There are several factors to consider when choosing an order fulfillment company, but cost always tops the list. Simple orders can cost just $1 to fulfill, while complex orders can cost $10 or more, and that’s before shipping fees. This guide covers 4 common fulfillment costs that shippers encounter and explores solutions to fit various fulfillment needs.
Before we dive in, if you want to quickly find the best rates on outsourced order fulfillment, start with FulfillmentCompanies.net. It’s a free fulfillment matchmaker that prescreens 500+ fulfillment centers to find the best match for your business. Click here for free quotes from multiple fulfillment centers.
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The 4 Primary Order Fulfillment Costs
Many ecommerce startups and small sellers outsource order fulfillment rather than handling it in-house. This way, they focus on business growth and leave stock storage, order packing, and shipping tasks to the pros. If you decide to outsource fulfillment, here are four primary services and costs you’ll see working with a third-party logistics (3PL) company:
1. Inventory Receiving Costs
Most 3PL companies charge for accepting and verifying a delivery of your inventory. Some charge per shipment, some per pallet or per box. We’ll explore specifics below.
2. Inventory Storage Costs
Most 3PL services charge for stock storage space in their warehouse. Charges range from palletized bulk storage to individual bins or shelf spaces for per-SKU storage.
3. Order Pick & Pack Costs
Some fulfillment centers charge a per-order pick & pack fee based on the number of items being picked from storage and packed into each box. Others roll this cost together with shipping into one order fulfillment fee.
4. Shipping Costs
Fulfillment companies pass shipping costs on to you, but these costs can be far lower than what you’d pay handling fulfillment in-house. Due to their volume, fulfillment centers get deep shipping discounts, both inbound (inventory coming into the warehouse) and outbound (orders to your customers).
How Much Order Fulfillment Companies Charge
Here’s an overview of what 3 top fulfillment companies charge for the services outlined above. You’ll find that each company charges for services their own way, and this is common across the industry. These 3 fulfillment companies are a good representation of the range of costs you’ll find when interviewing potential fulfillment partners.
Comparing Fees of 3 Top Order Fulfillment Companies
| ShipBob | RedStag | Fulfillment by Amazon (FBA) Multi-channel | |
|---|---|---|---|
| Receiving | $35 per inbound shipment | $13.25 per pallet | N/A |
| Storage | Pallet: $40 per month Bin: $5 per month | Pallet: $15/month ½ Pallet: $7.50/month ¼ Pallet: $3.75/month Pickable Shelf Location: $1.25 per month | Cubic foot, averages : 64¢ - $2.35 per month Learn more about FBA storage costs |
| Pick and Pack | Included in shipping costs | $2.55 first item + 30¢ per added item, per order | Standard: $2.50 - $5.50 Oversize: based on unit size Learn more about FBA multi-channel packing fees |
| Inbound & Outbound Shipping | Inbound: Discount available with ShipBob shippers. Outbound: Negotiated rates based on order volume | Inbound: Discount available but not standardized. Outbound: Discounts up to 45% off standard FedEx rates | From 45¢/lb. based on item size and final packed box weight Learn more about FBA multi-channel shipping fees |
Let’s dive in a bit deeper to see what each service offers and where they differ. Remember! There’s no one cookie-cutter solution when it comes to order fulfillment. The fulfillment solution that fits one company may not be right for another. That’s why we recommend starting your search with FulfillmentCompanies.net if you’re new to outsourcing fulfillment.
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ShipBob Order Fulfillment Costs
ShipBob is geared to service sellers with low inventory counts and a high volume of sales. With no pick-and-pack fees, they’re competitively priced for sellers who ship multiple items per order. ShipBob also specializes in batch fulfillment, processing a large number of orders at once, which is why they’re a top pick for crowdfunding campaign fulfillment.
