Fulfillment costs are one of the largest and most important to watch expenses as you are starting out. Outsourcing fulfillment may be an important first step for many eCommerce companies. Using a 3PL, as they are commonly known as, allows you to skip creating infrastructure to warehouse and ship your products. However, whether you’re using third-party logistics, a solution like FBA (fulfillment by Amazon), or a combination, you must understand how costing works.
Understanding the cost structures allow you to evaluate solutions. I can tell you that while I was running a website with warehouse fulfillment, I was hit up by suitors on a monthly basis and they all had there way of pricing things. I regularly called them out on some of their strategies as it had hidden costs that they preferred you not realize.
These hidden costs exist in both a 3PL and FBA. Knowing your costs will help you understand how much fulfillment is actually costing, how to budget, and if you should charge customers for it. It should also help you determine if you setup your products in multiple storing solutions.
Most fulfillment solutions have similar fee structures. Even though there are no “standard” pricing schedules, their warehouse size, location, your order volume, the size and weight of your products, and other details will all determine your pricing. You will need to have all of those details about your product(s) in order to determine what is something that will work for your business.</p>
<p>I found our largest costs revolved around storage, the actual warehousing of the product. Keep in mind that you will pay for shipping separately which is actually the highest cost for you.
Things to Look For
Here are some basic costs that you need to evaluate for customer shipping:
- Document inserts
- Pick and Pack
Then on the operations side there are additional costs to evaluate as well:
- Product Setup
- Inbound Receiving
- Account Management
If you have any questions about any of these things, let us help you understanding things. Send us a quick message about it!