Ecommerce Order Processing: Steps, Models, Software & Best Practices

The ecommerce landscape has evolved from a convenience-driven alternative to brick-and-mortar shopping into a dominant force in global retail. In fact, global ecommerce sales are expected to surpass $7 trillion by 2025, accounting for over 24% of total retail sales, according to Statista. Behind the sleek interfaces of online storefronts and the instant gratification of “Buy Now” buttons lies a critical engine that keeps everything moving: order processing.

Whether you're running a direct-to-consumer (DTC) brand, managing a marketplace storefront, or fulfilling B2B ecommerce orders, the speed and accuracy of your order processing system can make or break - customer satisfaction. From the moment a customer clicks "checkout" to the time a package lands at their doorstep, a complex series of steps kick into motion. And every one of those steps, from inventory checks to order picking, packing, shipping, and status updates, falls under the umbrella of ecommerce order processing.

In this blog, we'll break down what order processing in ecommerce really means, how it works, and why optimizing it is key to scaling your business in 2025 and beyond. We'll also explore real-world examples and best practices that high-performing ecommerce brands use to process orders faster, cheaper, and with fewer errors.

What Is Order Processing in Ecommerce?

Order processing refers to the end-to-end workflow that ensures customer orders are received, verified, fulfilled, and shipped accurately and efficiently. It's a foundational part of the ecommerce fulfillment process that bridges the gap between the customer clicking “Buy” and receiving their order at their doorstep.

In ecommerce order processing, the steps typically include:

• Order receipt: Capturing the order from the online storefront or marketplace.
• Inventory check: Verifying stock availability in real time.
• Picking: Retrieving the ordered items from inventory.
• Packing: Packaging items securely and preparing shipping labels.
• Shipping: Dispatching the order via a chosen carrier.
• Tracking and confirmation: Sending tracking details and delivery confirmation to the customer.

Done right, online order processing increases operational efficiency, minimizes errors, reduces returns, and enhances customer satisfaction—all critical for winning in today's hyper-competitive ecommerce environment.

Key Order Processing Models in 2025

Ecommerce businesses in 2025 have access to a range of fulfillment strategies tailored to their size, growth stage, product mix, and customer expectations. The model you choose for order processing in ecommerce directly impacts your bottom line, brand reputation, delivery timelines, and scalability.

Here’s a closer look at the three most widely used models today:

1. In-House Order Processing

In this model, businesses handle all aspects of order fulfillment internally—from inventory storage to picking, packing, and shipping—within their own warehouses or fulfillment centers.

Why brands choose it:

• Total control over inventory management, order accuracy, packaging, and the unboxing experience.
• Enables custom branding and specialized kitting or personalization.
• Beneficial for businesses with predictable volume, high-margin products, or unique SKUs requiring handling care.

Examples:

• A premium cosmetics brand shipping influencer kits with hand-written notes.
• A DTC apparel company managing high-SKU variation and branded packaging.

Trade-offs:

• High upfront costs for warehouse space, warehouse management systems (WMS), and staff.
• Operational complexity increases as order volume grows or expands across geographies.
• Requires strong tech integration to ensure inventory visibility and shipping efficiency.
• Scaling up labor during holiday season requires additional investment in resources

2. Third-Party Logistics (3PL)

With this model, ecommerce companies outsource their fulfillment operations to a third-party logistics or 3PLs provider that manages warehousing, order processing, and shipping on their behalf using their expertise, resuorces and advanced 3PL wms software.

Why brands choose it:

• Scalable infrastructure without investing in physical space or labor.
• Access to multiple warehouse locations for faster, cheaper shipping.
• Leverage fulfillment expertise and value-added services like returns handling or international ecommerce shipping.

Examples:

• A fast-growing supplement brand using a 3PL to ship orders across North America.
• A mid-size electronics seller working with a 3PL to enable 2-day delivery across regions.

Trade-offs:

• Less control over packaging presentation and direct customer experience.
• Dependence on 3PL’s service quality and tech stack integration.
• May involve setup fees or monthly minimums, especially for enterprise-level providers.

3. Dropshipping

In the dropshipping model, businesses don’t hold inventory. Instead, when a customer places an order, it is forwarded to a supplier or manufacturer who ships the product directly to the end customer. According to Fundera, dropshipping is the preferred fulfillment model for an estimated 33 percent of online stores. 

Why brands choose it:

• Zero inventory risk and minimal capital investment.
• Easy to launch and test new product lines or niche markets.
• Flexible and low-maintenance for small teams or side businesses.

Examples:

• A print-on-demand t-shirt store selling through Shopify.
• A lifestyle brand testing trending gadgets without committing to bulk stock.