ShipBob: Basic Fulfillment Service Fees
| Account Setup | $0 |
| Inbound Shipping | Your pick: ShipBob’s rates from multiple carriers, your supplier’s shipper, or your own shipper. |
| Receiving | $35 per inbound shipment |
| Inventory Storage | Pallet: $40 per month Bin: $5 per month |
| Pick & Pack | $0 |
| Outbound Shipping | Negotiated shipping rates: Based on average order/box size, weight and overall order volume |
ShipBob: Additional Fulfillment Service Fees
ShipBob offers a range of specialty fulfillment services with specific fees:
| Custom Packaging or Printed Boxes | Inbound shipping and storage fees apply to custom packaging and printed boxes |
| Order Kitting | Kitting individual items as a simple grouped item is free. Advanced kitting and product packaging needs are per quote |
| Receiving Inbound Containers | Container receiving/unloading charged per hour. Typically $350 - $450 per container |
| Batch Fulfillment | $1 per order for batch projects |
| Returns | Return shipping only. No additional return handling fees |
ShipBob Fulfillment Costs Explained Further
Setup is free with ShipBob. Setup refers to the onboarding required to get your business’s entire logistics, including website, suppliers, and inventory integrated into ShipBob’s system.
Inbound Shipping
Inbound freight shipping charges are based on many factors, like freight origin and destination, products being shipped, and service speed. You can use ShipBob’s list of top carriers to bring inventory into their warehouses, or use your supplier’s carrier or your own. ShipBob’s freight rates are in-line with any small business rate plan, and they help you find the cheapest rate based on your shipment size and origin location.
Inventory Receiving
ShipBob charges $35 to receive each inbound palletized shipment, and that’s per shipment, not per-pallet. So a 10-pallet shipment is just $35 to receive. Container shipments are charged $25 per man hour to unload and receive, which usually runs around $350 – $450 per container.
Inventory Storage
Inventory storage at a ShipBob facility costs $40 per month per pallet or $5 per month per bin. Pallets are typically 64 ft³. Bins are typically 2 ft³. Bins are limited to one SKU per bin. Pallets are usually limited to one SKU, but they can hold two SKUs in situations where the inventory is easily differentiated. This is determined by your ShipBob rep.
Pick & Pack
ShipBob has a distinct pricing advantage here. They don’t charge a separate fee to pick items and pack orders. That means the process of preparing a customer order costs you nothing compared to companies with per-item and per-order pick-and-pack fees. Because of this, businesses that have few receiving and storage needs can get very cost-effective order fulfillment through ShipBob.
Outbound Shipping
The cost of shipping orders to customers depends on many factors, box size and weight, delivery location, carrier, service level, etc. So, these charges will vary, but you receive ShipBob’s discounted rates which, in most cases, are lower than what you’d pay shipping on your own carrier account.
Batch Fulfillment
Batch fulfillment is another area where ShipBob excels. If you’re fulfilling a large quantity of orders in one shot, say at the end of a successful crowdfunding campaign, then batch fulfillment is a great value. Instead of paying storage fees, you simply pay a fulfillment fee of $1.00 per customer order, plus your outbound shipping charges.
RedStag Order Fulfillment Costs
RedStag’s order fulfillment is ideal for businesses that sell large and/or heavy items (over 5 lbs. per order) in some volume. RedStag Fulfillment negotiated very low prices with FedEx and passes that savings on to their clients, resulting in significant savings on shipping costs large and heavy items. Red Stag Fulfillment also specializes in secure storage and shipping of high-value luxury goods.
RedStag: Basic Fulfillment Service Fees
| Setup | $0 |
| Inbound Shipping | They can refer to freight shipping company. Not uncommon to receive some discount, but not standardized. |
| Receiving | $13.25 per pallet |
| Inventory Storage | Pallet: $15 per month Half Pallet: $7.50 per month Quarter Pallet: $3.75 per month Pickable Shelf Location $1.25 per month |
| Pick & Pack | $2.55 for first item in order + $0.30 for each added item |
| Outbound Shipping | Discounts up to 45% off FedEx’s standard rates, with higher discounts for heavy/large items and high order volume |
RedStag: Additional Fulfillment Service Fees
| Custom Packaging | Order custom boxes at a discount with RedStag’s supplier or source on your own. Standard inbound shipping, receiving, and storage fees apply. |
| Kitting | Projects are quoted based on time involved, then charged at $30 per hour. |
| Batch Fulfillment | The same fees as regular fulfillment |
RedStag Fulfillment Costs Explained Further
Setup
Setup is free with RedStag Fulfillment. Setup covers the onboarding steps required to get your business’s entire logistics, including website, suppliers, and inventory integrated into RedStag’s system.
