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When to shift from in-house to outsourced fulfillment

What is your eCommerce business’ competitive advantage? Is it your product range, the exclusivity of your brand, your prices? Or is it your fulfillment?

Many eCommerce business owners are surprised to hear that fulfillment is their competitive advantage, but with the ability to handle more orders, deliver better customer service, save costs, and create time, your fulfillment process can drive you forward or hold you back.

Knowing when to shift from in-house to an outsourced fulfillment provider is vital to your business’ success – but how do you when it’s time?

The differences between in-house and outsourced fulfillment

We’ll keep this short and sweet:

In-house fulfillment

This is where you are responsible for the entire fulfillment process including receiving sales orders, picking, packing, shipping, tracking, and resolving any late, missing or damaged deliveries. At the beginning of your eCommerce journey it gives you control, an insight into your business and a cheaper way of starting up. As you grow, in-house fulfillment can be harder, more expensive and increasingly time-consuming to maintain.

Outsourced fulfillment

This is where you partner with an outsourced fulfillment provider, shipping your items to their warehouses for them to pick, pack, ship, track, and ensure delivery dates. Often used to supplement business growth, it brings benefits of expertise, lowers costs, larger space and quicker delivery times.

When to outsource your fulfillment

The differences between in-house and outsourced fulfillment are simple. It’s clear that in-house fulfillment is beneficial when beginning your eCommerce business, and that outsourced fulfillment is needed once you’ve scaled your eCommerce business. But when is the tipping point? When do you make the change?

1. Your delivery standards are slipping

First and foremost, if your delivery standards are slipping, it’s time to outsource your fulfillment. 17% of customers (that’s nearly one in five) won’t return to your store following a poor delivery experience. If the growth of your order volume is leading to late or incorrect deliveries, you must consider outsourced fulfillment.

Outsourced fulfillment providers have the expertise, space and staff to deal with an increase in orders – whether it’s a gradual increase as your business expands or a seasonal increase due to the types of products you sell. You are guaranteed perfect deliveries each and every time – keeping customers happy and loyal.

2. Your conversion rate is low

With cart abandonment rates at 69.89%, you won’t be alone in trying to increase your conversion rates. You’ve likely lowered your prices, added free delivery options, and started sending cart abandonment emails. But have you considered the impact of logistics on your cart abandonment rates?

Outsourcing your fulfillment enables you to guarantee fast shipping times, which qualifies you (often automatically) for fast shipping programs such as Walmart Free 2-Day Shipping. Fast shipping programs increase conversion rates by offering customers guaranteed fast shipping by a brand that they know and trust, and outsourced fulfillment ensures that your delivery rates are good enough to get on and stay on these programs.

3. Your listings aren’t visible

If you’re on the second line of the search results for your keywords, you’ve got a battle ahead. If you’re on the second page, you might as well forget about it. Optimizing your listings for increased search ranking is a great start but supplementing this with free and fast shipping is even better.

Another benefit of using outsourced fulfillment to qualify for fast shipping programs is the increased visibility that shipping programs such as eBay Guaranteed Delivery, generate. Listings automatically rank higher, appear in filtered search results, receive highlighted fast shipping tags, and have a higher chance of winning the buy box.

4. Your costs are too high

You’re running an eCommerce business to make a profit, so you should always be looking for ways to reduce your costs. As your marketplace, stock, and marketing fees grow, so do your warehousing, staffing, shipping and packaging costs.

Outsourced fulfillment can give you more money to invest in free shipping, marketing or your back pocket. How? Outsourced fulfillment providers have the expertise and geographical locations to deliver your items in the fastest way possible, as cheaply as possible – saving you immediate shipping costs. You’ll also spend less on warehousing space, staffing and packaging materials.

Tip: If costs are your motivating factor, use this fulfillment calculator to see if your business is ready to outsource fulfillment.

5. You want to expand

If your online store is ready for expansion, you must ensure that your fulfillment processes are too. Managing multiple sales channels, increased order numbers, and more marketing activities is time-consuming; in-house fulfillment can take you away from these important tasks, especially when you’re fulfilling more orders.

Partnering with an outsourced fulfillment provider takes the stress and time of fulfillment out of your hands – allowing you to dedicate more time to your business expansion plans. It also means that you don’t have to worry about the capabilities of your technology, warehouse, and staff to manage a growing business – your outsourced fulfillment provider will handle that for you.

6. It’s taking up too much of your day

If your day is spent parceling up products, printing shipping labels, and chatting to the delivery person, it’s time to outsource. We’ve even heard stories from sellers whose partners threatened to leave them — it’s a rare occurrence but it has happened, and is something to look out for.

Protip: You can combine the best of both

In-house or outsourced fulfillment aren’t the only options. If you think your business might be ready for outsourced fulfillment, but you’re not entirely sure, why not try both? Send some of your high-selling and fast-moving items to an outsourced fulfillment partner and keep your low-sale products in-house to see what works best.

Decision made – what next?

Once you’ve decided that your business is ready for outsourced fulfillment, then you need to pick a reliable outsourced fulfillment provider to partner with. In doing so, ensure that you make a note of the essential questions to ask your potential fulfillment provider, take a look at their case studies, and check out what fast shipping programs they can automatically qualify you for.

Outsourced fulfillment can be a scary step, but when taken at the right time, it’s an exciting and profitable one.

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