Practical Ecommerce

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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

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Comments ( 18 )

  1. crucialmusic June 11, 2011 Reply

    In the last week here in the UK I sold nearly 100 CDs through Amazon FBA. As a one-man (virtually) business there is no way I could have handled that volume of picking and packing with the addition of sales on eBay and other venues
    With Amazon Fulfilment customers TRUST the site to deliver quickly, to deal with queries and be 100% customer focussed.
    I would agree with your comments regarding using an unknown fulfilment house but, in my own experience, Amazon has been a boost to my business and, apart from the costs, I have no complaints (and judging from my feedback neither do my customers!)

  2. minrivertea June 13, 2011 Reply

    Good points! I agree that cost is definitely not a reason to outsource fulfillment, especially not FBA. However, one other situation (ie. my situation) where it’s essential is where you’re fulfilling internationally. I live and work in China selling Chinese tea to Europe. Sending the products direct from China would mean a 3-4 week delivery time. An outsourced fulfillment system like Amazon or Shipwire means I can guarantee 1-2 days delivery to UK customers.

    On the other hand, if I could do the shipping myself, I absolutely would, for the ability to personalise and ‘delight’ the customer much more than I can with Amazon.

  3. Elizabeth Ball June 14, 2011 Reply

    If you sell generic, "pick’n’pack" items in huge volume, I would definitely suggest you use a fulfilment company to save time, money and storage space.
    But if you sell anything that’s personalised in any way, or that is meant to be a gift, a fulfilment company simply will not provide the "delight" your customers expect.
    I have a suspicion that many of the older Baby Boomers who don’t wish to retire will be snapped up for customer service and complex fulfilment roles by specialist online retailers.

  4. Jamie Salvatori June 14, 2011 Reply

    @crucialmusic – If FBA works for you, that’s great, but you’re missing out on opportunities to brand yourself. Everything from Amazon says "" on it. They may think they purchased from Amazon — not from your company. In small business, repeat customers are essential.

  5. BIONIQ June 17, 2011 Reply

    At the very least try to pick a fulfillment company like Shipwire that doesn’t compete with you. Why educating your competitor with your sales data and help them to build their brand?

    • Gisli December 6, 2013 Reply


      I´m looking for warehouse/fulfillment service in The Nederlands.

      could you please send me information on your company.


  6. gmunnik August 25, 2011 Reply

    I do not agree with any of the above points mentioned. I own a fulfillment business in The Netherlands. We pick and pack the orders specifically to clients requirements. There is no reason why we would have any more breakage. Due to the large volume of packages we ship out, our clients benefit from our discounted shipping rates as we send out more than 250,000 cartons a year.

  7. John Lindberg October 31, 2011 Reply

    The #1 reason that ecommerce merchants outsource fulfillment is aggregate cost reduction per order shipped and this is especially true at shipping volumes less than 2,000 orders per month.

    The overhead cost of UPS or FedEx daily pick up service, or fees, and package processing software like ShipWorks can add up to over $3,000 per year and these basic costs are all avoided by outsourcing.

    When the cost of printers, scales, shelving, facilities, labor and supplies is factored in, it is not uncommon for the total outsourced fulfillment cost per order to come in at less than half of the DIY cost per order.

    This doesn’t include the value of the working capital and management focus freed up by moving the repetitive process of warehousing, picking, packing and shipping to others which can mean the difference between sales growth vs. stagnation over time.

    It is true that fulfillment outsourcing is not for everyone, but it would be a good idea for most online merchants to research the facts and figures carefully before making their own DIY vs. outsourcing decision.

    John Lindberg – President

  8. Tandy Byrd December 26, 2012 Reply

    One more point I did not see addressed for the small home business: scalability. My book business has outgrown my storage space. Fulfillment by Amazon allows me to increase stock without renting a storage unit or the like. Much cheaper to "rent" space at an Amazon warehouse than do it on my own. I send only items that amazon can’t damage (too often) in their picking and packing.

