Fulfillment is one of the highest costs for your eCommerce business. Finding ways to reduce order fulfillment costs is a great way to improve your profitability. However, affordable fulfillment isn’t just about pick and pack fees or shipping costs. It’s vital to look at the total fulfillment value to understand the actual costs and cost savings of your eCommerce fulfillment.
Know your options for fulfillment services
ECommerce companies have more choices for order fulfillment every year. Here are some of the most popular options for affordable fulfillment and the pros and cons of each. Which option provides the best total fulfillment value for you will depend on your eCommerce business model.
Pick and pack your own orders
Many online retailers start out doing their own pick and pack fulfillment. Even though most companies eventually outsource their fulfillment, the initial experience is valuable. When you understand your order fulfillment processes thoroughly, you’re in a better position to oversee a third-party fulfillment company. However, self-fulfillment may not be the best choice for affordable fulfillment as your business grows.
Pros of self-fulfillment:
- Total control over your fulfillment operations stays in-house, so you can ensure that orders meet your quality standards.
- You can add personal touches, like a thank you note to each customer.
- There are no compromises to meet the requirements of fulfillment partners.
- You can experiment with different fulfillment options to find out what works best for you.
Cons of self-fulfillment:
- Fixed overhead means you may pay for warehouse space you don’t need.
- If you outgrow your warehouse space, it can be a challenge to expand.
- You manage all the headaches of fulfillment, including hiring and managing warehouse staff.
- Fulfillment can take time and attention from other core functions of your business, including product development, marketing, and business planning.
- A warehouse near your business may not be the optimal location for eCommerce fulfillment, particularly if you sell to customers across the U.S.
Self-fulfillment might be a good option for your business at the beginning. As you grow, however, it makes sense to outsource your fulfillment. Happily, you have many options to choose from for third-party fulfillment services.
Fulfillment by Amazon (FBA)
Amazon is an essential eCommerce marketplace for online retailers. If you sell on Amazon, you can use Fulfillment by Amazon (FBA) to ship your orders. Amazon has an impressive logistics operation, but you may be disappointed if you turn to Amazon FBA for affordable fulfillment.
Pros of using Amazon FBA:
- FBA means your product listings are eligible for Amazon Prime shipping, which can increase your sales.
- Your customers get the benefit of fast shipping and excellent customer service from Amazon.
- Amazon’s eCommerce platform is your one-stop shop for sales and fulfillment.
- Fulfillment by Amazon will also ship orders placed on other eCommerce platforms.
Cons of using Amazon FBA:
- You don’t have control over where Amazon warehouses your products. This can sometimes lead to sales tax or other issues.
- Amazon limits warehouse space for FBA sellers during the holidays, so you might have difficulty avoiding backorders.
- During the 2020 pandemic, Amazon warehouses were so overwhelmed by the increased volume of orders that they stopped shipping all but essential items. This stranded many FBA sellers and their customers.
- Orders ship in Amazon boxes, so you lose the opportunity to expand brand awareness with branded shipping boxes.
- Fulfillment by Amazon fees can add up; the service ends up being pricey for some sellers.
- Amazon has been known to copy popular items and will often rank its own items higher than those from marketplace sellers. With Amazon FBA, you are sourcing a vital service from a competitor.
The bottom line on Fulfillment by Amazon is that many sellers get a lot of value from the service, but it also has significant drawbacks. Fortunately, you can offer Prime shipping and still control your fulfillment with Amazon seller Prime fulfillment.
Shopify is the most popular eCommerce platform, hosting more than a million online shops. Sellers can now use the Shopify Fulfillment Network for their order fulfillment services as well.
Pros of Shopify Fulfillment Network:
- Manage fulfillment in the Shopify dashboard.
- You control where your inventory is warehoused; the app helps you figure out how to distribute your stock.
- Ship in your branded packaging.
Cons of Shopify Fulfillment Network:
- This may not be a good choice if you rely on omnichannel fulfillment since you can only ship from Shopify channels.
