The Boom of Fulfillment Centers as a Logistics Solution
Estimated reading time: 7 Min
Urban growth shows no signs of slowing. By 2030, the global population is expected to reach 8.5 billion people, more than 5 billion of whom will live in major cities—a scenario that requires broad capacity across economic sectors to meet demand through fast, efficient service.
Building on this and adapting to new online consumption habits, logistics has made significant advances in recent years in technology, delivery times, and shipping methods, giving rise to new models such as Fulfillment Centers. Do you know what these facilities do? If you run an ecommerce business, you can't miss this article.
The best ally for urban logistics
Fulfillment Centers, or distribution centers focused on ecommerce, have given logistics a major boost by turning large spaces into agile, automated facilities where picking and dispatch times are shortened thanks to highly efficient inventory, picking, and distribution techniques. These allow faster location and preparation of a high volume of orders with few SKUs, as online stores typically require.
Traditionally, these distribution centers have been located on the outskirts of major cities, which, by increasing distance from the end customer, has posed a real challenge for ecommerce businesses in terms of delivery times. This is especially true when we consider the following figures published by AMVO:
- 53% of ecommerce users consider delivery speed an influential factor in their purchase decision.
- 38% will not buy from a company again after a poor delivery experience.
- 61% will not even complete the purchase and will abandon their cart if shipping fees are too high.
Based on this landscape, the logistics sector has been developing new ways to make deliveries more efficient every day. Companies like Cubbo, for example, have introduced innovative alternatives such as urban Fulfillment Centers—large facilities located in major cities that function as fulfillment centers for ecommerce, giving urban logistics in Mexico a major boost. These spaces are where the magic of connection happens. Their location allows them to respond quickly to order delivery and connect customers with their products in record time.
Delivery speed and experience, along with free or very low shipping rates, are essential factors in online purchase decisions. More than 50% of consumers rank these points as decisive when buying a product. And these are precisely the aspects that have made Fulfillment Centers the best logistics allies, thanks to their delivery efficiency that speeds up every stage, customer service, and more competitive shipping rates resulting from economies of scale—where higher volume means lower delivery costs (Cubbo saves its clients between 5% and 39% on logistics costs).
What does a Fulfillment Center do for your ecommerce business?
Logistics plays a decisive role in customer satisfaction, where retention is increasingly difficult. We face more demanding consumers who want everything better and faster. Fulfillment Centers have emerged to help ecommerce businesses with this challenging task, relying on optimization and the benefits of technology to streamline operations, organize processes, improve management, reduce errors, and lower costs.
What is their role? The Fulfillment Center handles all logistics related to your ecommerce business: storage, order fulfillment, order receipt and processing, packaging, preparation, logistics customer service, exchanges, and returns. Your only responsibility will be to sell—your fulfillment provider will handle everything else.
That's how simply ecommerce businesses around the world are transforming their logistics! Leaving the headaches associated with this process in the past and boosting customer satisfaction through a better shopping experience.
Want to learn in detail what happens at each stage of the fulfillment process? Visit our article Fulfillment: The Solution for Customer Loyalty in Ecommerce
How does your online store compare to the competition?
- Speed
- Support during the process and after the sale
- The best shipping prices
If you have gaps in the points above and know you need to improve to drive business growth, but you're not an expert and don't have the resources to deploy operations efficiently, don't hesitate to look for an expert in ecommerce fulfillment. The world's largest companies have grown thanks to working with strategic partners.
If your order volume reaches or exceeds 100 per month, it's time to consider hiring these services. When choosing a Fulfillment Center for your ecommerce business, make sure it meets the following characteristics:
1. Ecommerce specialization: a traditional logistics provider won't be the right fit to handle your operation.
2. Savings and efficiencies: working with a Fulfillment Center shouldn't require major investments to start your ecommerce delivery process. On the contrary, it should mean significant savings, since you won't need to hire staff or build infrastructure to develop it—the fulfillment provider will make these resources available to you.