  9. Trelos June 9, 2013 Reply

    We have been using drop-shipping services since 2000. Yes, things very occasionally go wrong but our own warehouse is only 1000 square feet. We use trade warehouses whose combined area is around 60,000 sq ft. We couldn’t afford to rent that space, never mind buy it. Nor could we employ 6 – 12 extra staff.

    As we are – acting as middle-men – we get the advantages of scale without having to pay for them. The stock is always available for shipping direct to the customer and we don’t have to pay for it until 30 days after the customer has paid us.

    We could never dream of affording the stock and the storage space.

  10. Michael Nelson June 14, 2013 Reply

    Most fulfillment companies claim a 99% accuracy rate. They have systems and procedures in place to make sure things go out correctly.

    Mike Nelson
    Xipix Logistix Order Fulfillment

  11. Rob February 6, 2014 Reply

    I agree with Jamie. FBA’s rising costs make it less possible to make a good profit. And once any warehouse has your goods you are at their mercy. They don’t care like you do. Plus the opportunity for smart cross-promo is too valuable to give away. Fulfillment is not rocket science and I consider it a core skill for ecommerce success.

  12. alastair Michel April 23, 2014 Reply

    There are some very valid points in the above. However, it is important to remember there are some very good fulfilment companies out there who could enhance your business as well as some very bad ones who will provide nothing but heart ache.

    From my perspective (as an owner of a fulfilment company), the decision whether to outsource depends on scale. I would strongly advise any start up company to handle their fulfilment in house in the early days. This will minimise the drain on cashflow and allow them to get an understanding of their order profiles.

    Once the business is established and the systems have bedded down, then that is the time to consider outsourcing should you wish.

    From our perspective we like to work with companies where we can integrate our systems, develop bespoke services and reporting. We are happy to make the front end investment to dove tail our services and this results in long term and successful partnerships.

    However, such can only be achieved when there is a certain volume to justify the time investment and the client has systems in place support the integration.

    3PL’s and their clients should work together as a team for the common goal. Providing a seamless quality service will simply result in more volume for all!

    CEO AFM Ltd

  13. Simon Wright June 19, 2014 Reply

    I feel that with a company like Amazon, the economies of scale offered can make it cheaper to outsource fulfilment. However as your theoretical e-commerce store increases in size, it may make more sense to fulfil orders yourself. There is also the option of going for multiple carriers one of which Parcelhub offers

  14. Dallas Nelson August 27, 2014 Reply

    I could not disagree more. There are times when you can not do the volume you need on your own. Look for a company that has been doing fulfillment for over 10 years and knows what they are doing. That is no dupe. Sometimes the money you spend at first gains you relevancy later. Could not be happier with Supplier Oasis.

  15. Eric November 4, 2014 Reply

    We are a fulfillment company and let me tell you. We have saved our customers plenty of time. We have our employees working all day long shipping items. Our customers can focus on selling their item and continue to make money. We take the burden of storing, packing, and shipping. We save our customers money on shipping because we ship such a large amount that they get a discount. We want to make sure our customers get the cheapest price and get the best experience. If you know of anyone that wants a fulfillment company please give us a call we will take care of you! (800) 765-4031.

  16. elizabeth sinnott January 19, 2015 Reply

    I couldn´t agree with you more. Of course each business is different but our business was small but growing until we “outsourced” to a professional fulfillment firm. This was because we decided to move to France (from Germany). We lost 50% of our customers within the first three months: this company also took our phone orders which we had been doing personally before. Huge mistake. Huge. Now we have so few customers left that no other fulfillment will take us on. I really enjoyed doing my own fulfillment, putting a personal touch on things and knowing my customers. We´re presently considering moving back or sending from France, which is expensive and difficult. But yes, I whole-heartedly agree with your opinion.

  17. Bill T March 18, 2015 Reply

    We have a small housewares company that currently outsources fulfillment to a local developmentally disabled not-for profit. Sales are growing fairly quickly. We are in 2 national chains and have been approached by several very large (500+ Stores). I don’t think Amazon/Shipwire/ is the answer-where would you suggest we go to scale fulfillment quickly, provide EDI, and easy customer ordering allowing electronic order flow from original order input to shipping of the order and electronic accounting as well?

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