Trade-offs:

• Little control over shipping speed, stock availability, and packaging.
• Vulnerable to supplier errors, delays, or quality issues.
• Margins are typically lower, and brand differentiation is harder.

How Does Order Processing in Ecommerce Work?

Order processing in ecommerce is a multi-step workflow that transforms a customer’s click into a successful delivery. Every stage—from capturing the order to shipping the product—needs to run smoothly to ensure a fast, accurate, and cost-effective fulfillment experience.

Here’s a step-by-step look at how modern ecommerce businesses process orders in 2025:

1. Order Placement

The journey begins when a customer places an order on an ecommerce platform—this triggers the order fulfillment process. The system immediately captures key data: product SKUs, customer information, payment confirmation, and shipping details.

A smart order processing system can:

• Route orders to the most optimal fulfillment center based on location and stock availability.
• Sync in real time with warehouse management systems to prevent stockouts or duplicate orders.
• Flag potential issues like incorrect addresses or failed payments early in the process.

Pro tip: Order errors at this stage are costly. They not only increase order fulfillment costs, but also lead to delayed deliveries and poor customer satisfaction. According to Shopify, 80% of customers are unlikely to return after just one negative fulfillment experience.

2. Picking

Once an order is placed, it’s time for Warehouse order Picking—locating and retrieving the right products from inventory. This step is crucial for speed and accuracy.

In a well-run warehouse, pickers use digital picklists generated by a complete warehouse management platform, which helps them find products quickly and reduce walking time.

Common picking strategies include:

• Piece Picking: Picking one order at a time—ideal for custom or high-value orders.
• Batch Picking: Gathering items for multiple orders in a single trip—improves speed in high-volume environments.
• Zone Picking: Assigning staff to specific warehouse zones—orders are assembled as they pass through each zone.
• Wave Picking: Grouping picks by shipping deadlines or carrier cutoffs—efficient for time-sensitive deliveries.

Order picking alone can account for up to 55% of warehouse labor costs, according to APS Fulfillment. That makes optimizing this step essential for reducing operational expenses.

3. Sorting

After picking, items are organized to ensure they match the right orders and delivery routes. Sorting helps streamline the next stages of ecommerce fulfillment, especially when handling multi-item orders or bulk shipments.

Different sorting strategies include:

• Order-based Sorting: Each order is kept as a unit—best for complex or custom orders.
• Item-based Sorting: Similar SKUs are grouped together—ideal when using batch picking.
• Destination-based Sorting: Items are grouped based on shipping region or warehouse zone.
• Carrier-based Sorting: Products are sorted by courier or delivery method—useful when multiple logistics partners are involved.

Efficient sorting reduces mis-ships, improves delivery speed, and helps lower order fulfillment costs

4. Packing

Next comes packing—the point where logistics meets branding. Staff carefully package the sorted items using appropriate materials that balance protection, sustainability, and cost.

Key steps in the packing stage:

• Choosing the right box size to minimize dimensional weight charges.
• Using eco-friendly materials to meet rising consumer expectations.
• Weighing packages and printing accurate shipping labels.

Packaging is not just functional—it’s also part of your brand’s first physical impression. Branded, thoughtful packaging can elevate the unboxing experience and drive repeat purchases.

5. Shipping

Finally, the packed order is handed off for delivery. Businesses choose a shipping carrier based on delivery speed, destination, cost, or customer preferences.

At this stage:

• Real-time tracking information is generated and shared with the customer.
• The warehouse management system updates the order status and closes the fulfillment loop.
• For brands managing high volume, consolidating shipments by region can reduce both delivery timelines and order fulfillment costs.

Stat to watch: In 2023, 47% of U.S. consumers abandoned carts due to extra fees like shipping or taxes (Statista). In 2025, transparent shipping options and flexible delivery speeds remain essential for conversion.

Order Processing Factors

Businesses need to consider the nature of the product, order volume, packaging requirements, productivity goals, and seasonality to determine the right approach to order processing in ecommerce. Implementing rule-based order processing allows businesses to create a tailored workflow aligned to specific business needs and scenarios.

• Nature of the Product: Fragile or large items require special handling and packaging while perishable goods like food items demand faster processing and specialized storage, impacting the entire order processing workflow. High-value items might necessitate additional security measures during processing and shipping.
• Volume of Orders: Businesses with a high volume of orders may benefit from automated systems and batch picking strategies to manage the workload efficiently. For smaller operations, simpler methods like piece picking and manual sorting will be more cost-effective.
• Packaging Requirements: Businesses need to choose between standard packaging and customized or branded packaging, depending on the brand and business model. For companies that prioritize sustainability and zero waste, the choice of packaging materials needs to be aligned with an eco-friendly future.
• Productivity Goals: Order processing strategies to maximize efficiency, reduce processing time, and optimize labor use should be aligned with business goals. If needed, businesses should train the warehouse labor to ensure the workers can work in tandem with the available technology and productivity doesn’t suffer as a result.
• Seasonality: During peak times like holidays, businesses need to adjust operational strategies and resource allocation to handle increased order volumes. In slower periods, a more cost-effective approach may be suitable.

