When does it make sense for my company to use a fulfillment provider?
Small companies in particular are often looking for a suitable partner to handle their shipping process. However, many of them encounter resistance, as many fulfillment service providers expect minimum shipping quantities or a minimum turnover.
We receive enquiries from small businesses and start-ups looking for a service provider for their online trading almost every day. Storing, packaging and sending goods involves a lot of effort and time. Often there is no space in your own four walls or in the office, and taking the parcels to the post office every day is a chore. It is understandable that traders would rather use this time for other things, especially since many of them only run their online business as a sideline.
Why are there minimum requirements?
With only 100 shipments a month, a service provider may generate 200-300 euros in sales per month. After deducting all costs, an estimated 20 euros remain. This is not economically viable, so a company with low shipping volumes always represents an investment for a logistics service provider in the hope that the customer will scale up to 500 shipments per month within 6 months. Unfortunately, only a few manage to do this.
In the last seven years, YouSellWeSend has taken on around 350 startups. One of these (grover.com) has gone through the roof. 323 companies remained below 200 shipments per month. Of these, 70 percent have ceased operations and the remaining 30 percent have switched to another service provider after price increases. Only 22 companies were able to send over 500 shipments per month. 10 of them even sent over 2,000 and 3 over 20,000 shipments per month.
How should a new company start?
Ultimately, every online retailer has to ask themselves whether their online business should be set up in a truly professional manner and whether they should therefore see a fulfillment service provider as an investment. If not, Amazon Fulfillment can be used. However, most startups usually succumb to the price war after a few months.
Many retailers fail during the growth phase, either because they do not have sufficient capital or because their organization cannot keep up. Any company that wants to build a professional retail business should look for a professional fulfillment service provider and see fulfillment as an investment in the future. This is the only way an online shop can scale successfully.