Inbound Shipping
Typically you’ll send your shipments into RedStag via a freight shipping carrier. Your freight shipping charges are based on freight origin and destination, products being shipped, and service speed. RedStag can refer you a freight company and discounted rates are not uncommon, but not standardized. Most small shippers use a freight broker to get the best deals.
Inventory Receiving
RedStag charges $13.25 to receive each pallet.
Inventory Storage
Storing your inventory at a RedStag facility will cost $15 per month per pallet, $7.50 for a ½ pallet, and 3.75 for a ¼ pallet. They also charge for pickable shelf locations (where a certain amount of your product is out and ready to fulfill orders) at a rate of $1.25 per month. Pallet space and pickable shelf locations are typically limited to one SKU.
Pick & Pack
RedStag’s pick and pack fees are $2.55 for first item in order. After that, each item added to the order has a pick and pack fee of 30¢. So, if you sell several items per order, your pick-and-pack fees can add up using RedStag.
Outbound Shipping
The cost of shipping orders to customers varies based on, box size and weight, delivery location, carrier, service level, etc. But RedStag has negotiated deep discounts with FedEx and passes that savings to you. Businesses selling heavy or large items in volume receive the lowest rates. For example, a customer selling a high volume of bowling balls may be able to see shipping discounts of 45% off standard rates.
Batch Fulfillment
While RedStag can do batch fulfillment for their regular daily-shipping customers, it isn’t a special service. They follow the pricing of standard fulfillment for batch projects.
Fulfillment by Amazon (FBA) Multi-channel Order Fulfillment Costs
Amazon offers two primary types of order fulfillment: Fulfillment by Amazon (FBA) and Multi-channel Fulfillment.
FBA is Amazon’s fulfillment service for products that are sold via the Amazon marketplace. The cost of FBA is steeply discounted because Amazon also receives a cut of every product sold on Amazon, this is called the seller fee. Seller fees average about 15% of the sales price, thus the discounted FBA service.
Amazon’s Multi-channel Fulfillment service fulfills orders not placed on the Amazon marketplace, such as purchases made on business websites or other marketplaces. Amazon’s Multi-channel option can be more expensive than some fulfillment options, but for sellers who already use FBA to sell products on Amazon, it’s a convenient way to ship all orders from one fulfillment service.
Amazon sorts Multi-channel Fulfillment products into 3 broad categories:
1. Media Products
Standard-sized books, music, video games, DVDs and software with a selling price of less than $300
2. Standard Size Products
Non-media products that fall under the dimensions and weight of oversized products
3. Oversize Products
Any single product or grouped set that weighs more than 20-lbs. and measures more than 18x14x8. Note, Amazon also charges special handling fees for television products
FBA Multi-channel Fulfillment: Basic Fulfillment Service Fees
Inbound shipping and storage fees fall under standard FBA rates, but the order fulfillment and shipping fees are higher on Multi-channel Fulfillment orders than Amazon orders. If considering Amazon as a fulfillment option, check out their FBA fee and revenue calculator.
