E-fulfillment cost management in omnichannel retailing: An exploratory study

Abstract

The purpose of this study is twofold: investigating how omnichannel (OC) retailers manage e-fulfillment costs and establishing how these costs relate to the evolution of OC retailers' e-fulfillment strategies. Experts in e-fulfillment from 34 European OC retailers across various sectors participated in an exploratory survey. The study's results reveal that although e-fulfillment costs significantly influence the evolution of e-fulfillment strategies, many OC retailers fulfilling online orders from retail stores or traditional warehouses remain unaware of the actual costs of e-fulfillment. Activities other than picking and last-mile delivery, such as inbound logistics and storage, are poorly controlled. Furthermore, complex cost metrics such as cost-to-serve—the total cost associated with delivering a specific order to a specific customer—are predominantly found among OC retailers operating fulfillment centers (FCs) in their e-fulfillment distribution networks. This underscores the need for all OC retailers to accurately assess e-fulfillment costs at multiple levels, which will be crucial for optimizing order preparation, tailoring pricing strategies, and achieving profitability, especially when operating hybrid e-fulfillment strategies where online orders are prepared in multiple facilities. As the largest study on e-fulfillment costs to date, it highlights the importance of advancing e-fulfillment cost management systems among OC retailers and adopting an approach that encompasses all e-fulfillment activities. Future research should delve into the key challenges of developing these systems, considering the operational realities of each OC retailer.