Kitting and bundling have shifting meanings in eCommerce fulfillment. Some use the words interchangeably, while others have different definitions for each term. Both refer to selling products in a group instead of individually, and both kitting and bundling can help you increase sales and revenue. Here’s what you need to know to organize your inventory to take advantage of these fulfillment processes.
What’s the difference between kitting and bundling?
Kitting creates a set of grouped items in advance of the pick and pack process. That way, a picker can pull the kit from the shelf as a single item rather than gathering all the individual SKUs during order fulfillment. Because your 3PL completes the kitting process ahead of time, it adds efficiency to your order handling. Kitting usually groups complementary products into a set.
Not all 3PLs provide kitting services. At Red Stag Fulfillment, kitting is a core service offering because we’ve seen the benefits it offers to our clients. For inventory management purposes, we typically store the kits under a new SKU. However, we can also unkit items if you need them for your inventory.
Examples of kitted items include:
- Subscription boxes
- A gift set, such as soap, face mask, and bath salts grouped together
- Marketing materials grouped to accompany a particular product
- Accessories grouped with a product, such as a bell and bike lights shipped with a bicycle
Product bundling may involve the same process as kitting. Both kitting and bundling may combine multiples of the same item or a set of products that go together. However, we’ll use bundling to describe bulk packages of the same item for this article. Bundles will sometimes get a unique SKU but not always. For example, if your 3-pack of socks bundle has special packaging, that would need its own SKU. However, if customers who order the 3-pack get three pairs of individually packaged socks, you have the option to use the original SKU. When a customer orders the 3-pack bundle, the picker will simply pull three pairs of socks.
Bundles usually offer a volume discount. Kitted items sometimes sell for less than the retail value of all the items sold separately, but not always. A set of six different juices for a juice cleanse would be a kit. A pack of six bottles of the same juice, sold at a discount, is a bundle.
How kitting and bundling help grow your eCommerce business
At Red Stag Fulfillment, we’ve used kitting and bundling to help our clients in surprising ways. For example, we got a shipment from a client’s manufacturer that was missing a component in each box. The client could have sent the products back to the factory to fix the error, but that would have cost valuable time and might have led to backorders. Instead, the manufacturer shipped the missing component to our warehouse. We set up a kitting process to open the boxes, add the missing part, and reseal them in new condition. When orders came in, the products were ready to ship.
That’s an example of an unconventional use of kitting. But kitting and bundling save money and increase profits for online retailers every day. Here are some of the ways they can help you maximize profits.
Save on shipping costs
Shipping multiple items in the same box can be an excellent strategy to reduce the total shipping cost. When you ship large products, your package might have a shipping surcharge called a dimensional weight charge. Dimensional, or DIM, weight is a “weight” derived from the box dimensions. If the actual weight is higher than the DIM weight, that will be the billable weight. However, the dimensional weight surcharge often applies for oversized goods or light but bulky products.
Let’s take the example of the bicycle that ships with a bell and front and rear lights. The bike will almost certainly incur dimensional weight charges because of the size of the box. So, if you can kit the small items into the same package, you can ship them without any extra shipping charge.
In addition, kitting and bundling can create parcels with lower shipping costs per item because FedEx, UPS, and USPS all include a base per-package charge in their pricing. For instance, the 3-pack of socks weighs more than a single pair, but the cost to ship the 3-pack won’t be three times as much. If you ship via USPS Priority Mail, you might be able to fit three pairs of socks into the same size package you needed for a single pair so that you will get reduced shipping costs for the order as a whole.
Incentivize multiple sales
Kitting and bundling encourage people to buy more than they would if they needed to pick out individual items. For instance, a customer might come to your site planning to buy some watercolors and brushes. If you offer a kit that includes brushes and paints plus paper, oil pastels, and colored pencils, you can inspire them by showing what’s possible with a fuller set of art materials.
Bundling typically offers a price incentive for multiple purchases. If a single pair of socks costs $6 and you sell the 3-pack for $15, that’s a great deal for the buyer. If your wholesale cost is $3, you won’t make as much profit on each pair as if you’d sold three pairs individually. However, if your bundled items get the customer to buy three pairs instead of one, you’ve doubled your profit on the sale from $3 to $6. And you’ve helped the shopper think of themselves as a bulk purchaser of items from your online store.
Both kitting and bundling can increase your average order value, which allows you to reduce the associated costs per order.
Make gift-giving easy
Consider the kitted gift pack of bath items. An online shopper who needs a gift might buy the soap, bath salts, and face mask individually. Then they must find a gift bag or basket and wrap the gift. The stress of choosing which products go together and how to present them could discourage the customer from buying at all. Or they might order a bar of soap and pair that with something from one of your competitors.
When you offer a set, you make gift-giving more straightforward, and you can send it in a pretty box that’s perfect for a gift. You just saved your customers time and hassle, and they will remember that the next time they need a present.
Creating a warehouse management system for kits and bundled products
To make kitting and bundling work for your business, it’s crucial to integrate the processes into your warehouse and inventory management systems. Your choices for managing your kits and bundles will depend on your inventory management goals. Here are some tips.
Inventory management for kitting
Items grouped through kitting should have a unique SKU to ensure accuracy in the picking process. Whether you offer the kit as a single SKU in your online store or simply use kitting to improve fulfillment efficiency, that’s a best practice.
Your warehouse and inventory management system should also track inventory of the individual SKUs that make up each kit in case your demand shifts. For example, you might have 100 spa bath kits ready to go when you see a spike in demand for face masks as a standalone item. If new orders deplete your face mask inventory before you can restock, your 3PL can dismantle some of the kits to fill orders quickly.
Inventory management software is the key to a flexible kitting solution. Make sure your software provides the data you need to make the most out of your stock on hand.
Inventory management for bundles
Your inventory management system can be more flexible when bundling products. You can give bundles a new SKU, particularly if they have new packaging. Assigning a different SKU to bundled products can also help you manage pricing in your online store and ensure that the warehouse pick lists show the correct quantities. However, bundles that are multiples of the same product don’t always need to be processed ahead of fulfillment and may be sold under the same SKU as the single product. Again, make sure the bundling process you choose works well with your inventory management software.
Red Stag Fulfillment takes the headache out of kitting and bundling
Kitting and bundling can help boost profits and speed up your fulfillment operations. But inventory management for kitting and bundling can add complexity to your operations. Fortunately, your 3PL can help you develop standard operating procedures to integrate kitted or bundled sets into your product lineup. And your fulfillment company can manage operations, so you don’t have to.
We offer product kitting and bundle fulfillment tailored to your needs. But our kitting services are just one of the ways that Red Stag Fulfillment has earned a place as one of the top 3PLs in the U.S. Our fulfillment guarantees and low error rates help our clients beat the competition. If you’re ready for fulfillment that helps your eCommerce business grow and scale, we’d like to talk to you.
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