The Importance Of Ecommerce Distribution Center For Retail In Today's Online Landscape

In the fast-paced world of ecommerce, traditional warehousing may not provide the speed and efficiency you need to compete with other fast-shipping online brands. As your business grows, the complexity of order fulfillment and managing supply chains at scale may also become a burden.

Distribution centers managed by third-party logistics (3PL) companies have become increasingly popular among ecommerce businesses. These specialized facilities are rapidly replacing traditional warehouses with their focus on agile logistics. This article will explore the numerous benefits of using distribution centers to help your ecommerce business achieve its goals.

What Is An Ecommerce Distribution Center?

An ecommerce distribution center is a specialized warehouse with fast and efficient order fulfillment processes. This type of storage facility may also be called a fulfillment center. An ecommerce distribution center is the central hub for your order fulfillment process in a specific geographic location.

Why Are Distribution Centers Important For Ecommerce?

Third-party logistics (3PL) companies use these strategically placed distribution centers to speed up delivery and reduce transportation costs. The decentralization of inventory puts your products near the “last mile” of delivery in primary markets, making it easier to offer faster shipping options to more customers.  You can also use ecommerce distribution centers to expand into new territories. With products on hand near untapped markets, you can start advertising in these locations to drive sales.

What Is The Difference Between Distribution Centers And Warehouses?

Distribution centers and warehouses are both storage facilities that fulfill orders, but with some key differences. See the table below.

	Distribution Centers	Warehouses
Function	Ship orders with speed and efficiency	Provides long-term storage and standard order fulfillment
Warehouse Layout	Optimized layouts for fast receiving, storing, and shipping of goods	Simpler layouts with products stored on racks or shelves
Inventory Management	Real-time inventory management systems to optimize inventory levels and order fulfillment	More complex inventory management systems to track stock levels and ensure optimal storage conditions for specialized goods
Order Fulfillment	Automated processes to speed up order fulfillment	May use automation and advanced technologies, but doesn’t rely heavily on them
Locations	Located closer to end customers for quicker shipping and lower transportation costs	Located in areas with lower warehouse rental rates and lower labor costs
Customer Experience	Value-add services such as customized packing or returns processing	Provides warehousing space only

 

What Are The Benefits Of Using A Distribution Center For Your Ecommerce Business?

Outsourcing your warehousing and order fulfillment to a third-party logistics (3PL) provider gives you access to a network of distribution centers. While your 3PL runs your supply chains with maximum efficiency, you can focus on sales, marketing, and designing new products. Imagine how much free time you’ll have when you offload order fulfillment to seasoned professionals. Here are more ways an ecommerce distribution center can benefit your business.

Cost-effective Shipping

Ecommerce distribution centers consolidate shipments to make routes more efficient. Their high shipping volume also allows them to negotiate lower rates with carriers. These strategies help reduce transportation costs resulting in cost-effective shipping.

Advanced Inventory Management

Avoiding out-of-stock items is crucial to prevent lost sales and poor customer experiences. Ecommerce distribution centers use inventory management software to track real-time product availability. This technology helps your business maintain sufficient inventory levels and respond to changes in demand.

Faster Delivery Times

According to Statista, more than 40 percent of US consumers expected their online delivery to take two to three days. Distribution centers located near major markets help you reduce delivery times and associated costs. For example, SEKO Logistics offers True Next-day Delivery to the US, UK, and Australia. Offering next-day shipping can help you attract more customers looking for on-demand services.

Simple Returns Process

A report by IMRG states that a quarter of all consumers return between five  and 15 percent of the items they buy online. Designing a simple returns and exchanges policy is one of the best ways to keep your customer engaged long enough to build brand loyalty. This is especially true if you operate an online fashion brand where the return rate is 26 percent of online purchases. An ecommerce distribution center has the systems to handle returns and exchanges with speed and efficiency.

Plan for Future Demand

Adapting quickly to changes in demand without compromising your logistics helps you capitalize on new business opportunities. Ecommerce distribution services provide flexibility to grow your business without additional physical locations or designing elaborate supply chains. The best third-party logistics (3PL) providers make it simple to scale warehousing and order fulfillment to your new markets.

Improved Customer Service

Ecommerce distribution centers have highly trained staff specializing in shipping, handling returns, and customer service. This level of support helps customers get quick and effective solutions to their problems. Distribution centers often use advanced technology and inventory management techniques to process orders efficiently and accurately. Their use of technology can lead to faster shipping times and fewer errors. Some distribution centers provide 24/7 support to ensure customers receive prompt assistance anytime.

HOW HAS THE GROWTH OF ECOMMERCE IMPACTED THE NEED FOR DISTRIBUTION CENTERS?