| Media | Standard | Oversize | |
|---|---|---|---|
| Setup | $0 | $0 | $0 |
| Inbound Shipping | $0.45 per lb. - $2.00 per lb. | $0.45 per lb. - $2.00 per lb. | $0.50 per lb. - $2.00 per lb. |
| Receiving | $0 | $0 | $0 |
| Storage Jan - Sept | 64¢ per cubic foot/mo. | 43¢ - 64¢ per cubic foot/mo. | 43¢ per cubic foot/mo. |
| Storage Oct - Dec | $2.35 per cubic foot/mo. | $1.15 - $2.35 per cubic foot/mo. | $1.15 per cubic foot/mo. |
| Pick and Pack | $0.60 | $0.75 | $3.00 |
| Order Handling | $1.90 - $14.40 | $4.75 - $14.75 | $7.00 - $17.00 |
| Outbound Shipping (termed Weight Handling) | $0.45 per lb. - $2.00 per lb. | $0.45 per lb. - $2.00 per lb. | $0.50 per lb. - $2.00 per lb. |
FBA Multi-channel Fulfillment: Added Fulfillment Service Fees
| Media | Non-Media | Oversize | |
|---|---|---|---|
| Custom Packaging* | Neutral Boxes Custom Packing Slips | Neutral Boxes Custom Packing Slips | Neutral Boxes Custom Packing Slips |
| Returns ** | $0.45 per lb. - $2.00 per lb. | $0.45 per lb. - $2.00 per lb | $0.50 per lb. - $2.00 per lb. |
Custom Packaging*: Amazon’s Multi-channel Fulfillment packaging is neutral and does not use Amazon-printed boxes.
Returns**: Typically, returns and customer service are handled by the seller but you can route returns to Amazon warehouses via FBA and be charged applicable shipping fees.
Amazon Multi-channel Fulfillment Costs Explained Further
Account Setup
Setup is free on Amazon, no matter what type of product you’re selling or where you sell it, on Amazon or on other channels. Your only initial cost is shipping goods into Amazon’s warehouses.
Inbound Shipping
Shipping charges vary based on the weight and box size of your inbound product shipment. Typically, they’re reasonable as they run on Amazon’s discounted carrier rates.
Receiving Fees
Amazon does not charge receiving fees for standard FBA inventory shipments. They do have an Inventory Placement service that allows you to ship into fewer Amazon distribution centers, and from there, Amazon sorts and ships them throughout their storage network for a fee.
Inventory Storage
Amazon’s monthly inventory storage fees are based on total cubic feet stored on average each month. Amazon FBA offers guidance on inventory-on-hand needed to fill your average order volume. The trick is to store what you need to fill orders without running out of stock, but not stock more than needed, especially from October through December, when fees are higher during the holiday shopping season.
Pick, Pack & Order Handling Fees
Amazon’s pick, pack and order handling fees vary based on the type and size of products being packed and the overall size and weight of the packaged order. Order handling fees, in particular, can drastically increase your fulfillment costs, so it’s important to understand where your products fit into their fee structure.
Outbound Shipping
Outbound order shipping charges vary based on total weight and size of the order. Typically, FBA shipping charges are quite competitive since Amazon gets very low rates from all carriers due to their massive volume.
These are the most common fees you’ll encounter using FBA Multi-channel Fulfillment. But, there are other fees you might run into if your inventory sits unsold or if your inbound shipments aren’t prepared per Amazon FBA instructions. These include:
- Long-term storage (unsold stock after 6+ months)
- Labeling Fee (to add barcodes to each item received)
- Removal Fee (to return or dispose of unsold inventory)
- And more…
While Amazon’s Multi Channel Fulfillment may not be a good deal for most businesses, if you are already selling some or all of your products on Amazon, then using FBA can be a convenient and cost-competitive option.
Other Factors that Affect Order Fulfillment Costs
We’ve outlined the most common costs you’ll encounter if you choose to outsource order fulfillment to a 3PL company, but there are other factors that can affect your costs.
6 Factors That Can Affect Your Storage Or Shipping Costs
- Product dimensions & weight
- High number of SKUs
- Distance to and from fulfillment centers
- Storing special shipping materials like pallets or crates
- Duration of storage, unsold inventory can incur added fees
- Special handling or storage needs, like climate control for foods or cosmetics
7 Special Services That Generally Have Added Fees
- Custom API integration with online store, order management, or point-of-sale systems
- Custom labeling of products with your logo or other images that evoke your brand
- Custom inserts in packed orders for special offers, personal notes, etc.
- Kitting or specialty packing of grouped products as a set, as in subscription boxes
- Light assembly, minor product customization, etc.