- Shopify doesn’t provide the fulfillment services itself. It works with a network of 3PLs, so you aren’t directly connected with your eCommerce fulfillment providers.
- You may need to upgrade your Shopify account to access the order fulfillment features you want, which can come with a substantial cost increase.
Shopify is one of the best eCommerce platforms, but Shopify Fulfillment Network isn’t the right choice for many eCommerce businesses. If you sell only on Shopify, however, this could be a good option for you.
FedEx is one of the top shipping carriers in the U.S., offering a range of services from same-day delivery to freight shipping. The shipping company’s fulfillment arm, FedEx Fulfillment, leverages that expertise for its 3PL services.
Pros of FedEx Fulfillment:
- Returns are simple. That’s vital since an excellent return policy is one of the best ways to convince new customers to buy from your online store.
- It facilitates omnichannel selling, shipping orders from all your eCommerce platforms.
Cons of FedEx Fulfillment:
- You have to ship all your orders via FedEx.
- The pricing can vary, making it hard to predict your fulfillment costs.
FedEx is a logistics expert. If you want to bundle your eCommerce fulfillment and shipping together, this is an option to consider.
Third-party fulfillment company
The most popular outsourced order fulfillment option is a third-party fulfillment company or 3PL. Your 3PL will provide a wide array of services, including receiving, warehousing, pick and pack fulfillment, and shipping. In addition, many 3PL companies often offer valuable services such as kitting.
Pros of a third-party fulfillment company:
- You have the flexibility to use more or less warehouse space as your business cycles demand.
- Storage and fulfillment pricing are flexible. You pay only for the warehouse space you use.
- Your eCommerce fulfillment is done by professionals who know how to pack orders, so they arrive safely.
- By working directly with your 3PL, you have control over your fulfillment services.
- You can choose the number and location of the warehouses you use to serve your customers best.
- Omnichannel selling is easy since many 3PLs offer integrations with a wide range of eCommerce platforms.
- You can choose a specialized fulfillment center that handles other products similar to yours. That will give you the best fulfillment service, particularly if your merchandise requires special handling.
Cons of a third-party fulfillment company:
- You have to manage the fulfillment services that your 3PL provides to you.
- Onboarding with a new logistics company will cost you money and time.
- If you don’t read your contract carefully, you could get hit with unexpected fulfillment costs.
Choosing the right order fulfillment company for your business is a challenge. It’s worth spending the time to make sure you pick a 3PL partner that’s right for you. To help you out, Red Stag Fulfillment has created a fulfillment company questionnaire and a guide to the best 3PL companies.
Hidden costs of order fulfillment
It’s challenging to figure out the most affordable fulfillment option for your business. In addition to the cost of picking and packing services, packaging, and shipping, it’s essential to consider the total fulfillment value. The total value of your eCommerce fulfillment isn’t just the money it costs you but the money you save as well.
Here are some of the hidden costs that can make your order fulfillment less affordable.
The longer a pallet of your products sits on the receiving dock, the longer your products are in limbo when they should be in inventory. If your fulfillment center doesn’t promptly unload your inbound shipments, that can cost you sales.
At Red Stag Fulfillment, we guarantee that we will process all inbound shipments in two business days or less. We can even move backordered items directly from the receiving dock into shipping, using cross-docking to get our clients’ orders out faster.
Lost inventory (shrinkage)
Most order fulfillment contracts include a shrinkage allowance. The allowance can range from 2% to 10%. The shrinkage allowance is lost inventory that you pay for. When your items are lost, damaged, or stolen from the warehouse shelves, it shaves a slice off your profits.
Shrinkage can have a significant effect on your bottom line. With Red Stag Fulfillment’s zero shrinkage guarantee, some of our clients have seen a boost to their bottom line. We almost never lose or break items in our care, but we reimburse you for the wholesale cost of the product when we do.
Slow order processing
When a customer clicks the Buy button, they want their order as soon as possible (but with free shipping, of course). Two factors determine the time it takes for order fulfillment: delivery time and order processing time.