Ecommerce has shifted away from in-store sales to an increasing number of products shipped directly to consumers. Some third-party logistics (3PL) companies transformed their traditional warehouses into distribution centers to meet the growing demand for direct-to-consumer sales. Traditional warehouses aren’t fully equipped to handle the order processing speeds required for ecommerce. 

Before this direct-to-consumer shift, traditional warehouses would store various products in one bulk shipment and deliver the goods to a physical retail location. Then, the retailer would sort and display products in their store. Now, 3PLs store retailers' products as individual inventory units in distribution centers.

The increased number of inventory units leads to a phenomenon known as “SKU Proliferation” and requires specialized picking, packing, and shipping processes. Sophisticated 3PLs use in-house technologies to handle the high volume of SKUs and create a smooth order fulfillment process. 

To gain a competitive advantage, some online retailers have tried to improve their “Fulfillment Responsiveness” with physical retail stores acting as small warehouse fulfillment centers. These "Dark Stores" are usually located closer to their customers in congested urban areas and help with faster delivery.

HOW DO ECOMMERCE DISTRIBUTION CENTERS HELP BUSINESSES MANAGE INVENTORY AND STREAMLINE FULFILLMENT PROCESSES?

Technology and automation play a central role in helping third-party logistics (3PL) companies optimize their distribution centers for ecommerce. These technologies require a heavy investment, ongoing maintenance, and continuous innovation to stay ahead of the curve. 

Partnering with a tech-savvy 3PL ensures your business always has access to the latest logistics technology while saving you from the high costs of software development. Take a look below to learn more about how distribution centers optimize the fulfillment process and enhance inventory management.

• Inventory Management Systems: Barcodes and RFID chips help provide real-time tracking of inventory levels to ensure product availability.
• Automation Technologies: Conveyor systems, automated storage, sorting machines, and robotics help reduce labor costs and streamline operations.
• Fast & Accurate Order Fulfillment: Automation technologies help reduce the risk of errors and speed up fulfillment processing.
• Warehouse Management Systems: These systems help distribution centers manage the movement of products—from receiving, storing picking, and shipping. 
• Efficient Layouts: An ecommerce distribution center uses strategic layouts to minimize the time and distance required to move products from one location to another.
• Transportation Management Systems: These systems optimize delivery routes and carrier selection to make transportation more cost-effective.

SEKO has developed best-in-class software solutions to help your business achieve the highest level of operational efficiency. These platforms include MySEKO, SEKO 360, and SEKO IMS. To learn more about these industry-leading technologies, please visit this page: SEKO’s Specialist Technology Systems.

HOW DO ECOMMERCE DISTRIBUTION CENTERS CONTRIBUTE TO THE OVERALL CUSTOMER EXPERIENCE FOR ONLINE SHOPPERS?

It’s not enough to have a great product. Your company needs to create a memorable customer experience. An ecommerce distribution solution provides many value-added services to help you achieve this goal. Below are some of the services you can use to your advantage.

• More Shipping Options: Offer expedited shipping, same-day delivery, and curbside pickup to cater to the different needs of your customers.
• Order Tracking: Technologies like automated order tracking and email notifications inform customers of estimated delivery times.
• Returns & Exchanges: A convenient returns policy makes it easier for customers to engage with your business and develop a strong relationship.
• Customer Support: Some ecommerce fulfillment centers provide customer support 24/7/365 to resolve any issues your business or customers may encounter.

WHY HIRE SEKO FOR ECOMMERCE DISTRIBUTION CENTER SERVICES?

SEKO offers various solutions to help your business optimize its supply chains and improve the customer experience. Some of the best businesses in the world trust SEKO to provide fast and reliable order fulfillment services. We take a client-first approach to understand your needs and design effective solutions around them. Choose SEKO as your 3PL and become a member of our thriving business community. 

• Over 40 Years of Expertise: SEKO has provided businesses of all sizes with first-class logistics solutions for decades. We’re here to help you navigate the complex world of ecommerce logistics.
• Advanced Technologies: SEKO has developed best-in-class software solutions that integrate with the most popular ecommerce platforms to give you complete visibility into your supply chains. These technologies also help enhance your fulfillment process for fast and efficient delivery.
• Global Reach: With our expertise in international shipping, currency exchange, and customs regulations, your global expansion will be a simple process. Our 15 multi-channel distribution centers located across 60 countries allows us to provide you with end-to-end global logistics. 
• Quality Customer Service: SEKO is committed to providing exceptional customer service. Our dedicated team of experts can answer your questions and provide support. We’re committed to giving you the highest care and attention.

Read this case study to learn how SEKO secured a US distribution center for Canyon Bicycles and gave them access to American buyers.