- Sourcing specialty packaging outside of standard boxes and fill
- Customer service support to answer customer phone calls and email queries
Inbound Inventory Shipping Considerations
When shipping inventory to your fulfillment center, it’s typically cheaper to ship palletized freight via truck versus sending a number of smaller parcels via UPS or FedEx. Most fulfillment centers deal with freight shipments daily and can offer advice on the best and most cost-effective way to bring stock into their warehouse.
However you ship your stock, pack and ship pallets yourself or send inventory straight from your supplier, you need to know how truck freight works to keep an eye on your costs. Most small sellers and startups ship a few pallets via less-than-truckload (LTL) freight, and you can find great deals using a freight broker. If you have a huge manufacturing run or import order to ship to your fulfillment partner, you can get even better deals on full-truckload (FTL) shipments of about 24-26 pallets. But, if you ship small items like t-shirts or jewelry, you can fit a huge quantity of products into a few large boxes and ship via UPS or FedEx.
Added or unexpected costs like those listed above can creep up and really affect your business. So it’s vitally important to find a fulfillment partner that can correctly evaluate your needs and prevent costly surprises down the line. That’s why we always recommend starting your search with FulfillmentCompanies.net
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Your Other Option: In-House Order Fulfillment Costs
Startups and small businesses often handle their own fulfillment in the early days, and this isn’t a bad idea at all. Hands-on experience gives you a full understanding of the fulfillment and shipping process. Plus, it helps you keep an eye out for excessive costs when you ultimately outsource your fulfillment.
Most startups shipping fewer than 100 orders per month can craft an in-house fulfillment operation on a shoestring, depending on what you’re shipping. Small items like apparel, household goods, gadgets, etc., are cheap to store at home or in a nearby storage unit, and simple to pack and ship. But if you’re shipping fragile, heavy, or large items, your storage, packing, and shipping tasks can be much greater.
Another cost that startups and small businesses encounter when they elect in-house fulfillment is opportunity cost. As you grow, in-house fulfillment demands time and energy that could potentially be directed into business-building tasks, like marketing or new product development. That’s something to consider as we explore the hard costs.
4 Cost Factors For An In-House Fulfillment Operation
- Employees – Yes! Your time counts, too
- Warehouse or storage space
- Warehouse equipment, shelving, worktables
- Shipping equipment and shipping fees
These costs can vary greatly, of course. A tiny do-it-yourself startup can get by with in-home storage, a laptop to access online store orders and shipping software, a postal scale, and label printer. A larger operation needs adequate space, employees, warehouse shelving, and packing and shipping stations, at the very least.
To get an idea of how in-house and outsourced fulfillment stack up, here’s a quick cost comparison of my own ecommerce startup costs and ShipBob’s fulfillment costs:
In-House Fulfillment Startup Costs vs. ShipBob Costs
| Cost Center | My Solution & Cost/Mo. | ShipBob Solution & Cost/Mo. |
|---|---|---|
| Storage for 75 inventory items | 15’x20’ Storage Unit incl. Electricity & Onsite Security $150/mo. | 70 in Bins @ $5/mo = $350 5 divided on 3 Pallets @ $40/mo = $120 $ 470 |
| Receiving Stock | My time | 8 stock shipments/mo @ $35/ea $ 280 |
| Labor | Me, costs figured at $20/hr x 20 hrs/wk $1600/mo. | Combined Labor, Packing & Shipping Costs for 240 Orders/mo: Estimate based on my average package weights and delivery destinations: $ 2904 |
| Packing Materials | Boxes & paper fill $300/mo. | |
| Shipping Costs | UPS & USPS costs for 240 packages/mo., average $8/pkg $1920/mo. | |
| Monthly Total Fulfillment Costs: | $3970 | $ 3654 |
| Fulfillment Cost-per-Order (monthly cost / 240 pkgs) | $16.54 | $15.22 |
Let’s compare the numbers:
In-house fulfillment monthly total: $3970
ShipBob fulfillment monthly total: – $3654
Difference: $316 per month in savings using ShipBob
Added together, that’s an annual savings of: $3792 per year
So even shipping just 240 orders/mo. on a shoestring setup, I could still save money moving my fulfillment to ShipBob. Plus I could use that time to focus on marketing and other business-building tasks instead of packing boxes.
