Reduce Operating Expenses
There a few ways an online retail business might work with third-party fulfillment services, including simply replacing the retailer’s own warehouse.
While each retailer’s situation will be unique, using a service company that specializes in warehousing and fulfillment could help some ecommerce businesses reduce operating expenses. For example, employing a third-party fulfillment firm could:
Eliminate or at least reduce the cost of leasing a warehouse or storage unit,
Reduce labor costs and taxes associated with order fulfillment,
Lower packing material costs, since fulfillment services may have better prices,
Pack and ship more quickly, allowing more economical shipping services to be used,
Cut shipping costs because of volume and warehouse location.
The money saved could be dropped directly to the bottom line or invested in other areas of the business, like marketing, which in turn could lead to growth.
Focus on Other Areas
In addition to the possible monetary benefits described in the section above, working with a third-party fulfillment service may also free up a merchant’s time.
This is especially true for small online retail operations. For example, if it’s your job to both develop the store’s content marketing and pack orders from noon to 5:00 p.m., using a fulfillment service may mean that you have a lot more time for blog posts, customer-attracting articles, a video FAQ section, or similar.
If you believe content marketing will help your business grow, having the time to do more of it or to be more effective at it is very important.
Options for Order Fulfillment
For at least a few reasons described here, employing a third-party fulfillment service could help an ecommerce business grow. The emphasis is on “could help,” since not every business is in a position to use third-party services nor does it make sense for every product in every situation.
To understand if this is a good option for your ecommerce operation, it can be helpful to consider some of the fulfillment options or models available for tangible products.
Fulfill your own orders. Almost any retailer, large or small, can fulfill its own orders. Self-fulfilling orders has the benefit of controlling the process and adding personal touches or branding to shipments. For low-volume sellers, this is probably the least expensive model.
Outsource orders. When you hire a third-party fulfillment service, you are effectively outsourcing. You gain all of the benefits described above, but do surrender control and some branding opportunities.
Mixed order fulfillment. Your business can fulfill some orders and outsource others. This model works especially well for regional businesses seeking to grow in other areas or for seasonal sellers who need help during peak times.
Drop shipping. Your business might not even need to buy products at all. With drop shipping, when a customer buys something from you, you then buy it from the manufacturer or distributor, which ships the order directly to your customer.