The High Costs of Doing Your Own eCommerce Fulfillment
One of the keys to Amazon’s tremendous success as an eCommerce business is its ability to deliver virtually anything direct to consumers at low cost and high efficiency. Amazon makes it look so easy that many online retailers might be tempted to take on their own fulfillment logistics.
For many businesses, this would be a big mistake. The reason? They woefully underestimate the costs and complexity of eCommerce fulfillment. Not understanding the scope of the logistics involved is a recipe for unexpected delays, unhappy customers and, ultimately, lots of hidden costs.
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According to Supply Chain Management Review, “establishing a sustainable e-Commerce position is as much about using the right fulfillment strategies to get your products or services to buyers as it is about having the right product at the right price. The key to success is being able to give customers what they want, when they want it, and how they want it — all at the lowest cost.”
Running a tight fulfillment operation boils down to several key factors: efficiently managing your human resources, implementing the right technology, and having the sufficient physical infrastructure in place.
Let’s take a deeper dive into each of these critical success factors.
You Won’t Win Without The Right Technology
There’s no way around it: running a world-class eCommerce operation requires a major investment in technology. The problem is many companies fail to understand the true cost of implementing and maintaining this technology. According to Forrester Research, as many as 43 percent of online retailers report that ownership costs for their eCommerce platform is higher or significantly higher than they predicted.
On average, retailers surveyed by Forrester said they spend 7 percent of their online revenues supporting the technology that underpins their eCommerce operations. This is not optional; the very survival of these companies depends on keeping their technology stack updated and running smoothly.
That’s because today’s sophisticated and demanding consumers expect a seamless experience when they purchase anything online. It’s a given that orders can be placed entirely on the web, fulfilled at the warehouse, and shipped directly to the consumer’s doorstep without a hitch.
To make this happen, online retailers need to have an eCommerce solution that performs flawlessly nearly every time. The process is further complicated by the need to expand globally, which requires support for multiple languages and currencies, as well as the expectation of a seamless omnichannel experience. Enabling fulfillment across various customer touch points such as ship-to-store, in-store pickup, and mobile point-of-sale can be extremely daunting for many businesses that are not experts in logistics.
Hidden Warehouse & Handling Fees
If your business has no prior experience in fulfillment, expect a steep learning curve. You’ll surely receive a crash course in shipping costs, labor and handling expenses, and infinite other details that come with physically managing inventory.
Along with labor and technology costs, here are just some of the other expenses of maintaining a warehouse to consider:
- Rent: Leasing a warehouse space will add to your fixed costs.
- Utilities: You will need to pay for electricity and water to keep the facility up and running.
- Insurance: You will need to buy coverage for accidents that happen in your warehouse.
- Supplies: The cost of any materials needed to run your facility, including pallets, shipping boxes, shrink wrap and diesel fuel for machinery.
- Shipping: The actual cost of shipping your products through carriers such as FedEx and UPS.
- Security: To safeguard your goods against theft, you will need 24/7 protection.
In this environment, mistakes have a way of multiplying quickly and becoming very expensive problems to fix.
Such was the case for CandyLab Toys. The eCommerce company sent 50 international packages with just a slight error in the zip code. While the packages didn’t end up in the hands of customers because of the mistake, the shipping carriers still charged CandyLab for making the attempt.
To support the growth of your eCommerce business, your infrastructure also needs to be ready to respond accordingly. Will you be prepared for an unexpected surge in customer orders? Do you have enough physical now and into the future? Will you need to add more fulfillment centers to meet customer demands for speedy delivery, given that you will be competing against the likes of Amazon Prime? Is your equipment and heavy machinery adequate and well-maintained for the tasks at hand?
Scalefast As Your Fulfillment Partner
At Scalefast, you’ll see an immediate ROI by leveraging our fulfillment resources. You’ll significantly reduce your technology, labor and warehousing costs. Cut your upfront capital expenses by as much as 90 percent by outsourcing your eCommerce operations to Scalefast.
From your customer’s first visit to your eCommerce store to the time they open their package at home, Scalefast assumes the responsibility. With our international logistics network, we can fulfill your orders to the last mile, freeing up your team to focus on growing your business and staying creative. Focus instead on product development, marketing, and other growth initiatives.
Get better results and more profits with less risk by investing in Scalefast as your full-service eCommerce partner.