eCommerce order fulfillment is a deciding factor when it comes to attracting customers. You need fast, accurate, and low-cost delivery to retain today’s customers.
According to the latest stats of Invespcro, same-day delivery influences the purchasing decision of 49% of shoppers. To meet the customer’s expectations, you need to integrate your e-store with eCommerce shipping solutions. But even here you should choose wisely: if your delivery is more than 2 days late, 69% of consumers won’t shop with you again.
Yet, eCommerce order fulfillment is more than that: you also have to pay for setup, receiving and intake, storage, picking and packing, kitting, account management, and returns. All of this costs 70% of an average order value.
What options do you have? How to calculate your average costs? That is exactly what we are going to explore in this article. Keep on reading and learn everything you need to know about eCommerce fulfillment costs.
What Are eCommerce Fulfillment Costs?
Overall, eCommerce fulfillment costs are how much money you spend on delivering an order. There are four basic factors to consider while calculating this number: receiving, storage, pick and pack, and shipping. There can be additional fees as well like onboarding (when you first start to work with a fulfillment company) or returns.
The costs will vary greatly based on the following aspects:
- who is responsible for order fulfillment (your in-house team or an outsourcing company)
- what is the duration of cooperation with the outsourcing company
- what are the size and weight of the products
- how urgent is the delivery
- what is the distance of the delivery
Which eCommerce Fulfillment Pricing Model Should I Use?
The pricing model will greatly influence your order fulfillment costs as well. Your choice shall be based on two factors: what you sell and where.
Firstly, you should choose between paying for the time spent on providing the services or per unit. These are the two most popular pricing models out there and down below you can see the average order fulfillment fees for various 3PLs.
From the table above, it becomes clear what is a fulfillment fee. Secondly, you can access the provider that suits you best based on where you sell. Here you have such fulfillment options as Amazon FBA, your eCommerce platform fulfillment, pick & pack, and a third-party logistics (3PL) provider.
Amazon retailers can take advantage of the Amazon FBA fulfillment option. Amazon fulfillment centers will store, pack, and ship the orders for you as well as handle returns and exchanges. Besides, Amazon FBA users get their products to appear in the Prime listings and are eligible for fast shipping. This fulfillment option is alluring for two reasons:
1) you can gain a competitive edge over other retailers thanks to a higher ranking in the marketplace listings;
and 2) you save yourself the trouble of worrying about logistics.
The Amazon FBA fulfillment fees for standard-size products range from $2.70 for small items to $5.68 for large ones. You can learn more about the pricing here.
Shopify Fulfillment Network
Shopify Fulfillment Network is for Shopify users. You can send them products and they take care of the packaging, delivery, and returns processing. You will make two-day delivery available and have your custom packaging. Take a look at the video down below to learn more about the particularities of operation of SFN.
SFN has more drawbacks though: it is for the US and Canada only and you should send a minimum of three orders per day. The pricing for Shopify Fulfillment Network is not available publicly and a seller should apply through the Shopify website to get more details. However, here you can find what the fulfillment fee depends on.
Pick and Pack Fulfillment Cost
Pick & pack fulfillment is the best option for businesses that have their own warehouses. You pay the company for picking up the products from your warehouse, packing, and delivering them. You can significantly cut order fulfillment costs because you will not have to pay an additional monthly storage fee, a fee for letting your products sit for too long in the storage, etc. These are some of the high-quality pick and pack vendors to consider:
- Vendors in the US: HowardLogistics, AeroFulfillment, and BergenLogistics
- Vendors in Europe: EcommerceFulfilment, Huboo, and Selazar
Third-Party Logistics (3PL) Provider
3PL fulfillment is by far the most popular option among those who have an established eCommerce website. Basically, you let a third-party company take care of logistics and the fulfillment process for you. Ideally, a 3PL provider should optimize your fulfillment cost by arranging adequate product distribution across the country or globe for faster shipping. 3LP is often used by those who have too many orders to pack on their own, have no idea about logistics, or run out of storage space.
With 3PL, you do not have to make big upfront investments in warehouses or software for storage management. Third-party logistics fulfillment pricing depends on several factors. You also don’t need to get big sales for shipping since these companies usually send a lot of products from different businesses and have volume discounts. The only concern you should be having is to find a high-quality 3PL that you can trust. Here are some of the reliable vendors you can consider:
- Vendors in the US: CH Robinson, ShipBob, and EasyPost
- Vendors in Europe: Omni Logistics, Shipwire, and Pro FS (Professional Fulfilment Services)
eCommerce Fulfillment Costs Breakdown
3PL is the most popular fulfillment model among merchants with established eCommerce websites because of the efficiency of this approach. We’ve made an order fulfillment pricing breakdown for you to learn what exactly you will be paying for.
Setup & Onboarding Fees
This fee is typically a one-time payment. Together with a 3PL, you sit down and figure out how you want the fulfillment to look like, what volume you expect, and how to organize the process in the most efficient way. The payment can range from $100 to $1,000 based on how big and complex your company is.