3. No upfront payments: these should not be a condition to start operations. Ideally, your fulfillment provider should not request advance payments for its service. The amount charged should mainly correspond to storage and orders managed while operations are running.
4. No fixed costs: you shouldn't pay the same for 100 orders as for 300. Your operation shouldn't be conditioned by a fixed fee. In this case, the ideal is to have variable costs according to your ecommerce activity—there will be months with more sales and months with fewer, and your fulfillment provider should charge you based on the orders it manages.
Some providers use aggressive billing systems—they charge for integration, for each process, for each user enabled on the platform, etc. Avoid this type of contract and lean toward those that offer more competitive rates and added value.
5. User-friendly technology: look for a Fulfillment Center that provides easy-to-use technology. It's important that you can integrate with their platform quickly and effortlessly, so your entire team can have control and visibility of operations with a single click. Technology should be an ally for your ecommerce business, not a headache that causes delays and burnout.
6. Full operational visibility: at all times and in real time, you should be able to know the status of each process and maintain total control and visibility of operations.
This visibility should also extend to the end customer, allowing them to know their order status through text notifications, tracking, exchanges, and returns. Many Fulfillment Centers offer this service for free. The goal is for you to differentiate yourself and give your customer a great experience with their order, thanks to your responsiveness and ability to follow up.
7. Be a provider with the necessary guarantees to build long-term relationships, provide security for your products in their facilities, and have the track record and experience to manage your operation efficiently while you focus on growing your business.
8. No mandatory contract terms: if you're not comfortable with the service, you should be able to end the relationship at any time.
9. Win-win relationship characteristics: your growth goals should be aligned with the service your fulfillment provider delivers. Your relationship with this provider should allow you to save money on logistics services and inventory costs, quickly increase your fulfillment rate, and boost customer satisfaction with the best support service.
The Fulfillment Center should be able to provide its service at scale for any type of company—if you're an SME now, it should be able to handle your operation when you grow and your order volume increases.
10. Competitive delivery times: as we've seen, delivery time is one of the most important factors for consumers. Your provider should offer delivery times that allow you to stand out from the competition. Fulfillment Centers like Cubbo offer Same Day delivery in Mexico City and an average of 1.3 days nationwide. 73% of Mexican ecommerce businesses deliver between 48 and 72 hours after the order is placed (according to AMVO studies).
If you want to learn more about the points above in detail, download the following guide we have for you: 3PL Checklist
Leave operational pain behind
The speed at which companies are adapting to online sales is incredible. Every day there will be more channels and digital buyers, making the role of players like Fulfillment Centers increasingly relevant. If you don't modernize your logistics processes, you risk falling behind on your customers' shopping lists.
In Mexico, adoption of these services by ecommerce businesses has been developing gradually, and although there is still a long way to go, compared to more advanced economies like the United States—where storage service adoption approaches 80% versus 40% of Mexican ecommerce businesses—we're on the right track.
During the third quarter of this year, demand for specialized warehouses grew 62% in Mexico (according to Lamudi data), all as a consequence of ecommerce growth during the pandemic—a trend that emerged in the country's main cities: Mexico City, Tijuana, Monterrey, Querétaro, Guanajuato, Saltillo, Guadalajara, Puebla, Mexicali, San Luis Potosí, Aguascalientes, and Tecate, known as the most important industrial zones for Mexicans.
Every day more companies understand that to grow, they need to delegate their logistics operation to an expert who, thanks to their capacity and experience, can meet current demand that will only become larger and more demanding.
If you're looking to improve your operation and make the most of the benefits of a Fulfillment Center, discover how fulfillment in Mexico City can help you optimize delivery times and elevate your customers' shopping experience.
Looking for a Fulfillment Center for your ecommerce business? Don't hesitate to contact us—grow your business while we operate for you. Just click here
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