What is an Order Processing Software?

Order processing software helps businesses automate and manage various stages of the order fulfillment cycle in ecommerce. Order management systems typically integrate several functions – from receiving and processing orders, through inventory management, to shipping and delivery tracking. Mordor Intelligence estimates the multichannel order management market size to reach USD 3.27 billion in 2024, with significant growth in ecommerce and retail segments.

Order processing software tracks the customer purchasing journey from end-to-end — from order placement to delivery, including processing payments and handling returns or exchanges. It coordinates with shipping carriers, calculates shipping costs, and provides tracking information. Modern order processing systems can maintain customer data and order history and generate reports on sales, order status, inventory levels, and other key metrics for informed decision-making.

Five Benefits of Using Order Processing Software

Order processing software oversees the order fulfillment lifecycle from end to end to introduce significant benefits to businesses. These benefits include enhanced operational efficiency, improved inventory management, accurate and reliable order processing, enhanced customer satisfaction, and cost-effectiveness coupled with data-driven insights.

1. Enhanced Operational Efficiency

Order processing software streamlines order fulfillment by automating tasks such as order entry, picking, sorting, and shipping. It reduces the time and labor involved in processing customer orders, leading to faster order turnaround and boosting overall productivity and operational throughput.

With m-commerce and omnichannel fulfillment across social media and online marketplaces gaining ground, a centralized order processing system allows businesses to track orders across multiple channels. It can consolidate customer and order data to track order routing and inventory turnover ratio and deliver a consistent and cohesive omnichannel retail experience.  

2. Improved Inventory Management

According to Package X, 43 percent of small businesses are not tracking their inventory. Order processing software allows businesses to track and manage inventory levels in real-time, dramatically improving visibility into the warehouse and operations. It analyzes demand, selling patterns, and key performance indicators to anticipate stock levels and prevent issues like overstocking or stockouts. 

Businesses can leverage order processing software to monitor inventory levels across multiple sales channels and use the consolidated data to maintain adequate inventory. A centralized approach provides the granular visibility and control necessary to automate inventory management tasks like updating customer information, adding carrier data, and maintaining optimal stock levels.

3. Accurate and Reliable Order Processing

Order processing systems enable businesses to automate traditional pen and paper-based tasks and reduce the likelihood of human error in order processing. The software ensures that orders are processed accurately and consistently, reducing the chances of errors such as incorrect item picking or shipping. 

Order processing software improves the productivity of warehouse workers by guiding them to the right products, supporting various picking and packing strategies, and creating smart picklists. It provides continuous oversight for multichannel inventory management — this reliability is key to minimizing ecommerce returns, exchanges, and customer dissatisfaction.

4. Enhanced Customer Satisfaction

Order processing software provides transparency and real-time updates to customers regarding their order status. This level of communication, combined with real-time visibility into the order status, improves customer trust and satisfaction. 

With integrated order processing systems, businesses can handle specialized order scenarios like back orders and split orders with efficiency. Fast consolidation of returns enables businesses to process refunds or exchanges faster and reallocate inventory to accommodate the returned items.

5. Cost-effectiveness and Data-driven Decision Making

Software-driven automation streamlines order processing workflows, leading to notable cost savings by reducing labor and operational expenses. Advanced analytics and reporting capabilities provide comprehensive insights into various aspects such as sales performance, inventory levels, order fulfillment efficiency, customer service quality, and financial health. Sales reports reveal trends and customer preferences, inventory analytics optimize stock management, fulfillment metrics highlight process efficiencies, and financial reports offer crucial fiscal insights.

These insights feed data-driven decision-making to strategically manage inventory, tailor marketing efforts, streamline supply chain operations, and improve financial planning. According to research by Bain & Company, 56 percent of retail and consumer goods companies plan to ramp up investments in predictive planning and demand forecasting. Insights into customer behavior and feedback further help enhance customer service and improve retention. 

Five Best Practices for Effective Order Processing System

By combining the right software and hardware, automating key processes, and ensuring seamless integration with ERP and WMS, businesses can significantly enhance the efficiency and accuracy of their order fulfillment operations. These practices not only streamline processes but also contribute to better customer service and overall business growth.

