What should I expect to pay for fulfillment services?

What should I expect to pay for fulfillment services?

That is a great question and one that everyone is interested in understanding.  Short of simply selecting the “lowest price” and learning later that it may not be the best criteria with which to evaluate a company, there are standards within the Direct to Consumer industry by which you can compare your costs with companies that do their own fulfillment as well as with companies that pay to outsource their fulfillment services.  The formula goes like this:

INDUSTRY STANDARD FULFILLMENT FORMULA FOR FULFILLMENT SERVICES

This formula will help you to determine what you should pay for these services and to manage your business according to these standards.  This percentage should typically be between 10% and 15% of your average transaction.

COSTS	EXAMPLE
Take the total average cost per order of fulfillment, which includes everything from the packaging itself to the packing peanuts, the labor, the invoice/other paperwork enclosed in each package, as well as the cost of warehousing/storing the product, the account management, the inbound phone charges, etc. (ask us for details)	$ 5.00
Add the cost of shipping (e.g. actual UPS, Fed Ex or USPS fees)	$ 5.50
This totals the cost to get a product to your customer	$10.50
Subtract the shipping and handling fees collected from your customer	$ 4.95
This will give you your total net cost	$ 5.55
Divide this by the average sale price of an order	$50.00
This will give you the percentage cost of your fulfillment	11.0%

Remember that it is always possible to find a “low cost provider,” but – as is commonly the case – you get what you pay for.  It is easy for a fulfillment provider to cut services in order to arrive at a cheap price, but as a result, your business may suffer.  We strongly encourage you to concentrate on the services you will receive, and not just on the cost.  Give us a Call Best West Direct for your Fulfillment Service.

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