Outsourcing fulfillment is an important step for many eCommerce companies, who often struggle with creating infrastructure to warehouse and ship products quickly and efficiently. However, whether you’re using third-party logistics, a solution like FBA, or a combination of the two, it’s important to understand pricing and where costs are coming from.
Both a 3PL and FBA have relatively complex pricing schemes, which can result in “hidden” costs which you weren’t expecting based on upfront rates. Understanding costs, how they accrue, and what each cost means will give you more leverage to understand how much fulfillment is actually costing you, what you should budget for it, and how you should charge customers for it. It should also help you make better decisions regarding which products you store with different fulfillment solutions so you can reduce costs.
Understanding fulfillment costs also makes it easier to find and compare fulfillment solutions so you can choose one that works for your product types, location, and budget.
Most fulfillment solutions charge the same types of fees, which will change depending on the vendor, their warehouse size, location, your order volume, the size and weight of your products, and other details. There are no standardized prices for fulfillment, so you will have to shop around to find something that works for your business.
In most cases, your largest costs will revolve around storage and warehousing. For example, if you’re paying based on product weight (like with Amazon), you will pay a great deal for large and heavy items. Paying attention to how storage is charged in relation to your products is one good way to keep fulfillment costs down.
Understanding your FBA bill
FBA costs will depend on the size and weight of your products. If you’re an Amazon seller, you can view FBA costs by going into Seller Central > Payments > Statement View.
From here, you can filter to see which fees are allocated to Inbound Shipping, Inventory Placement, Storage, Return Fees, and Amazon FBA Fees, which includes Pick & Pack, Order Handling, Weight Handling, and Referral.
We’ll cover some typical Amazon fees below, but the two primary FBA fees are fulfillment and storage. FBA rolls their fulfillment costs into one straightforward fee, which takes care of items from pick to shipment. Their storage fee is charged monthly, and will depend on the month, size of your items, and how long they’ve been there.
Tip: Watch out for Amazon’s long-term storage fees.
Amazon fulfillment fees
Inventory Placement – If sellers want to select their own warehouse, this optional fee allows them to send to one Amazon warehouse instead of multiple. Amazon charges a surcharge for this.
FBA Fulfillment Fees – FBA charges flat-rate fees for items based on size, weight, and category. Fulfillment fees start at $2.41 per item for a small order which includes pick and pack and shipping with carrier.
FBA Storage Fees – Monthly FBA storage fees are charged on the 7th and 15th and are calculated by cubic foot. You pay 0.69 per cubic foot for standard and 0.48 cents per cubic foot for oversized items between January and September and $2.40 per cubic foot for standard and $1.20 per cubic foot for oversized items in October-December.
FBA Long-Term Inventory Storage Fee – Long-term storage fees apply to any goods left in warehouse for 180+ days. Fees include $3.45 per cubic foot for items left in storage for 180+ days and $6.90 per cubic foot for items left in storage for 365+ days, with a minimum storage fee of 0.50 cents per item.
Returns Processing – Returns processing is typically the fulfillment fee + 20% + the referral fee (varies depending on product category).
Unplanned Service Fees – Amazon charges fees for items that do not meet FBA prep standards. You will typically pay a higher rate than FBA prep fees.
You may also choose to opt into additional Amazon services such as their Repackaging, FBA Prep, or FBA Label services. If so, these fees will typically show up on your standard monthly bill mid-month.
Understanding your 3PL bill
Order fulfillment fees vary a great deal for 3PLs, because some roll costs together and others charge for every single movement. Normal 3PLs usually have complex fee structures, so you need to be careful about confirming your costs upfront.
We’ve heard horror stories from sellers who didn’t know what their invoice would be until it was too late, and they couldn’t plan in advance to protect their margins.
Be sure to ask about the following fees;
- Set up
- Inbound shipping and receiving
- Storage and warehousing
- Box and packaging
- Pick and pack
- Label printing and order insert
- Account management
3PL fulfillment fees
Set up – Setup fees are typically a one-time charge, which includes integrating software, creating infrastructure, and offering training so you know how to use their resources. This is free for some 3PLs, but can cost up to $1,000 or more for others.