1. Implement the Right Order Management Software

Select the order processing software that aligns with your business size, complexity, and specific needs. Look for features like real-time inventory tracking, integration support for your existing infrastructure, and customer management capabilities. 

Train your staff and warehouse labor to support ground operations and improve productivity. Your order processing system should be capable of tracking and refining existing workflows in real time to align your output with business objectives.

2. Leverage the Latest Hardware Technology

Use the latest hardware technology like barcode scanners, RFID tags, and mobile devices to speed up processes like picking, inventory counting, warehouse labeling, and shipping. Ensure that hardware devices are fully integrated with the order processing software for seamless data transfer and real-time updates. 

3. Automate the Pick, Pack, and Ship Process

Implement tools and technologies like automated conveyor systems, sorting machines, or robotic assistants to streamline the pick, pack, and ship process. Warehouse automation reduces errors and increases efficiency, allowing staff to focus on more critical tasks. 

Order processing systems can integrate with warehouse hardware and create smart picklists, streamline communication, and trigger tasks for warehouse workers. It can consolidate carrier information to recommend the best shipping option based on the product, destination, package weight, and size.

4. Integrate with Enterprise Resource Planning (ERP) Systems

Ensure that the order processing system is seamlessly integrated with your ERP system. ERP integration provides businesses with a unified view of business operations across all departments - from sales and inventory to finance and customer service. 

Integration ensures consistent and accurate data across all business functions and multiple sales channels to streamline order fulfillment and improve the overall customer experience.

5. Invest in a Warehouse Management System (WMS)

An ecommerce WMS can greatly improve warehouse operations and reduce operating expenses by optimizing space utilization, improving inventory accuracy, and streamlining picking and packing processes. Ensure the WMS is integrated with your order processing system for real-time data exchange and enhanced coordination between warehouse activities and order fulfillment.

Hopstack for Faster Order Fulfillment

Hopstack revolutionizes the pick, pack, and ship operations for today’s e-commerce companies, transforming order fulfillment into an intelligent, streamlined, and highly efficient process. 

Hopstack’s WMS seamlessly integrates with warehouse hardware like handheld scanners and automated robots and supports workers with smart picklists and guided picking workflows to ensure every pick is precise and efficient. We optimize the packing process and shipping process to minimize time and material usage and ensure compliance with instant carrier information, intelligent rule-based carrier selection, and cost-effective order consolidation. 

Hopstack's performance analytics and customizable workflow configurations enable businesses to not only boost their operational efficiency but also gain in-depth insights for continuous improvement. Contact us to schedule a demo and discover how Hopstack can elevate your e-commerce fulfillment operations to new heights of accuracy and efficiency.

Frequently Asked Questions (FAQs)

1. How does order processing impact customer retention in ecommerce?‍

Order processing directly influences delivery speed, accuracy, and customer satisfaction—all of which affect retention. A delayed or incorrect order can damage trust and lead to churn, while a fast and seamless experience encourages repeat purchases. In fact, 69% of consumers are less likely to shop with a retailer again if an order isn’t delivered within two days.

2. Can automation reduce order fulfillment costs without sacrificing accuracy?

Yes. Automation tools like barcode scanning, smart conveyor systems, and integrated warehouse management systems can significantly reduce manual errors, labor costs, and fulfillment time. This improves accuracy while lowering long-term order fulfillment costs through optimized labor allocation and faster turnaround.

3. How does multi-warehouse fulfillment affect the order processing workflow?

Multi-warehouse fulfillment adds complexity but increases speed and cost efficiency. The order processing system must intelligently route orders based on inventory availability, delivery location, and shipping method. Without proper routing, businesses risk increased shipping costs and delayed deliveries.

4. What are some hidden costs in order processing that ecommerce businesses often overlook?

Some overlooked costs include packaging inefficiencies (using boxes that are too large), carrier surcharges due to dimensional weight, labor inefficiencies during picking and packing, and inventory holding costs from poor forecasting. These often inflate order fulfillment costs without clear visibility unless tracked via robust reporting tools.

5. How does order processing tie into returns management?

A well-structured order processing system doesn’t stop at delivery—it also enables smooth returns. Pre-integration of return labels, tracking, and restocking processes ensures returns are processed efficiently, which helps recover revenue and inventory faster while improving the overall customer experience.

6. What KPIs should be tracked to measure ecommerce order processing efficiency?

Key performance indicators include:

• Order cycle time
• Picking accuracy rate
• Order accuracy rate
• Cost per order
• On-time shipment rate
• Returns due to fulfillment errors

These KPIs help benchmark performance and highlight areas where your warehouse management systems or labor strategies may need adjustment.