How do you choose the right fulfillment warehouse for the specific needs of your eCommerce business? What features should you prioritize? What can you afford to ignore? These questions — and many more — affect who you choose to partner with. Making the call isn’t easy: you need to take multiple factors into account including cost, location, technology, or whether they can process returns or not. A single post is never going to be able to cover all that. That’s why I’m going to focus on the three non-negotiables I’ve noticed from speaking to our clients.
Speed is (almost) everything. This has been said hundreds of times before, but I’m going to say it again: Amazon Prime has spoiled consumers when it comes to delivery expectations. It’s also primed them. According to the 2019 Walker Sands Consumer Report, one third of consumers (and 43% of millennials!) receive one or more Amazon packages a week. The 2020 numbers aren’t in yet, but if I had to guess, I’d wager this has gone up. Amazon offers speed: large population centers enjoy same day delivery; those more remote can still get a package dropped off in two days.
And two days is quickly becoming the upper limit. A Statista report found that — back in 2019 — 40% of US consumers were “willing” to wait two days for fast shipping. According to the US Census, eCommerce sales went up by 7.7% in the first quarter of 2021. That increase comes on the heels of a 44% increase in 2020. This means that while more shoppers are heading online, more competitors are entering the rink. That’s why you can’t afford to have your fulfillment process put you at a disadvantage, which leads me to the first major point: your fulfillment partner — or 3PL — should offer fast shipping as an option.
Offering at least two day delivery can be a major competitive advantage and one of the fastest ways to increase conversions and provide a great customer experience. But overnight or 2-day delivery isn’t the only thing to consider when it comes to fulfillment speed: warehouse distribution matters too. As a general — if slightly crude — rule of thumb, the closer your products are to an area, the faster and cheaper it is to deliver them. Partnering with a 3PL or 4PL with broad distribution will help you distribute products, save money on shipping and cut delivery times all at the same time.
There are no universal best practices, rules or connectors when it comes to 3PL or Warehouse Management Systems (WMS). Each 3PL you partner with will likely use their own WMS to handle orders and fulfillment. This means that you — and the platforms you are selling on — need to integrate with it. At the moment, when it comes to integrations, you’ve got several options:
Before you choose a partner, look into your integration options and choose the route that makes most sense to you. The last thing you need is to get halfway through setting everything up and realize that the software you use is incompatible with what your 3PL uses.
Just like every other kind of business, some 3PLs are clearer about their pricing than others. Generally, most 3PLs would likely use one of these pricing models:
While these are three of the most common pricing models you’ll encounter, there’s no standardized 3PL pricing model. Before you settle on a partner, make sure you understand exactly how their models. Find out if there’s room for negotiation and identify all the strengths, weaknesses and risks of the model in play. The most important thing here is to choose something that works for your eCommerce business and current operations process.
As of 2020, the 3PL industry in the US is worth 196.4 billion dollars. Over the last 6 years, it’s grown by 2% year over year. This slow, steady growth indicates a maturing market. It’s a competitive one too: this means consumers have choices. You can prioritize the features and services that matter to you. These three points (and the bonus) are a good place to start, but in the end, only you can evaluate your needs.
Jon is a master at taking disruptive B2B SaaS applications like Pipe17 to market. He worked for many years in the world of enterprise software, marketing to the global 2000. Drawn to the massive potential in direct to consumer ecommerce where there are still many unsolved problems, he and his team are focused on thoughtful digital engagement with brands and merchants.
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