How to know when to outsource ecommerce fulfillment
For brand-new ecommerce businesses, there’s usually no recourse other than to fulfill your orders yourself. In the beginning, you’re so focused on identifying your customer base, working the kinks out of your relationships with manufacturers, and developing a brand that handling the shipping phase yourself feels comparatively simple. As you scale your business, however, order fulfillment becomes an increasingly important part of the supply chain to optimize.
To that end, many ecommerce brands—small businesses and ecommerce giants alike—turn to third-party logistics companies (3PLs) to take fulfillment services off their plate and reinvest resources elsewhere in their business. Here are a few common signs that your business has outgrown its order fulfillment operation and should consider outsourcing fulfillment to a 3PL.
Fulfillment has become one of your largest cost centers.
If you’re a large ecommerce business that runs an order fulfillment operation in-house, you’re aware that it comes with a lot of overhead. You’re paying for long-term, expensive warehousing leases. You’re hiring and managing a fulfillment team, and you’re managing direct relationships with shipping carriers. Depending on the kinds of products you sell and which carriers you work with, you might be buying everything you need to package your products for shipping, from packing tape and bubble wrap to boxes and printing labels. Working with a third-party logistics company offers you opportunities to eliminate efficiencies throughout this process. According to a 2016 study, 70% of businesses who use 3PLs have seen their logistics costs reduced.
3PLs are able to spread their overhead across multiple clients, so they’re typically able to offer lower rates on packaging and housing your inventory, and don’t have to lock you into long-term leases. They often have established partnerships with shipping carriers and can offer bulk discounts to lower your shipping costs. If you’re currently shipping orders out from a single warehouse location, you may be paying higher postage for packages that travel across multiple shipping zones. Larger 3PLs that have fulfillment centers in multiple regions can distribute your inventory across the country and help you minimize shipping costs.
You’re seeing an impact to customer experience due to fulfillment issues.
Increasingly, customers expect ecommerce delivery to be quick and without a high price tag—or even free. 61% of shoppers say they’ve abandoned their cart at checkout because shipping fees and taxes are too high. 25% of shoppers abandon their carts because the delivery options offered aren’t fast enough—they aren’t offered one- or two-day shipping, for example. And they’re unlikely to forgive you if their order arrives late or in poor condition: 38% of shoppers will never shop with a retailer again if they’ve had a poor delivery experience.
If you’re hearing feedback from your customers that your shipments are taking too long or you’re seeing a high rate of cart abandonment in your online store, working with a 3PL may help improve your brand favorability. Many 3PLs can offer you a network of fulfillment centers in regions across the country. This puts your inventory closer to your customers and their shipping destinations, meaning you can offer quick delivery via ground instead of only offering expedited air shipping, which have higher shipping rates.
You’re spending too much time running fulfillment yourself.
This is a common trap for smaller, fast-growing ecommerce brands, particularly if you’re running fulfillment out of your home or office. As your order volume increases, you may find yourself spending too much time reacting personally to new orders coming in: buying packaging, packing items, printing shipping labels, transporting the order to the shipping carrier, dealing with returns or items damaged in transit.
There’s an opportunity cost associated with taking on your own order fulfillment. If you’re spending most of your time on low-impact activities—packaging, going to the post office to ship items, providing customer service, ordering supplies—you’re missing out on the opportunity to learn more about your market, focus on product development, and launch new marketing campaigns.