Do Fulfillment Services Companies Offer Price Discounts at Increasing Order Volume Levels?
For those companies searching for fulfillment pricing and costs, oftentimes a question that arises is whether or not fulfillment companies offer volume discounts for order fulfillment fees. In other words, does the order fulfillment price per order decrease at different volume levels, and if so, at what levels does this increase take place? This is a great question worth exploring so that costs can be calculated as sales levels increase.
How Many Fulfillment Companies Provide Volume Discounts?
While it’s tough to say exactly how many companies provide volume discounts, it’s safe to say that the vast majority do provide them. In its most recent fulfilment costs and pricing survey, FulfillmentCompanies.net found that 74.36% of the respondents offered discounted pick and pack (order fulfillment) fees based upon volume of orders. Furthermore, the study found that the average discount was applied at a level of 1,800 orders per month (largely ranging from 1,000 to 2,000 orders per month), with the greatest frequency of responses providing breaks at 1,000, 2,000 and 5,000 orders per month. Finally, they found that the average discounts ranged from 3-10%. It’s important to note that the average fulfillment cost for a single item B2C order in their survey was $2.64, and the average fulfillment cost for a B2B order was $3.74.
At Fulfyld.com, our pricing is extremely competitive versus an average fulfillment center. We provide pricing that is all inclusive of receiving, shipping, pick/pack and dedicated account management.
Why Do Fulfillment Centers Provide Discounted Order Fulfillment Pricing?
Warehousing and fulfillment is an interesting industry. While Amazon and robots and drones have made the industry seem like some sort of hip and technologically savvy field, the reality is that it is and has always been a historically low margin, high volume oriented business. In order for fulfillment services to survive, they have to ship a lot of orders, since they usually make a very small amount off of each individual order.
But as order volume increases, warehouses have an increasing ability to negotiate better rates with suppliers themselves, such as better shipping rates, carton rates, etc. Furthermore, as volumes increase, oftentimes fulfillment centers can further streamline their processes and make them more efficient, not to mention that they have additional profits with which to invest in technological solutions that can further decrease their “per unit costs” of processing and shipping orders. Therefore, as volumes increase, they can typically operate at a slightly better level, providing them with an opportunity to offer a slightly better rate for customers.
Will Fulfillment Houses Require Anything in Return for Volume Discounts?
Another important consideration is whether or not the fulfillment house will offer anything else in return for being given better rates. Oftentimes, at a minimum, the fulfillment house will require that they volume levels are achieved in order to receive the rate. Sometimes, they will provide a “ramp up” period, where the order volume doesn’t have to meet the level. But in the least, they will most likely require that the levels are achieved before granting any discounts.
Additionally, many fulfillment centers will require some sort of a “contract,” or length of agreement to secure the discounted rates. Oftentimes, companies will require either a year-long or multi-year agreement. It’s important to read the fine print of the contract to determine any and all requirements. At www.Fulfyld.com, we don’t require contract lengths, and allow you to cancel at any time. This is significantly different than the norm!
What About Other Fees?
Fulfillment companies usually charge a fee for every service they perform for you. Typically, you’ll find the warehouses charge a receiving fee, storage fee, order fulfillment fee, shipping fee, returns fee, kitting fee, account management fee, as well as other potential charges. It’s important to look at any quote in its entirety to make sure that it is fully competitive. One of the best ways to ensure an accurate quote is to ask the fulfillment center to take a month’s worth of data and provide you a sample invoice. This will give you a very good idea of what the total charges will be if you use their service.
Again, in the case of our company, we deviate from the norm. Rather than charging all of these other fees, our “per order”fees cover everything needed to run a successful eCommerce business. We believe that you should have the ability to grow without having restraint on how your orders are fulfilled and with a comfortable feeling of your cost of goods sold (COGS). It’s important to note that there are additional charges for additional items on an order, and in the case where order volume is less than 1,500 orders per month, there is an additional charge of $.10 per order for same day shipping. But other than that, our pricing is very simple, straightforward and easy to understand – not to mention that you’ll find it to be lower than the competition!