Delivery time is a factor of shipping zones, discussed in the next section. Order processing is the time it takes from your customer placing an order to the fulfillment center receiving the order, putting it in line for fulfillment, and completing fulfillment. Slow order processing delays delivery and can lead to unhappy customers. Fast order processing can shave time off your order fulfillment.
Red Stag Fulfillment offers same-day order fulfillment services with two cutoff times: 3:00 pm ET and 5:00 pm ET. If someone places an order at 4:59 pm ET, we guarantee to get it picked, packed, and shipped that same day.
Pick, pack, and ship errors lead to returns
Pick and pack errors have both an immediate, quantifiable cost and an intangible cost. The immediate expense is the cost of return shipping and possibly re-shipping, a lost sale, or an unsalable product. The intangible expense is an unhappy customer, who might not order from you again if they have a negative experience. Reducing your return rate will increase your profits over time.
Red Stag Fulfillment aims for perfection in order fulfillment, and we get pretty close. Plus, if we mis-pick or mis-pack your order, we pay for return shipping, plus we pay you $50.
Factors that affect eCommerce fulfillment value
In looking at the total fulfillment value, several factors can affect affordable fulfillment. The value of each element will depend on the specifics of your business.
Some 3PLs require clients to sign long-term contracts. The contract term locks you in, even if you find you’re unhappy with the service.
At Red Stag Fulfillment, we offer a 30-day free trial of our order fulfillment services. If you decide to work with us, we don’t lock you in. We want to win your business with excellent service every month.
Shipping discounts and shipping zones
The eCommerce fulfillment company you choose can significantly affect your shipping costs in two different ways.
First, many 3PLs are volume customers for the major carriers, so they qualify for shipping discounts. At Red Stag Fulfillment, we use our bargaining power to offer discounted shipping rates to our clients.
Second, warehouse locations will determine the shipping zones of your package destinations. The higher the shipping zone, the more it costs (and longer it takes) to ship that package. Red Stag Fulfillment’s warehouses are sited in locations that can reach almost all U.S. addresses in two days or less because they travel through fewer shipping zones.
Shipping is one of the biggest factors in affordable fulfillment. A 3PL that can save you on shipping is providing significant fulfillment value.
Integrations with your eCommerce platforms
You can set up custom APIs to integrate with your fulfillment partner, but plug-and-play integrations will save you time and money. At Red Stag Fulfillment, we offer integrations with dozens of eCommerce platforms. You can view all your sales channels with our easy-to-use order management dashboard.
Order minimums and affordable fulfillment
Some eCommerce fulfillment companies require a minimum number of orders per month. If you don’t have a high volume of orders, you might have to pay a fee so that 3PL won’t be an affordable fulfillment option. Make sure you understand this requirement when you choose your 3PL.
At Red Stag Fulfillment, we generally work with companies that ship at least 200 orders per month. However, we don’t have set order minimums, and we don’t charge a monthly fee.
It’s essential to understand how much your order fulfillment will cost upfront so you know how to price your products. If you’re hit with unexpected charges, they can eat away your profits. Even something as simple as a floor-loaded container rather than palletized products can lead to an extra expense.
At Red Stag Fulfillment, we work with our clients to make sure they understand all the costs associated with their order fulfillment. That means understanding your business in and out from the beginning so we can find savings to create affordable fulfillment for you.
Every service that your eCommerce fulfillment company can provide is one more thing off your plate. Add-on services increase the total fulfillment value offered by your 3PL.
Increase your total fulfillment value with Red Stag Fulfillment
At Red Stag Fulfillment, our goal is nothing less than to be the country’s best eCommerce fulfillment company. That doesn’t mean we’re the most expensive. In fact, our fulfillment guarantees save you from hidden costs that can turn inexpensive fulfillment into a money pit.
Truly affordable fulfillment is order fulfillment that reduces errors and keeps your customers happy. Give us a call and find out how we can save you money on fulfillment.