Outsourced fulfillment is a path many eCommerce companies follow to save time and money. But 3PL pricing models will affect just how much money you’re able to save. They’re not all created equal, and knowing what you’re paying for can help you decide whether a 3PL makes sense for your business.
Also, remember that upfront cost isn’t always the end factor. Hidden costs can indirectly increase your 3PL budget. Plus, the outsourced company’s commitment to service will also affect your customer satisfaction and reputation.
Here’s a rundown on 3PL pricing and how you can choose the best provider.
How is 3PL Pricing Structured?
One of the most common 3PL pricing structures we’ve seen is the flat rate vs. per item model. This means that you can choose to pay a flat rate regardless of how many items you sell OR pay a per-item fee.
Amazon FBA uses this structure for its sellers. For example, their Individual Plan charges $0.99 per item sold. By comparison, the Professional Plan is a flat $39.99 per month with no limit on the number of items sold.
In addition to “base plans,” many 3PLs charge additional fees for specific services. We’ll use Amazon again: They charge a separate fulfillment fee, a referral fee for each item sold, and additional selling fees.
3PL giant Deliverr takes an inclusive approach to pricing. They only charge two fees: Fulfillment and Storage. Their Fulfillment fee covers everything from picking to packing to shipping, while the Storage fee is calculated each month based on cubic feet per item.
ShipBob is another inclusive pricing model that separates costs for receiving, inventory storage, and shipping. Picking and packing are included in the price and you won’t see a separate charge for this.
Some eCommerce companies might not need full-fledged 3PL services, such as kitting and customer service. In this case, your 3PL might create a custom quote for you based only on the services you need.
Common 3PL Fulfillment Costs
Specific costs and services can vary between 3PL providers. Some of the expenses you might incur include:
Account Setup Fees
Some 3PLs will charge a one-time fee to set up your account. This cost includes integrating your eCommerce store into their software, dedicating space for your inventory, labeling your items, and onboarding your business into their processes. Other 3PLs will not charge a setup fee.
Many 3PLs charge an hourly rate to receive and sort your inventory from your warehouse or manufacturers. Other 3PLs may charge a flat rate by the pallet.
Once shipments are received, your items will need to be stored in bins, shelves, pallets, or even specialty areas like refrigerators or freezers. This cost is usually based on cubic feet, though some companies may charge per bin, per shelf, or per pallet. Also, if you require cold storage, expect to pay a little more.
For items that are stored separately but need to be combined in a “kit” when ordered, some 3PLs charge a separate fee for this service. This fee usually depends on the complexity of your kitting requirements.
3PLs usually buy boxes, bubble wrap, and other packing materials in bulk and pass some of those savings on to you. They may add a separate line item for packing materials, or this cost might be included in your monthly service fee.
Like large eCommerce companies, 3PLs usually work out volume discounts with logistics providers and may pass some of those savings on to you. You’ll pay for shipping costs per item, which usually include the cost of label and insert printing.
Many 3PLs will offer customer service options, such as processing returns and refunds. This usually includes the cost of return shipping and a restocking fee.
Consider Hidden Fulfillment Costs, Too
There’s another side of 3PL pricing that can’t always be calculated in black and white. If you’re on the fence as to whether to use a 3PL service, you should also consider the cost of not doing so.
These are referred to as hidden costs because they’re not usually listed as line items on a P&L statement. However, they do directly or indirectly influence your bottom line. These costs may include:
A Lack of Integrated Systems
Manual processes are still the way of life for many companies handling their own fulfillment. Once an order is placed, your fulfillment processes should be connected to your eCommerce technology for a seamless, automated experience.
3PLs deploy robust tools like Zenventory to fulfill orders faster without manual inefficiencies slowing things down.
Having just one location from which to ship could be costing you more than you realize. For example, if you’re in New York and you have customers in California, you’re paying higher shipping rates for those customers.
A 3PL can support a multi-warehouse location strategy to help you curb higher shipping costs.
A Poor Customer Experience
We’re living in an era of instant gratification. Expectations for immediacy are spilling over into shipping timelines, with speed being a top priority and second only to cost.
Amazon has been a driving force behind the way customers perceive shipping costs and timelines. Even if you don’t think you’re competing with the online giant, chances are that your customers are holding you to Amazon’s delivery standards.
If you’re not shipping items in a timely manner, or if items aren’t properly packaged or tracking isn’t made available, your customer’s experience suffers.
Retail Wire notes that nearly 29% of consumers are more likely to place an order if they can receive their items within a week. Delivery is also important, with 72.7% of consumers saying they won’t do business with a company after a poor delivery experience.
Build Your Multi-Channel Fulfillment Strategy
Your order fulfillment needs are unique. But like many eCommerce companies, exploring a multi-channel fulfillment strategy rather than doing it all in-house may help you to save on fulfillment costs, improve the customer experience, and build a stronger business.