How to enter the B2C e-commerce market as a 3PL/Fulfillment Provider

The e-commerce market is booming and it is expected to continue for years. Classic B2B fulfillment providers recognise the opportunities in the B2C market. The digital shopping world is growing at a rapid pace and more and more companies are turning to the growing B2C e-commerce business. Even classic B2B fulfillment providers recognise the opportunities offered by smaller shipments and see lucrative business expansion in the B2C market, with researchers expecting the number of online shoppers to reach 2.5 billion in 2020. But B2C is not the same as B2B - classic fulfillment providers face new challenges to provide future new customers with professional e-commerce fulfillment.

Market entry

The B2C market is recognised as an exciting business model, but the question arises of the right market entry strategy. In the first step, fulfillers should be clear about which segment they want to address - small and medium-sized or large brands? The industry is also an important factor. In sectors such as pharmaceuticals or food, aspects such as shelf life and batch management, cooling temperatures and other specific requirements must be taken into consideration. Any fulfiller that has already gained a foothold in B2B should take advantage of this experience in e-commerce business. With this know-how, existing references and the potential of existing B2B customers ready for e-commerce business, they can get a head start.

Market performance and observation is essential for the market entry choices and the acquisition of new potential customers. Which traders are experiencing strong growth, which start-ups are booming and being coveted by investors? Fairs and events are a good source of information and key to keeping an eye on trends.

Right target group

• Small and medium-sized or large brands

In sectors such as pharmaceuticals or food, aspects such as shelf life and batch management and other specific requirements must be taken into consideration.

Experience as an advantage

Market performance and observation

• Which traders are experiencing strong growth?
• Which start-ups are booming and being coveted by investors?

Classic B2C target groups

Any business that wants to serve the B2C e-commerce market needs to know their target audience and their challenges.

The classic target groups in B2C e-commerce business are:

• Classic pure players: e-commerce retailers that are growing steadily and reaching their capacity limits with their logistics operation. These limits can be either spatial, for example, insufficient storage space, or a lack of human resources.
• B2C start-ups: eCommerce retailers experiencing strong growth and the logistics improving to be a bottleneck constraining business growth.
• B2B Distributors / Producers: Experts on the floor and new entrants in e-commerce business who want to professionally handle their shipment processing through a fulfiller.
• "Changers": Dealers who are dissatisfied with their current fulfillment provider or whose future requirements are no longer satisfied by their existing offer.

The fulfillment offer

The provision of customer service and cross-border fulfillment should be considered well in advance. A good customer experience will motivate repeat purchases from online buyers. The appropriate language and customer service during regular business hours are essential. If customer service cannot be consolidated for multiple customers, it should remain the responsibility of service expertise centres or an external call center.

Customer service should encompass:

• Debtor management and payments
• IT technology and shop operation
• Shipment processing such as order picking, packing, packaging and shipping
• Marketing and photo studios
• Customer service
• Cross-Border Shipping

Cost structure

B2B pricing is usually based on the customer's targets and is calculated per pallet or order. In B2C, this is not typical due to the strong fluctuation of the customers’ business. For a first calculation, fulfillment providers in the B2C e-commerce business should orient themselves between 17% and 28% of the net value of the average basket of goods less the return. The following aspects should be given special consideration in pricing:

• Value of the average shopping basket: This can vary greatly per customer.
• Number of orders: This can change significantly over time, but it provides a first, essential clue about acceptance and prominence in the marketplace.
• Risk of business failure: The e-commerce market is agile and flexible. However, not every e-commerce story ends in success.
• Existence on the market: This provides information about the customer's business model.
• Investor security: The existence of one or more investors creates security and should influence pricing.

Contract periods

The e-commerce market is growing rapidly, but contract terms in B2C are set at a much shorter term with a maximum of three years. For contracts with start-ups, terms of just one year are common.

A look into the classic warehouse of a B2B fulfiller shows pallet racks and technology with plenty of space for bulky goods. For the B2C business, however, this storage technology is inappropriate. The B2C Business requires individual shelves and space for order picking for selecting individual items. Therefore, providers who dare to take the leap into the B2C business should deal with the appropriate storage technology and include this investment in their business model

Goods delivery

The delivery of goods spread throughout the day differs in the B2C market. Fulfillment providers must expect multiple, small-scale deliveries throughout the day. Resources must be calculated in advance and made available.

Software

The basis of a 1A fulfillment offer is a professional order processing. For this purpose, a suitable WMS automates all shipping, payment and logistics processes and links them with the communication processes.

Conclusion

• The B2C e-commerce market is an exciting business. The choice of the appropriate target group and market entry strategy is indispensable.
• A clearly defined range of services creates security for both the provider and customer, and the needs of the target group should be determined in advance.
• It is essential to use a warehouse management solution (WMS) specialized in e-commerce to ensure an error-free shipping and returns process.