If you have an ecommerce business or a bricks and mortar business that also sells items online, you know that one of the biggest challenges (after making the sale) is getting the item your customer purchased delivered to them quickly and smoothly. You may start out with inventory in your basement, garage or spare bedroom that you hand label and ship out. Maybe at some point you get a warehouse to store inventory.
But as your small business grows you may decide to hire someone to do this work for you, and that’s where fulfillment centers come in.
What Is Ecommerce Fulfillment?
Ecommerce fulfillment gets items to customers after they purchase them online. Services may include receiving, storing and tracking inventory, processing orders, preparing and shipping items for fulfillment and ensuring they get delivered to the customer. A third-party logistics firm (3PL) often manages these activities for a retailer.
How Do Fulfillment Centers Work?
Fulfillment centers fulfill orders. In other words, their job is to make sure the item your customer purchased gets delivered. They handle the inventory and logistics of the order fulfillment process, often for multiple clients.
Their services typically include:
- Receiving and storing inventory
- Picking products from inventory
- Packing orders
- Printing labels
- Getting prepared orders to shippers
- Returns processing
Many also provide inventory management software and tools with real-time tracking or insights to help small business owners manage their ecommerce order fulfillment process and find ways to save money.
What Do Fulfillment Services Cost?
Fulfillment center costs can vary greatly depending on the services provided.
A few may charge based on a percentage of sales or a flat fee. But oftentimes 3PL pricing involves a number of fees based on the services required for order fulfillment. Here are common fees.
| Set up fee | Incurred for new customers. Will vary but may be several hundred dollars or more depending on complexity. |
| Account management fee | There may be a monthly fee charged for maintaining the account. Usually a fixed monthly fee. |
| Warehouse receiving | Your product arrives at the warehouse and someone must receive it and get it into the right place in the warehouse. May be hourly or per container/pallet/box or skew. |
| Warehouse storage | Most fulfillment centers are set up for short-term storage (a month or less) and will charge a monthly fee for warehousing product. May be per pallet/cubic or square foot, or bin. |
| Picking and packing | Getting items from storage into shipping packages. Often charged per item. May include packaging. |
| Kitting and assembly (optional) | Refers to packaging multiple items together in anticipation of them being sold together. May be charged per order or per hour. |
| Packaging or box fee | This may include boxes, envelopes, bubble wrap and/or custom packaging. Per box or package. |
| Shipping labels | Labels are created and affixed and items are turned over to delivery services. May include order inserts. Usually charged per order. |
| Shipping | Shipping will be charged at the carrier’s rate based on size, weight and distance. The fulfillment center may be able to get discounted shipping rates on both inbound and outbound shipping. |
| Return Fee | If items are returned, the fulfillment center may process them for resale or to be discarded. Fee typically charged per order. |
Should I Use A Fulfillment Company?
As you can see there are a lot of costs to consider, and to pay for if you decide to hire an order fulfillment service.
At the same time, if you are trying to fulfill products in house all these steps still have to be done, either by you or by contractors or employees. Startups quickly learn you can’t rely on friends and family to help out forever!
That’s why it’s important to plan for the day when you’ll have a fulfillment center, even if you decide not to outsource it. If you don’t price your products properly, you can end up in a situation where demand becomes overwhelming and you are forced to outsource and raise prices to cover these costs.
A few other things business owners will want to think about when considering hiring a fulfillment provider:
What is your order volume? If your business makes just a few sales a week or month you may be able to fulfill those yourself. But if you have a high-volume business, or are going in that direction, you may want to hire a professional order fulfillment partner— or risk a poor customer experience. Don’t forget about seasonal sales, which are likely even more time sensitive since there is a limited window for orders and delivery.
How fast do your customers expect to receive their product, and how quickly can you fill and deliver them? American customers expect very fast order delivery these days. While they may be more patient with custom or bespoke products, they may not be willing to wait if it takes a week or longer to even get yours out the door.
Can you save money using a fulfillment service? When you factor in labor, shipping supplies and shipping fees, you may not be saving as much money as you think by fulfilling products in house. Just the savings on negotiated shipping services prices that a 3PL company offers may make it a no brainer.
Is your time better spent elsewhere? Whether you are fulfilling orders yourself or overseeing employees who manage this task, you may find your time is better spent focusing on other tasks that bring in more revenue.
Ultimately you’ll have to make an informed decision about when (or whether) to outsource fulfillment to a service provider, but looking into this option sooner rather than later may be crucial. If you experience a huge influx of orders, you’ll want to be prepared.