But what if you have a larger operation? Here’s what you’ll face handling fulfillment yourself in a 5000-sqft. warehouse with one employee, shipping 1500 orders per month. Of course, costs vary by location, but this gives you an idea of the basic costs:
In-House Fulfillment Costs for a Larger Operation
| Monthly Cost | Annual Cost | |
|---|---|---|
| One Warehouse Employee | Figure $18/hr. after payroll taxes $2880/mo. | $34,560 |
| 5000-ft. Warehouse Space | @ $.75 per sq. ft. $3750/mo. | $45,0000 |
| Warehouse equipment, shelves, computers, packing boxes & materials | Startup equipment: $3,000+ Packing materials: $600/mo. | $7200 |
| Shipping | Negotiated rates by volume, estimate $8/order @1500 orders/mo. $12,000/mo. | $144,000 |
As you see, running an in-house operation can quickly get expensive. But there are other things to consider too, like how you’ll scale efficiently to handle growth spikes and slowdowns.
Scaling Challenges With In-House Fulfillment
It’s critical to keep in mind that the amount of space and number of employees needed to fulfill your orders constantly change. You’ll see seasonal sales spikes as well as unexpected slowdowns. Your shelves will be overflowing at times, and some days you’ll have space to spare. You’ll sometimes find yourself shorthanded and pushing to get the orders done. Other times, you’ll be overstaffed and pressed to find a project for employees to work on.
In-house fulfillment almost always has greater inefficiencies than using an outsourced company. It’s nearly impossible to use your warehouse space and employees to 100 % capacity. On average, an independent company’s warehouse employee might pull, pack, and ship 10 orders an hour. Plus, they have receiving and stock management tasks. So, if you ship more than 50 orders per day, you’ll likely need more staff, but they won’t be fully utilized at first.
Because of this, you’ll find that even if your orders grow steadily, your in-house fulfillment costs will grow in spurts, like this:
Fulfillment Companies Scale Up & Down With Your Volume
By comparison, fulfillment professionals are experts in managing scale, both up and down, to efficiently meet business needs. Their job isn’t to run a company, source products, and market to customers. Their job is managing distribution, plain and simple.
They spend their days ensuring efficiencies so shipping their staff can create more output. For example, ShipBob employees process 30-60 orders per hour (depending on order complexity), making them 3 to 6 times more efficient than the average small business warehouse employee. Plus, employees work across multiple accounts, so sudden sales spikes or slowdowns don’t affect cost averages.
Using a fulfillment center, your fulfillment costs always stay in-line with order volume. Since you only pay for the storage and labor you need at the time, you don’t face the overcapacity or undercapacity issues of in-house fulfillment.
Of course, finding the right fulfillment partner is the key to managing your business’s fulfillment needs at the lowest possible costs. Start with FulfillmentCompanies.net to find the best match for your unique business.
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The Bottom Line: Order Fulfillment Costs
Businesses large and small elect to outsource order fulfillment for a number of reasons. For some, cost is a driving factor, for others, it’s the time factor. After running my own busy in-house fulfillment operation for more than 16 years, I can tell you one thing: it’s a full-time job.
Beyond the time involved, the costs of an in-house operation aren’t flexible. Lease commitments measure in the years, employees take time to train, and overstaffing and overcapacity quickly drains bank accounts.
Outsourcing fulfillment is a far more nimble solution in all ways. And with fulfillment centers like ShipBob, Amazon FBA, and RedStag Fulfillment, even small sellers and startups can quickly move these tasks over to the pros and focus on what they do best, building their business.
Do you handle fulfillment in-house or leave those tasks to a fulfillment center? We’d love to hear your thoughts and experiences in the comments below.
We have a new lawn and garden product that is packed in a 2″ x 32″ x 32″ box and POP displayed one dozen units. These should do well in hardware stores and garden centers. My question is how to market these to the stores….does the distributor do this or do we?
