The value of online shopping has continued to grow exponentially over the past years, with ecommerce transactions accounting for nearly 20% of global retail sales through 2021.
Through 2022, global ecommerce sales are expected to total $5.5 trillion, highlighting increased demand and the opportunity for online brands to scale globally.
Meeting such demand can be challenging, however, especially in instances where your online store has to scale quickly to fulfill its orders. Handling this yourself when fulfillment isn't a core competency makes the challenge even harder, so you may need assistance in order to realize the full value of increased demand.
But does your ecommerce store need a third party fulfillment center to manage its orders? We'll explore this further below while appraising some of the benefits of third-party fulfillment.
What Do We Mean by Third Party Fulfillment?
When you first launch your ecommerce venture, you may be able to meet demand by shipping packages one-by-one to customers.
However, this becomes increasingly untenable as demand grows and your sales volumes rise, creating the need to identify more efficient and streamlined shipping solutions.
This is where third party fulfillment comes into play, as this describes the process of outsourcing the management of your online orders from the moment they're received until the product is delivered directly to the customer.
There are numerous elements to third party fulfillment, including product location and packaging, warehousing and sending goods to the end customer.
The best ecommerce fulfillment brands will provide a comprehensive service that includes the use of local distribution centers, which minimizes shipment costs and shortens delivery times (we'll touch more on this below).
What Are the Benefits of Using a Third Party Fulfillment Center?
Now that you understand the precise function of third party fulfillment, the next step is to discuss some of the benefits of outsourcing responsibility for your online orders.
This way, you can make a more informed decision about whether your ecommerce store needs to partner with a third party fulfillment center. Here's some advantages to keep in mind:
#1. Reduction of the Cost Per Order
While it isn't always true that using a third party fulfillment center will reduce the cost per individual order, it's usually the case for small and medium-sized stores or those that see demand fluctuate through different periods of the year.
For SMEs, established third party fulfillment centers are capable of managing a much larger volume of orders, which can in turn unlock volume discounts and a significantly lower cost per order.
Similarly, most ecommerce fulfillment partners operate a large number of distribution centers in multiple locations, reducing the distance (read time and cost) that packages have to travel through the process of shipping.
To determine whether your ecommerce business can unlock savings through third party fulfillment, we'd recommend carrying out a fully loaded cost comparison as you do the detail selection. This way, you can compare pricing accurately and determine the best course of action.
#2. Scale Successfully in Line With Demand
If your business is seasonal in nature, it can be hard to cope with significant fluctuations in demand and online sales.
This is particularly true when it comes to maintaining the necessary workforce to handle orders in house during peak seasons. For example, you won't necessarily want to employ or remunerate a largely idle workforce when demand is low, but attempting to scale this quickly to meet seasonal demand can be difficult and incredibly costly.
With third party fulfillment, however, you can access a bespoke and readymade warehousing and logistics solution during seasonal peaks.
At the same time, you won't have to regularly recruit new or additional staff in order to increase internal capacity, saving your venture significant sums of cash in the process.
#3. Make Better Use of Your Time and Resources
Most ecommerce brands are product-centric, which means that their expertise lies in manufacturing or sourcing goods for sale.
Concepts such as logistics, fulfillment and shipping are rarely core capabilities, which means that in-house order management is often a struggle that consumes significant time and resources
By outsourcing such responsibilities to a third party fulfillment supplier, you can direct your resources towards the manufacturing and development of your products, along with other strategically important business elements like marketing and sales.
At the same time, you'll enhance and streamline your logistics process, creating a win-win scenario for your ecommerce brand.
#4. Lower Your Web Store's Capital Investment
While ecommerce stores typically have much lower overheads than brick-and-mortar businesses, you should note that in-house warehousing, order management systems and fulfillment facilities all require an upfront, capital investment.
These financial outlays can be significant, while they may divert funds from crucial aspects of product development or much-needed marketing campaigns.
Fortunately, outsourcing to a third party fulfillment center helps to minimize or completely avoid such capital investments, while reducing other costs such as product storage capacity and the implementation of WMS solutions.
This is particularly beneficial for smaller ecommerce stores, who will most likely lack the financial resources to make large capital investments from the outset.
#5. Reduce Your Shipping Times (and Costs)
As we've already touched on, the best ecommerce fulfillment providers boast large and comprehensive distribution networks.
This means that products can be packed, shipped and delivered much quicker, especially when compared with single or central distribution centers that have to cover a much larger catchment area.
At the same time, third party fulfillment centers make use of their distribution network to negotiate considerably lower shipping rates while optimizing their own capacity.
This will reduce your own shipping costs markedly, creating a scenario where you may be able to offer more competitive pricing to your customers.
The Last Word
Ultimately, you'll have to determine whether your own ecommerce store would benefit from using a third party fulfillment center based on the considerations above, but there's no doubt that this delivers obvious advantages to small and medium sized businesses. Do you still have any doubts? We answer often heard questions in this article.
If you do decide to outsource your ecommerce fulfillment needs, you can rest assured that we offer a comprehensive service here at Salesupply. Our global fulfillment network is certainly ecommerce-centric, while we currently operate 15 distribution centers across three different continents.
To find out more, you can call us today on (786) 604-2042, or send us a more detailed message through our 'Contact Us' page.