Five Huge Ecommerce Fulfillment Services
When you are ready to choose an order fulfillment company, here are 5 popular options to consider:
ShipBob
ShipBob is a global fulfillment solutions company with 30+ fulfillment centers serving over 7000 brands in many different countries across the US, Canada, Europe and Australia. They boast a 99.95% accuracy rate on order fulfillment.
Benefits and features available
- 2-day shipping option
- Packaging customization
- B2B fulfillment
- Global fulfillment
- Omnifulfillment across sales channels
- Fulfillment software – from order to delivery
Their customers get a dashboard that gives them valuable insights into various costs, allowing them to find opportunities to save money. They also offer a merchant warehouse system (MWH) for businesses that want greater efficiency and savings on in-house fulfillment.
You can use their pricing calculator to understand costs. Be sure to check out their informative free guides on e-commerce fulfillment, drop shipping, subscription box fulfillment and more.
Fulfillment by Amazon
Fulfillment by Amazon (FBA) allows your business to let Amazon handle your order fulfillment. You can sell your items on Amazon.com, your own website and other channels and still take advantage of Amazon FBA services.
Benefits and features available
- List products on the world’s largest online ecommerce marketplace
- Orders eligible for Prime Free Two-Day Shipping
- Amazon customer support
- Amazon handles returns for FBA items ordered on Amazon.com
- No minimum number of products
- Exporting to 100 countries available
Amazon is well-known for its extensive online store, but behind that it’s a sophisticated ecommerce fulfillment company. It has distribution centers all over the world and manages a complex supply chain. That makes it popular with sellers too.
However, Amazon does offer a generous refund policy which may mean you experience higher return rates. Counterfeit products from competitors, and Amazon creating its own version of popular products are both a problem some Amazon sellers have encountered, which means this option may be better for unique products.
Amazon offers a free Fulfillment by Amazon Revenue Calculator you can use to estimate fulfillment costs using FBA. You can also download the free FBA Getting Started Guide to learn more about using FBA in your business.
Shopify Fulfillment Network (SFN)
Shopify is a popular online ecommerce platform for online retailers, but you can also use the Shopify Fulfillment Network (SFN) to get orders into the hands of customers.
Benefits and features available
- Two-day delivery (where eligible)
- Returns management
- No upfront cost
- Free storage for items sold within 6 months
- All-inclusive pricing
SFN only charges on items sold within six months. (Inventory storage fees will be charged for items not sold within six months.) However, to get pricing costs you’ll need to apply. Shopify currently accepts stores fulfilling three or more American or Canadian orders per day.
Shopify does not insert marketing materials, so if that’s important to your business you’ll either need to make sure they are pre-packed or choose another option.
Fulfillment centers are located in the US or Canada, though international shipping is available upon request. However this may not be the best option for companies with strong sales outside the US.
ShipHero Fulfillment
ShipHero offers a robust software program that allows it to work with businesses both a warehouse management system and with fully outsourced shipping. It boasts transparent flat-rate pricing and 30% faster shipping.
Benefits and features available
- Streamlined order management
- Flat-rate pricing with no zones
- Labor costs less than $1.50/package
- One-click store integrations
- Integrations with eCommerce, marketplace, shipping and robotics platforms
- Dedicated account resources
ShipHero has 7 warehouses in the US and Canada and offers zone skipping (no increase in shipping based on zone) to help customers save money.
ShipHero does list some pricing information on its website. Flat-rate pricing includes picking, packing and postage. Other services may be at an additional cost. For example, storage is charged on a daily basis currently at the rate of $0.65 per cubic square feet. But to get detailed pricing you’ll need to request a quote.
ShipMonk
ShipMonk offers a 3PL platform for ecommerce, direct-to-consumer (DTC) and subscription box sellers. It offers some 75+ integrations to allow sellers to fulfill and track orders from multiple sales channels.
Benefits and features available
- Multichannel 3PL fulfillment
- No setup fees or order minimums
- Duty-free fulfillment
- FBA prep services and seller fulfilled Amazon Prime orders
- Crowdfunding product fulfillment
- Strong customer support
- Returns management
- Freight management
You can use ShipMonk’s online pricing calculator to estimate costs. It provides a lot of specific information about pricing. You can then request a personalized pricing quote.
If your business ships from the US to customers outside of the US, ShipMonk offers Section 321 compliant shipping to avoid customs delays and to reduce import fees. It promises 100% reduction in import fees and tariffs for shipments valued less than $800.
ShipMonk offers a library of free ebooks to help you understand the fulfillment process, including Shipping for Dummies and How to Offer Customers Free Shipping. You can also use their shipping zone chart and DIM weight calculator to help understand how locations and dimensions (DIM) may affect shipping costs.
This article was originally written on August 31, 2022.
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