Inbound shipping and receiving – This fee includes receiving shipments from your warehouse or manufacturer. Rates and services will vary, but you will most likely be charged an hourly rate per number of employees needed to help unload and store your products. Expect $25-$50 per hour. Some 3PLs charge a flat rate, which can vary per order to per pallet to per item.
Storage and warehousing – Most 3PLs charge based on the volume of space your pallet or product is using. Expect to be charged by the pallet, square foot, or square meter.
Box and packaging – Box and packaging fees are the actual cost of packaging and the boxes you’ll be using. This may be rolled into the fulfillment fee. Expect anywhere from 0.25-$2 per package depending on size and customization.
Pick and Pack – Pick and pack may be charged on an hourly or per-item basis. This rate is often rolled into fulfillment or box/packaging fees, but may be standalone. Rates are typically anywhere from 10 cents to $2 or more.
Label printing and order inserts – Any order inserts and label printing can cost 10 cents or more each, and are usually only included on request.
Shipping – This is the base cost of shipping a product through different carriers. It will vary based on how quickly you want to fulfill, and whether your items should go out by air, sea, or land.
Workorders – Workorders are charged by the hour based on how long it takes an employee to do something. These come into play if something shows up mislabeled, you want to check something, or you ask your 3PL to do anything that isn’t covered in their existing fees. This is something to watch out for, since it can be a hidden $25 per hour (and usually rounded up).
Returns – Some 3PLs may accept returns on your behalf. Costs typically include return shipping and a processing fee of approximately $1 to $3.50 for restocking.
Account management – Account management fees can be a high hidden cost, especially as many 3PL charge rates of $45-$200 per month.
Your 3PL costs will vary a great deal depending on the service provider, their billing system, and their rates. Like with Amazon, your highest cost will likely be storage fees, which are typically based on bin, pallet, or size and which can add up significantly if products remain in warehouse for a long time. Most 3PLs will charge monthly fees, so the longer products remain in warehouse, the lower your profit margins.
Understanding your Deliverr Bill
To keep things simple at Deliverr, we only charge two fees, which are all-inclusive.
- Fulfillment fee – This all-inclusive fee covers everything from when we receive your items to when your customers do.
- Storage fee – We calculate monthly storage fee per cubic feet per item per month. Aged inventory rates scale up, but not as drastically as Amazon multi-channel FBA.
Your invoice will show unit price (fulfillment cost), which will remain the same regardless of where you’re shipping to.
To view your Deliverr bill, navigate to your dashboard, and go to Orders on the left-hand console.
While order fulfillment costs and charges will change quite a bit depending on your fulfillment solution, it’s important to understand costs, to know what and why you are being charged, and to be able to track those costs directly to products. For example, if your storage costs are suddenly going up with FBA, you may want to consider moving inventory to reduce costs.
Putting it all together
Understanding your fulfillment costs can seem daunting, but if you know the company you’re dealing with and what their pricing structure is, it’ll make it easier for you to estimate your cost of fulfillment. Here are some final tips that help you put everything we’ve gone over above together to better project your fulfillment price per month.
- If you’re working with a 3PL that doesn’t have set costs per month, be sure to ask for order fulfillment estimates so you understand how much you can expect to pay per order.
- You should verify individual costs, considering many fulfillment companies tend to separate things like pick and pack fees from their published shipping cost.
- Verify fulfillment services offered, such as whether they include pick and pack, inventory storage, and type of packaging.
- Ask what fulfillment service they use, whether it’s USPS or in-house. This may make a difference in your coverage, speed, and price considerations.
- Make sure they have multiple fulfillment centers. The more spread out your inventory storage is, the better chance you have of getting items as close as possible to buyers, so they can get their orders as quickly as possible.
- Finally, double check that any fulfillment services you choose can keep up with your order volume, even as you scale.