How Much Does Order Fulfillment Cost? Fulfillment Services Pricing Explained
When you’re planning your e-commerce business, the last thing you want to worry about is the cost of order fulfillment services. These are costs that businesses often forget to factor in, but they can be massive – so much so that they can completely derail your business. That’s why it’s essential to know how much does order fulfillment cost? Fulfillment services pricing is explained here, including full breakdowns of each service and step-by-step guidance on how to get your fulfillment costs as low as possible.
An Introduction to Order Fulfillment
While it might seem simple enough to set up your own warehouse and do all the packing and shipping yourself, you’ll find that’s not always possible. You may also find that it takes more time than you’re willing to invest in the business. This is where fulfillment services come in handy. What they provide, essentially, is a service where they will store, pack, ship, and fulfill orders on your behalf. You get a storage unit for the inventory that gets shipped out to customers when they place an order with you and then pay fulfillment services for storing those products until it’s time for them to be shipped out again. The price of each order varies depending on how much work is involved as well as what your needs are as a customer.
Why Is Inventory Management Important?
Inventory management is an important part of any business. It’s necessary to keep track of how much inventory you have, so that you can order more when needed. If you don’t manage your inventory well, it can lead to storage or floor space issues, and that can lead to higher expenses or just plain wasted inventory. Plus, while some customers are okay with waiting a little longer for their order if they know they’re getting something unique, others will take their business elsewhere if they have to wait too long. A survey from Q1 2017 found that 73% of shoppers consider quick delivery as the most important factor in determining where they buy from. With this in mind, choosing the right fulfillment service is essential to ensuring customer satisfaction and ultimately achieving your goals as a business owner.
Traditional vs. Self-fulfillment
One of the questions we often get asked is How much does order fulfillment cost? The answer to this question depends on what you are trying to fulfill. Generally, there are two different types of fulfillment options: Self-fulfillment and third-party fulfillment services. They have a number of similarities, but they are also significantly different. Self-fulfillment means the business fulfills its own orders, while third-party fulfillment means the business hires a 3rd party company to fulfill its orders for them. The table below provides some information about these options, including pricing based on volume and complexity.
Table comparing self-fulfillment vs. third-party fulfillment options with regards to price per unit and how many units can be fulfilled by each type of service. There is no limit to how many units can be ordered or fulfilled through self-fulfillment, which offers an advantage in terms of flexibility. However, both types offer great convenience for customers who don’t want to pay for shipping costs when their order is small or medium-sized.
Calculating your Average Product Sale Price
Average Product Sale Price = Total Sales Dollars / Total Units Sold
In order to calculate your average product sale price, you would want to divide the total sales dollars for the day by the total units sold. For example, if you sold $5,000 worth of products and had 300 products on hand that day, your average product sale price would be $17.50. Let’s do a little bit more math in order to determine how much profit is lost with each sale. If you were selling at the same rate and price as before, but only had 150 products left in stock (150 * 17.50 = $2,325), then your gross profit per day would decrease from $3,525 to $1,700 ($3,525 – $2,325). It may not seem like such a big deal when it only takes away about 20% of gross profits but let’s see what happens over time. The table below shows what percentage of profits are lost as inventory continues to dwindle:
After this point, there are so few items left that they might as well be considered non-existent because there won’t be any money coming in at all!
Final cost calculation
Order fulfillment is the process of getting a customer’s order to them once the order has been placed. Sometimes this process may involve shipping, packing, and handing items in person. This can cost a lot of money if you’re not careful. Here are some factors that go into figuring out how much your order fulfillment will cost -Volume: The more orders you have to fulfill, the more it costs.
-Location: Shipping from one location to another will cost more than fulfilling orders from the same warehouse or store.
-Retailer fees: Retailers like Amazon charge fees for third-party sellers who use their platform. These fees range anywhere from 20% – 45%. It all depends on what they offer and how they operate their business model as well as what marketplaces they use (eBay, Etsy). There are a few other costs associated with fulfilling an order such as labor expenses, inventory management, etc., but these vary depending on the size of your business.
