What Are Fulfilment Houses/Fulfilment Centers?
In case you don’t already know what a fulfilment house is – it’s a specialist company that takes care of product fulfilment on behalf of the business owner. So basically a 3rd party company that takes care of everything to do with your order processing.
Why Should You Consider a Fulfilment House?
There are a number of reasons as to why you should consider a fulfilment house for your business – in fact, it’s something that I think EVERY business owner should at least look into because it potentially means:
- No more picking and packing orders!
While this may not be a huge consideration when you’re just starting out – trust me when I say this – it will be!
As your business grows you will inevitably have to spend more time sorting, picking and packing orders and if you want to continue being a business owner and not just end up with an online job then that leaves you with only two real options:
You either have to create an in-house solution – which means hiring people and possibly renting storage/warehouse space.
You can outsource the entire order fulfilment aspect of your business to another company, a specialist, i.e. a fulfilment house.
Of course, which option you choose will depend entirely on your specific circumstances; your business, the goods you sell, your personal goals etc. BUT one thing is for sure; fulfilment houses can be a terrific and incredibly SIMPLE solution.
The in-house option will mean a lot of work for you – hiring someone suitable, training them, paying them (and all the tax work involved with this), insurance, renting a warehouse… I think you get the idea – there is a LOT to deal with!
Compare this to simply sending your goods to a fulfilment house, who will sort and store them and send them out to your customers as and when required.
That’s it! It really couldn’t be any simpler for you and it means that:
- You can spend time actually GROWING your business.
Think about how much extra free time you’ll have when you don’t have to do any of the tasks involved with order fulfilment – no worrying about jiffy bags and bubble wrap, no packing items, no address labels, no trips to the post-office and no waiting for courier collections… this means you can instead spend that time on the really important things in your business – things that will increase your sales and profit!
Okay, I can hear what you’re saying now – “That’s great Andrew, it all sounds good – but what about the cost!?” And you’re right of course – that is the main consideration!
But unfortunately I can’t give you one simple answer here. The cost will vary hugely based on the number of products, the size and type of products, the number of sales, average order amount, additional features needed and of course – which company you use.
So as much as I wish I could tell you roughly how much a fulfilment house will cost you – I can’t; the only way to know for sure it so contact a few companies for a specific quote.
One tip I do have is to use one of the bigger companies as a starting point – someone like Amazon with their hugely popular Fulfilment By Amazon option or Shipwire (more on them below). You can easily find their pricing details without having to contact anyone and can then use it as a comparison when speaking to other, smaller fulfilment houses.
Fulfilment houses generally have a charge for storage, fulfilment per item, and then of course the shipping cost. So take a look at these two links and see what type of cost you’re looking at for your business:
Both companies have fairly easy to understand pricing structures, and Shipwire have a great tool for filling in your monthly order and storage details so use that if you’re not sure or are estimating for future sales.
Which Fulfilment Company Should You Use!?
Again, another question which I know you’ll all want an easy, simple answer to, but once again, I’m afraid there isn’t one.
Though I have personally used Shipwire to fulfil orders for my own information products business, there are a number of things you have to consider when trying to choose the right fulfilment house for your business.
I’ve created a checklist of points to help you when searching through all the options out there:
Of course – price is probably the first thing you have to look at as it doesn’t matter how good a fulfilment house is and how much time it’ll save you – if your margins don’t cover the cost then it’s a non-starter.
As above, the price is usually broken up into three main parts – storage, handling and the actual shipping cost plus extra for specific, additional services. So make sure you always take into account the full cost for each fulfilment house.
Another very important aspect of product delivery is of course speed – we all know how important it is nowadays to get items shipped fast to your customers so I would only really consider a fulfilment house if they offered same day shipping up to a certain time (the later the better).
Reliability is another incredibly important consideration! The last thing you need is a fulfilment house that doesn’t stick to its claims, makes fulfilment mistakes, and overall – let’s you and your customers down. That can be fatal to your business so you need to go with a company that is reliable. Of course this is probably the main plus point of the ‘big two’ – FBA and Shipwire.
Amazon are famous for their market-leading fulfilment set-up so you know you’re in safe hands and I’ve personally sent thousands of items through Shipwire without even a single wrong-address delivery.
That’s not to say that the smaller companies will offer worse service, you just need to be a little more mindful and should spend some time combing the web for reviews before making a decision.
As a small business, you need a fulfilment house which offers some degree of flexibility as you will have more variables than a huge, high-street company. Your storage needs and sales volume might change month to month, you may start selling completely different items, you may need to make specific changes to individual orders etc., so look for a fulfilment house that is not completely rigid in their set-up.
- Real-Time Info
One big minus point of fulfilment houses has always been the fact that you don’t have up-to-date info for your customers in the event of a problem or simply a query. Say a customer emails or calls you about an order and you have to first refer the matter to your fulfilment company and get a reply from them before you can let your customer know what’s going on. That’s simply not good service at all and isn’t something I’d be comfortable doing.
But happily nowadays that’s not the case and a good fulfilment company will give you real-time access to all the shipping and tracking details so you have all information to hand, exactly as you would if you’d shipped the item yourself.
Fairly obvious, but you don’t want to have to email every individual order to your fulfilment house – that will cause delays and extra work which basically defeats the whole point of outsourcing order fulfilment in the first place. So choose a fulfilment house that can integrate seamlessly with your shopping cart and selling marketplace (such as eBay, Amazon or Etsy), automating the entire process.
Although this partially falls under Reliability, I thought it also deserved its own point. Mistakes do and will happen in order fulfilment, that’s inevitable and something you CAN’T avoid (though at least with fulfilment houses it will always be less than when processing orders yourself) so it’s important to work with a fulfilment house that doesn’t pass-off the blame for any mistakes. Product shrinkage/damage, labelling errors, wrong items dispatched etc. – a good fulfilment house will take responsibility for any of these errors, refund where appropriate and help you to solve the problem for your customer.
- Additional Features
And then lastly, you have to consider all the additional features offered by a fulfilment house:
- Ease of returns – can the fulfilment house accept customer returns, inspect the item and add it back into your inventory?
- Product inspection – what if you want to send products directly from your supplier to the fulfilment house, can they do an initial inspection and report?
- Stock alerts – does the fulfilment house offer live stock levels and stock alerts when inventory for a product reaches a certain level?
There are many more specific features that you may need in your business so always check to make sure it’s offered BEFORE you sign-up with anyone.
So I think that covers pretty much everything!
I hope this guide has been useful to you and please – actually take the time to really consider using a fulfilment house as I really think it’s a terrific option for a lot of businesses.
It allows you to grow and scale your business without being constrained by order processing, and it offers the flexibility and freedom that you were probably looking for when you started an online business.
Imagine being on holiday and knowing all you have to do is check your emails in the morning and answer a few customer queries (if you haven’t also outsourced that!), knowing that your business is operating exactly as normal!
I always say that the key to running an online business and creating the lifestyle that you want is by outsourcing the tedious, time-sapping jobs like order processing, and there’s no better way to do this than by using a fulfilment house.
Feel free to share your thoughts in the comments box below. Have you used or are you currently using a fulfilment house? Share them below so we can uncover some hidden gems that aren’t as well known as Amazon or Shipwire!
Until next time!
All the best,