Top 7 Reasons Why You Shouldn’t Outsource Fulfillment
The allure of outsourced fulfillment (such as Amazon’s FBA program) is strong. But, don’t get sucked in by the hype! In any business, you never outsource anything that you can do better or more efficiently yourself.
If you don’t think you can make your fulfillment operation more efficient than a third party, then you’re not trying hard enough. All of Amazon’s super-advanced technology is designed to handle the massive size of their operation. If you’re a small business, you don’t need advanced technology to grab a product off a shelf, put it in a box, pad it, and put a label on it.
Here are my top 7 reasons why you should perform your own fulfillment:
Would you outsource your customer service? Of course not. Fulfillment is probably the most important aspect of an e-commerce business because it’s the LAST thing customer’s remember about their interaction with your store. If a waiter is great for an entire meal, but takes five minutes too long to bring the check, you’re going to have a poor opinion of them. It’s human nature. If everything about your site is great, but the customer has a bad fulfillment experience, they’re going to blame you and not your fulfillment company.
Vendors are going to make mistakes. They’re going to send the wrong item. They’re going to send too few or too many of an item. Items will get broken during delivery to the fulfillment center. How is your fulfillment company going to handle this for you? Will they even know if an item is damaged? Will they know if your vendor made a change to the packaging? Will they know if the vendor changed a spec of the product? If the vendor forgot to inform you, you won’t know until a customer complains! This will cause you constant headaches. As soon as you lose control over such an essential part of your business and you’re at the mercy of another company, you’re destined for major problems.
Returns. When a customer needs to return an item, do they send it back to the fulfillment company? Are you going to trust the fulfillment company to decide if the product is in good enough condition to resell? You may put yourself into a position where you have to eat all returns. Also, if the returns aren’t sent to you, you lose out on a valuable feedback mechanism to determine why a particular product has a high return rate.
You won’t save money. Seriously. The fulfillment company is going to charge you to store product (remember that about 80% of your products aren’t best sellers). They’re going to charge you to pick product, to pack product, and to actually ship it. They may pass along some of their volume postage savings, but they have to make a profit, too. When you add up all of those costs, you might as well hire someone to do it yourself. At least you’ll have control over the entire process. If you don’t do enough business right now to hire someone, then do it yourself and include a hand-written “thank you” note inside each order.
Don’t get duped by the “we’re experts in fulfillment” sales pitch. As a small business owner, you’ve figured out how to performs tons of things you never thought you could do. Determining the best way to send an item without it breaking during shipping is definitely something you can do. I don’t mean to sound crass, but at a 3rd party fulfillment company, they don’t have PhD’s packing your product. You can figure out how to do this efficiently for your business and teach an employee how to do it.
Customization: You have best sellers. You can purchase boxes that fit those items exactly. This saves tremendously on shipping costs because you don’t have to use void fill material and the chance of breakage drops to nearly nil. Third-party fulfillment can’t (and won’t) do this.
Breakage. The fulfillment company doesn’t know anything about your products. They don’t know what’s highly susceptible to breakage. They’re going to pack everything in exactly the same manner. When breaks occur, you’re the one who will have to deal with the customer service and pay for the reshipment. Yes, the fulfillment company might reship for free, but you’re out the cost of the product. You also have an angry customer. If you handle fulfillment, you can make adjustments so that the same problem doesn’t repeat itself. A large 3rd party fulfillment company can’t handle this level of customization.
Third-party fulfillment companies setup their operations to be as generic as possible. This, by definition, is going to be less efficient than what you can create yourself.
The only cases in which I think outsourced fulfillment makes sense is if you do not have the physical space to do it yourself. Otherwise, roll up your sleeves, and learn something about shipping! You’ll be glad you did.