Whether your online retail business is just starting out or getting ready to expand, logistics and eCommerce fulfillment is the very key to making your business a success. And if the German market is on your horizon, read on to discover how eCommerce fulfillment works in Germany.
Here’s what you’ll learn in this article:
- What is eCommerce fulfillment
- What is warehouse-as-a-service
- How eCommerce fulfillment works
- What happens in a fulfillment center
- What does the future of eCommerce look like in Germany
- What’s special about the German consumer
- What are key fulfillment companies in Germany
Let’s jump right in, or… Los geht’s!
What is eCommerce fulfillment?
eCommerce fulfillment is everything that happens after a customer places their order: from storing, picking, packing, labeling, shipping, and to handling returns and exchanges. Basically, it’s about fulfilling the order and making sure the customer receives their order on time and in tip-top shape.
In short, there are three ways to manage eCommerce fulfillment.
1) Self-fulfillment
As the name suggests, with self-fulfillment the merchant manages order fulfillment on their own. They’ll store the inventory, purchase packing materials, pick and pack the goods, ship them and collect returns.
Self-fulfillment is best suited for small businesses with low order volumes. The bigger the volume grows, the more time it takes to process all orders. Not to mention the storage space required to house the growing inventory.
Another way to go about self-fulfillment is to invest in proper warehouse facilities and train a professional in-house fulfillment team. But that is probably out of reach for most small and midsize merchants.
2) Dropshipping
In dropshipping, the merchant doesn’t hold any inventory. Once the customer places an order, the drop shipper contacts the supplier and they ship the goods directly to the customer.
The upside of dropshipping is its low-risk level. It’s an easy way to kickstart your online business without having to commit to large inventories.
But in the long term, drop shipping can be restrictive for the merchant. You can’t directly control the inventory and branding choices might be limited. The parcel comes from the supplier so it might not match your brand.
3) Third-party logistics (3PL)
Despite logistics in the name, third-party logistics refers to the entire process of outsourcing not only your eCommerce logistics but the whole fulfillment.
In this model, a third-party fulfillment company handles the storing, packing, shipping, and returns on the merchant’s behalf.
If you don’t want to outsource your whole fulfillment operations, you can make a deal with a 3PL company to only take over parts of the fulfillment process, like inventory and storing, and still ship yourself.
3PL becomes an attractive option when the volume of the eCommerce business grows. Unless the online business is massive, it might not make sense to invest in warehouses and in-house logistics teams. A third-party fulfillment center can take care of that for you.
What is warehouse-as-a-service?
You might have come across the term warehouse-as-a-service (WaaS). It can be used interchangeably with 3PL or it can refer only to a part of it.
Warehouse-as-a-service is a model where the warehouse supplier either provides just the storage (warehouse) or extends their operations to cover the whole fulfillment process (which would be the same as 3PL). Browsing the internet, you might see these terms mix. It’s not always easy to make the distinction between them.
The idea behind warehouse-as-a-service is to challenge the traditional and rigid warehouse leasing models where a merchant would have to commit to renting space for several years ahead. But this doesn’t fit the flexible nature of modern eCommerce.
So, in the WaaS model, merchants could scale up and down on their warehousing needs without long-term commitments. When business is booming, storage capacity adapts – and vice versa if things slow down. All with a ‘pay as you go’ subscription model.
How do fulfillment services work?
Typically, fulfillment is more linked to B2C eCommerce, but there are fulfillment companies that cover B2B sales and larger order volumes.
eCommerce fulfillment can work in various ways. As a merchant, you can outsource the whole fulfillment process or opt only for partial service. That’s up to you and your 3PL partner to decide and negotiate.
But, generally speaking, fulfillment services can include any, or all, of the following:
- Warehouse management system
- Inventory management
- Inventory storage
- Specialty storage (e.g. cold chain storage)
- Picking
- Packing materials
- Packing
- Printing shipping labels
- Shipping
- Returns management
- Customer service
So… what actually happens in a fulfillment center?
A fulfillment center is an active hub, unlike a traditional warehouse which mainly just houses the stock.
Of course, inventory is stored in a fulfillment center. But it does much more than that.
A good warehouse management system (WMS) is crucial to make sure operations run smoothly and efficiently. The management system provides real-time information about the inventory and optimizes the task flows and makes sure the fulfillment team’s time is spent efficiently.
When a new order comes in, the picker is alerted. Once the item is picked off the shelf, it’s packed. This might include branded packaging, depending on what has been agreed upon between the merchant and the fulfillment provider. Shipping labels are printed and the parcel is prepared for shipping. And off it goes!
Depending on the fulfillment company, shipping can be carried out either by them or they might work with a network of courier partners.
And if the customer chooses to return the package, the returns are shipped back to the warehouse and processed there.
eCommerce in Germany keeps growing
According to Statista, eCommerce in Germany is expected to grow in the coming years. The year 2022 saw a slight slowdown in growth since the 2020-2021 pandemic heyday, but the trend for 2022-2027 is still looking upward and strong at an estimated annual growth rate of 12.83%.
This makes the German market highly attractive to merchants. Germany is the largest economy in Europe, yet its eCommerce is lagging behind the UK and France. There’s still a market share to be grabbed.
German consumer values trust
According to Waredock, convenience and better prices attract German consumers to shop online. No surprises here.
But what’s more pronounced in the German market particularly, is the role of trust in online shopping. It can make or break an online store’s success.
The German consumer values transparency, easily accessible information, hassle-free returns, and safe payment methods. According to Waredock, the preferred payment methods in Germany are:
- PayPal or similar
- invoice
- debit or credit card.
So, to make your online store a success in Germany, make sure your store is equipped with the right payment options. Offer shipping information well before checkout, send order confirmations and receipts promptly to your customer’s email and provide a tracking code for the parcel. Because we all like to see where our packages are traveling, don’t we?
eCommerce fulfillment in Germany – key 3PL companies and warehouses
From the perspective of eCommerce fulfillment and 3PL, Germany is a lucrative market in Europe thanks to its central location on the continent. A good example is the tech giant Amazon which has built a dense fulfillment center network in Germany and is still expanding it.
If you choose to outsource your fulfillment processes in Germany, you have plenty of 3PL providers to pick from. Some of the main players in the German 3PL and warehouse market include:
- DHL
- Dachser
- DB Schenker
- Amazon (Fulfillment by Amazon, FBA)
- Portica
- Lufapak
- Fiege
- byrd.
German logistics partners ship and deliver fast
When it comes to online shopping, time is of the essence. In Germany, thanks to the extensive fulfillment infrastructure, deliveries can be expected within 1-2 business days. For example, DHL’s and Amazon’s standard shipping times within Germany are 1-2 days.
And if you’re willing to pay more (or, that is, your customer is), you can have the package at your customer’s door even on the very same day.
Frequently asked about eCommerce fulfillment in Germany
Does Amazon have fulfillment centers in Germany?
Yes, Amazon has multiple fulfillment centers in Germany and the number is growing.
What is the largest 3PL company in Germany?
There’s no simple answer, but some of the main players in the German 3PL market include:
- DHL
- Dachser
- DB Schenker
- Amazon
- Portica
- Lufapak
- Fiege
- byrd.
Does Shopify offer fulfillment?
Yes, Shopify Fulfillment Network offers eCommerce fulfillment. However, Shopify fulfillment is only available for stores fulfilling in America and Canada, so it’s not yet available in Germany.
——
About the Author:
Ella-Roosa Koivupuro is a marketing professional with a background in eCommerce and tech. She provided this article on behalf of Pliant, a modern business credit card solution that makes card management, spend control, and reporting a breeze for companies.
