Fulfillment centers offer a great opportunity for people who want to get started selling their own inventory online but don’t have the capacity to store large quantities and fulfill orders themselves. They offer a strategic advantage and lower the barrier to entry. However, while they are practical and make eCommerce more accessible, they do have some drawbacks you need to be aware of before doing business with them. Here are a few of them.
Advantage – Allows You to Concentrate on What You Do Best
If your forte is finding great products to sell or developing your own, you don’t want to be tied up with all the logistics. The truth is that some of us are just not suited for that role, and having to invest in all of that infrastructure and hiring people to manage it is out of the question for most new eCommerce entrepreneurs. An order fulfillment company will allow you to fulfill orders with the same efficiency as the giants out there without the same initial investment.
Disadvantage – Less Control
At the end of the day, even if you choose the best fulfillment center there is, you are still giving up some power. Things can go wrong, and you are the one who will be to blame in that case. Some companies may want to be able to reduce delivery times or they find that their fulfillment center isn’t as efficient when it comes to returns. Coordinating with your customer support team can also be difficult when you’re dealing with a third-party logistics solution.
Advantage – Lower Overhead Costs
Perhaps the biggest benefit of going for a fulfillment center is lower overhead costs. Operating your warehouse costs a lot of money. Even if you decide to rent space in someone else’s warehouse, you will still have to pay money to maintain your inventory.
Not only that, but you will have to deal with equipment leases or purchases, payroll, and benefits packages for the people you hire. There is no need to worry about these things when working with an order fulfillment company.
Not only that, but fulfillment centers allow you to benefit from economies of scale as well. Since fulfillment centers handle large volumes, they can get preferential rates on shipping with various companies. And if you choose the location wisely, you’ll be able to save even more by reducing shipping distances.
Disadvantage – Not the Best Option for Small Volumes
You should know, however, that working with a fulfillment center does not automatically translate to lower costs. If you move very little merchandise or it stays on the shelf for too long, you will end up paying high fees. You could still benefit by focusing more on your main operation, but you will have to evaluate if the costs are worth it.
While working with a fulfillment center could be the perfect solution for certain businesses, it isn’t for everybody. So, make sure that you look at both sides before you decide on which option you’re going to choose.