Inventory Receiving and Intake Costs
It is a fee charged for intaking products from your supplier or you and processing them, meaning that they will organize goods and enter them into the system. You can pay either for an hour ($20-$50) or per unit ($5-$15 per pallet, $25-$55 average fulfillment cost per order, $.05-$.20 per piece, $1 per box).
Inventory Storage Costs
Storage costs come up for space that your inventory takes in the warehouse. You can pay for:
- pallet ($5-$20 per month) – it is the most cost-effective solution
- a cubic foot of space ($.30 to $.55) – it is for companies that want to reduce empty space
- bin ($1 to $2.50) – it is for smaller items
Some 3LPs charge an extra fee for storing fragile items and those that need specific conditions (like temperature, light, pressure).
Pick and Pack Fulfillment Cost
This part of order fulfillment comes when a customer orders an item: 3LP’s employees go find the product in the storage and pack it before shipment. Average pick and pack costs come per order ($2.50) or per item ($.20) basis.
Insider tip: choose your model based on the number of items on your average orders. If most customers order many items, an order-based system would work better. In case most customers order just one product for you, there’s no reason to overpay and choose the order-based model.
If you want to create custom packaging, you will face extra fees. It takes material and design labor to deliver custom items. If it is a simple plastic bag with a logo, you can pay $0.03 per piece. However, if it is about expensive materials and additional fillers, the pick-and-pack pricing per order can be as high as $30.
Kitting & Assembling Costs
The fee for kitting and assembling is optional. Basically, kitting means arranging items in a certain way during packing. It is a way to further customize delivery for your business. However, this individual service varies greatly from one eCommerce store to another and, therefore, has a price of $30–$50 per hour. If assembling a package takes little time, the worth of the single kit will be around $0,5-$1.
Shipping costs are fees you pay for delivering the package to the customer. It depends on a lot of factors like the product’s size, shipping location, product weight, and speed of delivery. You can also choose between using your carrier account or those provided by your 3LP. However, keep in mind that 3LPs usually work with big carriers. They place big orders and, therefore, have great volume sales that you can benefit from. For example, the 3PL Red Stag partners with all major US carriers such as FedEx, UPS, or USPS to provide shipping discounts to its clients.
Account Management Fees
It is extra administrative costs that go beyond the order fulfillment. It includes, for example, communicating with you and your suppliers, processing returns, resolving customer complaints, and handling unforeseen problems. You can pay based on monthly rate ($50–$1,000) if you have a lot of orders, returns, and other issues or hourly rate ($30-$50).
If the product was broken or did not fit, 3LPs have to do extra steps like receiving the return, inspecting it for defects, changing the stock, etc. Their effort costs money. The rate is a combination of pick and pack fulfillment cost and the cost of return shipping.
How Do I Calculate the Average Fulfillment Cost per Order with a 3PL?
It is quite difficult to estimate the final cost without contacting the 3PL. In order to create a rough monthly budget, you need to know the average amount of pallets, orders, or units for the month, the proximity of the customers, and your provider’s pricing. Do not forget to take into account the rush months from October to January – you will have more orders and eCommerce shipping and fulfillment costs usually are higher for this period as well. Add about 10% to your total.
Let’s say you’re selling shoes online. On average, you store about 200 shoe boxes and receive about 30 orders per month. To calculate the monthly budget you need to add the cost of storing 200 boxes and the cost of fulfilling 30 orders per month considering the fact that this fee would slightly vary depending on the customer’s proximity and delivery urgency.
Some companies such as Whitebox offer a free quote calculator, so do not forget to check for that option before creating a huge Excel with estimations.
Here is a table to help you understand the average fulfillment services pricing. Take into consideration that it is for common products, not industrial items.
|Fulfillment Service||Pricing Model||Cost|
|Receiving and intake||Per hour||$20 to $50|
|Per unit||$5-$55 per order|
|Storage||Per pallet||$5 to $20|
|Per cubic foot||$.30 to $.55|
|Per bin||$1 to $2.50|
|Pick and pack||Per order fee||$2.50|
|Per item fee||$.20|
|Shipping||Carrier pricing pass directly on to the client.||Depends on size, destination, weight, delivery speed, and more.|
|Kitting||Per hour||$30 to $50|
|Account management||A flat rate||$50 to $1000 per month|
|$30-$50 per hour|
Do not forget about volume sales too.
Order Fulfillment Cost Recap
eCommerce fulfillment rates depend on a variety of factors like the number of orders, the size of your products, and the pricing model you choose. We hope that the article helped you gain an understanding of how much does fulfillment cost and how to estimate this number.
There are four most popular fulfillment options the choice of which depends on the particularities of your business:
- Amazon FBA works for Amazon sellers
- Shopify Fulfillment Network meets the needs of Shopify-based stores
- Pick and pack fulfillment successfully serves the needs of businesses with their own warehouses
- Third-party logistics providers help well-established businesses avoid logistic challenges and optimize fulfillment costs.
If you decide to outsource eCommerce fulfillment to reduce expenses and streamline the processes, setting up integration with your third-party logistic vendor is essential. At Elogic, we have extensive experience providing Magento integration services for stable and secure data exchange.