Services like in-store pickup or returns for online purchases can improve customer convenience and satisfaction. That's not even counting the fact that fulfilling orders from stores can shorten delivery times, especially for customers located near these stores.

Microfulfillment

Microfulfillment is a streamlined approach to fulfillment that is gaining popularity, particularly for ecommerce operations. Microfulfillment centers can be owned or operated through a 3PL and are often located closer to the end customer, significantly reducing delivery times and costs.

Microfulfillment allows for a more responsive approach to inventory management and order fulfillment, adapting quickly to changes in demand. This approach offers a more cost-effective solution with lower startup and operational costs for businesses ready to invest in large-scale fulfillment centers.

Hopstack’s Fulfillment Platform: Simplifying Omnichannel for Brands and 3PLs

Hopstack's omnichannel fulfillment platform delivers a seamless ecommerce experience by integrating B2B and B2C channels. Designed to meet the complex demands of modern brands and 3PLs, Hopstack enables efficient, centralized management of diverse commerce chains, enhancing both operations and customer experience. Our primary offerings in this area are:

• Centralized Inventory and Order Management: Hopstack’s omnichannel fulfillment platform excels in syncing inventory across all sales channels, ensuring cohesive stock visibility and control. You can set up custom rules for allocation and replenishment to cater to both B2B and B2C channels. It’s designed to effectively manage sourcing and processing of orders, whether they are large-scale B2B orders or individual B2C parcels.
• Storage Management: The platform offers specialized storage management options, including bin and pallet storage. Our flexibility and scalability allows businesses to create storage solutions based on business-specific rules and needs, ensuring optimal space utilization and quick access to products.
• Flexible Workflows: The platform is designed to create granular inbound, storage, and outbound workflows tailored to each sales channel. For example, B2B orders may include a palletization step to streamline bulk shipments, while marketplace fulfillment might involve additional labeling steps to comply with marketplace regulations, ensuring compliance and efficiency in all operations.

Hopstack's omnichannel fulfillment platform is a comprehensive solution designed to address the complexities of modern order fulfillment. Schedule a demo with us to discover how Hopstack can elevate your omnichannel fulfillment strategy, bringing efficiency and precision to every aspect of your ecommerce operations.