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Hi Bob,
You can certainly find fulfillment centers that offer marketing services or are able to leverage existing retailer lists to clients’ benefit, but that all depends on your budget since costs for these services quickly add up. Most small businesses do much of the marketing legwork themselves via a good website that caters to the B2B crowd if that’s your focus, exhibiting at industry wholesale buyers’ markets, and direct outreach. Smaller independently owned lawn and garden stores and hardware crossovers like franchise ACE Hardware and DoItBest stores have independent purchasing departments compared tot he corporate buyers groups for large chain stores. So you can focus your efforts on those buyers while ramping up. I hope this helps, good luck!
Cheers,
Krista
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f
Great Read,
thank you for taking the time to make this
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You’re welcome! Thank you for reading and commenting.
Cheers,
Krista
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Mike
Hi Krista,
Great article. What cost effective options are out there for a local company who needs someone to house their inventory, deliver, and pick up the same inventory from the customer at a later date. Meaning the item is borrowed or rented than returned to the warehouse. These would be local deliveries only.
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Hi Mike,
Thank you! If you have fulfillment centers in your area, you can probably find one that can coordinate with a local delivery service that’s suitable to transport whatever it is you’re renting out. You’ll just have to work out the return/restock details and costs since that will be a normal function or the service, not an occasional need like with shippers that sell goods. I’m guessing that the items you’re renting are oversized or require special handling. If they pack in shippable boxes for transport, you could even use UPS or FedEx for the delivery/pickup side and any fulfillment company can set that up.
I hope this points you in the right direction. Good luck!
Cheers,
Krista
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Jonathan Millard
Hi Krista,
Fantastic article. I have a question. I have a product (custom jewelry) that requires, handwriting, gluing as well as some assembly which is difficult for pick and packers. Would you still think it’s worth it to go to fulfillment? The volume is definitely there but the fulfillment is complex.
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Hi Jonathan,
Thanks for reading, I’m glad you found the information helpful.
Some fulfillment services specialize in what we call “fussy” fulfillment, which is what you’re talking about here, essentially a series of small assembly tasks. If you have good volume and a good markup, you can make this worthwhile because someone obviously has to do it. Either you pay someone to do it or take that on yourself and tie up your valuable time.
Or, here’s a third option: Streamline your product or packaging a bit. Can the packaging be altered to have less prep and assembly steps? Can you pre-print handwritten cards instead of actually writing them each time? Simplifying the packaging to only the elements that deliver the biggest wow factor might lower your fulfillment costs enough to make outsourcing a good value.
I’m not sure if that totally answers your question, but it might give you an alternative route that gets you where you want to go. If not, let me know and I’ll help however I can.
Cheers!
Krista
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Juan
Hi Ian , I truly appreciated for all the information you provided. I am planning to start my Fulfillment Company that I am planning to provide service to small and large e-commerce companies. I’ve made some research and now have an idea about how much approx investment I’ll need and I know a little bit of the monthly expenses.
My question is, do you have any idea about the Profit margins of the business? I calculated that I can make %13 to %20 in profit. Do you think this number make sense?
Thank you so much for your time , I will really appreciate your ideas on this.
Best Regards
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Hi Juan, ecommerce profits depend on so many things that it’s hard to predict. My $1M+ ecommerce company averaged a net (after taxes) of about 9% to 12% over 16 years in operation, which was pretty standard for small reseller companies in my home & garden category. Others may be higher or lower and much depends on whether you resell or manufacture, and if you can get the word out and drive traffic and sales. We have a lot of information about how to get started on a budget in our ecommerce section.
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John
what about specific expenses. What percentage of sales will a small e-commerce business spend on warehousing? What about distribution expense as a percentage of sales? Do you have any insights you could share? Thank you
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You’re in luck. We have an article that details how to estimate your fulfillment expenses, for both in-house fulfillment and if using an outsourced partner. Once you have that estimate together, you can forecast your fulfillment/distribution expenses as a percentage of sales. I think this breakdown will be exactly what you need to figure this up. Cheers! Krista
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