If you’ve started an e-commerce company recently, this all sounds exciting — and it is. The industry is booming and only getting bigger.
However, there is a problem. When starting up, you probably didn’t factor in the 80-plus hour workweeks or the massive amount of effort it takes to get your product to your customer’s front door. Not to mention, the high cost of it all. For every minute you’re in the back picking and packing, that’s money lost in sales.
Your strength is on the front lines, handling customer service and dealing with vendors.
Yet, here you are. You’re frustrated and exhausted. You really don’t know what to do.
But, we do. The answer to all your time, money, and blood pressure problems is simple. You need to find a 3rd party fulfillment service.
But what is 3rd party fulfillment and how do we know that’s what will solve your problems? We explain below.
Types of Order Fulfillment
When e-commerce entrepreneurs set out to become one of the 30 million small business owners in America, they have to make a decision. It’s the same decision you had to make when you started your business.
Who’s going to handle everything?
You, along with millions of other start-ups, figured you’d save the most money by doing everything yourself. It’s starting to look like you were wrong. Don’t throw the towel in just yet.
There are three options for order fulfillment: self-fulfillment, dropshipping, and third-party order fulfillment. We’ll go over each of these below.
If you’re running your online store, picking and packing, shipping, and handling support, you use self-fulfillment. It’s pretty straightforward.
You may have rented a large space with a warehouse that’s draining money every day. You’re concerned you’re losing sales because you can’t get to customer emails.
You can hire more people, but how will you pay their salaries? How much longer can you pay your monthly rent?
The overhead is what’s hurting you. That, and the lack of sleep.
Someone may have suggested you start dropshipping. They told you that you’d save time, money, and headaches.
Two out of three ain’t bad.
If you now realize that self-fulfillment isn’t efficient, you won’t feel much better about dropshipping.
The theory goes that dropshipping saves you time and money. The reality is, it comes at a huge trade-off.
When you dropship, you find a supplier, usually online. They manufacture and warehouse a product. When an order comes in on your e-commerce site, the dropshipper puts your label on it and sends it to your customer.
Sounds great! What’s the problem?
Nowadays it’s very common to find these suppliers in China. This leads to obvious drawbacks.
First, you can’t pick up the phone and call the supplier when there’s an issue. For one, do you speak Mandarin Chinese? Another issue is that Beijing is 13 hours ahead of Fort Lauderdale.
That’s a lot of effort to tell your supplier that you have a shipping issue. Speaking of shipping…
The Biggest Disadvantages to Dropshipping
The shipping process is slow. How slow is it? We thought you’d never ask.
It can take a month for your product to reach your customer. Yes, 30 days. There are reports it’s taken longer.
Amazon, the King of e-commerce, found out that 60% of their customers didn’t think their lightning-fast shipping options were fast enough. So, do you know what Amazon did? They started their own logistics system.
Do you think your customers are going to wait four weeks? Of course not. You wouldn’t, why would they?
Another disadvantage is that you have no control over the quality of the product. All you do is upload a photo of the product to your online store. The only way you’ll know what kind of quality the product is, is by ordering one yourself.
The customer clicks the product, you contact the supplier, they ship it.
Weeks later, voila! It’s not the right product or the quality is poor.
Now what? Ordinarily, your customer returns it and you send a new one. The return process for dropshipping is often a nightmare.
For starters, the customer sends the faulty product back to you, at your expense. You may have to give them a refund. You might have to send them a replacement.
You pay for every single one of those options. Plus, there’s still a chance your now former customer leaves you a bad review. Not the look — or a headache — you want.
3rd Party Fulfillment
When you use 3rd party order fulfillment, you partner with a company that specializes in getting your product into the hands of your customer. That’s the entire job — ensuring the process is seamless.
They’ll receive your product, inventory it, and store it in their warehouse until you get an order. Sometimes, the 3PL company will have a direct ordering system attached to your store.
Other times, you simply forward the order to them. They’ll receive it, then get to work. They’ll pick and pack your product, often using your packaging. They usually get a good deal on shipping costs, too.
A reputable third-party fulfillment company will pass those savings onto you. They’ll also handle returns and stay in constant communication with you throughout the process.
That leaves you to focus on sales and providing excellent customer service. So, what’s the catch?
If you don’t choose the right warehousing and fulfillment service to partner with, it can get pricey. But, a company with a great reputation and a lot of experience will look for ways to keep your costs down.
What You Pay For with 3rd Party Fulfillment
Most fulfillment services use activity-based pricing. This means they charge you for what they actually do for you.
You’ll pay an initial set-up fee. After that, there are four fees you’ll see on your invoice:
- Receiving fees
- Storage fees
- Pick and Pack fees (aka, the actual order fulfillment)
- Shipping costs
Some companies charge an initial set-up fee for as little as $100. Bigger warehouses or 3PL providers may charge as much as $500.
They’ll charge you an hourly rate or per-unit rate for receiving your product. But, this is usually an umbrella term that includes more than opening up a receiving door. Many companies include product unloading, inventory data entry, and even barcoding.
Companies base warehousing costs on the amount of cubic footage, square footage, pallet storage, or bin storage your product takes up. They’ll charge you monthly, so this will vary depending on what your inventory is at the time.
And that’s one of the biggest benefits of 3rd part fulfillment.
You only pay for the activity on your account. If you don’t have new product come in, you’ll only pay for the product that went out. It’s very transparent.
How to Find the Best 3rd Party Fulfillment Company
Finding a 3rd party fulfillment isn’t difficult. There are 3PLs everywhere. The hard part is finding one that’s best for you.
When you search for a fulfillment service, make sure they’re upfront with you about the services they’ll charge you for. Ask them how they handle returns and how they figure your shipping costs.
If you’re in Fort Lauderdale, your answer’s are even easier to find.
At ASAP Courier, we provide a wide array of services for every business. We offer everything from refrigerated service to warehousing to last mile delivery.
Contact us today and let us know how we can streamline your business and help you increase your bottom line.