Is cheap fulfillment the right solution for an e-shop.

Cheap fulfillment: Is it the right solution for an e-shop?

To be successful in a highly competitive e-commerce market, an e-shop must be able to provide logistics that are fast and flawless. However, often times, online retailers are looking for solutions based on cost savings rather than quality when it comes to logistics.

Paying less for logistics is, of course, the goal of every businessman, but not everything that is cheap is also good. This rule applies even more when outsourcing logistics to a fulfillment company, whose main task is to provide the e-shop with top-notch logistics services.

There are also many companies in the fulfillment market whose quality, capabilities, and, most importantly, the price of their services differ. This is why e-shops often choose the cheapest option, but whether in the short or long term, this decision can have fatal consequences.

In this article, we will discuss what is paid for in logistics services and the risks associated with selecting the cheapest logistics partner without conducting a more thorough investigation of its quality. You will also read about what qualitative elements should be considered and why it sometimes pays to pay more for flawless and fast logistics.

Cheap fulfillment, high risks

Bad logistics leads to the decline and even destruction of the e-shop, as late or faulty shipments discourage customers who will switch to competition for future purchases. Not to mention the lost costs of conversions or refunds to customers waiting for their orders.

When choosing a fulfillment partner, it is important to consider how technologically advanced they are in terms of automation and information systems and if they have warehouse or personnel capacities. It is also important to find out how the logistics process is managed, how seasonal peaks are handled, whether they have their own transport solutions, how much they invest in development, and many other factors.

When it comes to the technology offered by the logistics partner, one should pay attention to things like packaging lines, sorters, conveyors, a reliable information system, an architecture system, integration with the process, etc. Even if a provider has a few nice-looking robots, one should be cautious because not all automation is efficient.

Without them, especially for larger volumes of orders, it is almost impossible to handle the increase in shipments, which leads to errors and delays. Especially demanding parts of the season, such as Christmas, can test the processes of many fulfillment centers, especially if it’s a cheap service with inadequate capacity and equipment.

With the arrival of the main season, orders increase, which significantly tests the capabilities of the fulfillment provider. The most significant risk is the slow expedition of stored goods and significant delays in delivery.

Among other problems, there are often errors, slow warehousing, bad packaging of products, delivery errors, failure to deal with returns, complaints, and many others.

As a result, angry customers may refuse to accept goods if they are delivered, leave negative reviews, return goods, or even switch to competitors. This slows down the growth of the e-shop or has a negative impact on its expansion into new markets.

Too-cheap fulfillment companies can, by undercutting prices, get into financial problems, the result of which can be the misuse of money from e-shop cash-on-delivery. In some cases, there is also a complete shutdown of communication with customers or e-shops, which complicates the running of an e-commerce business even more and requires a change of logistics partner.

However, it is not always an easy task, especially during peak season, because the integration process involves several steps that can take days, weeks, or even months. Therefore, if you are experiencing problems with your current logistics partner and do not see potential for improvement or have plans to expand to new markets, it is better to look for a more suitable fulfillment provider.

The following are the top six risks associated with poor logistics:

  1. Late shipments – customer dissatisfaction and switching to the competition
  2. High error-rate – deficiencies in stocking, packing, and delivering orders
  3. Low range of services – weak competitiveness on the e-commerce market without comprehensive logistics
  4. Limited investments in automation and digitization – inability to handle larger volumes of orders on time
  5. Misuse of cash on delivery – caused by operational loss of cheap fulfillment
  6. Collapse of fulfillment provider – sudden loss of logistics solution in e-shop, need to find immediate replacement

Costs in logistics – the middle ground

There are several items in logistics that simply cost money, and avoiding them is almost impossible. Of course, there are cheap providers who can reduce individual sums for logistics services.

At first glance, this is an attractive offer for an e-shop, but in the long run, it can be devastating. Low prices often lead to operational losses, which are reflected in zero modernization, minimal investment in automation, the improvement of services, and the gradual decline of fulfillment.

It is not uncommon for such a cheap provider to then cover its losses by misusing, for example, the funds from cash on delivery. This means delayed payments for the e-shop and, subsequently, insufficient capital for purchasing goods and running the business.

If fulfillment wants to offer the best services on the market, it must take into account various technologies in the price of services that increase quality, as well as expanding capacities, transportation solutions, and human labor. This is reflected in the complexity of services that a 3PL company offers.

An advantage for an e-shop are the new services it can offer customers. These include various modern and trendy solutions, such as automatic fit-to-size packing, faster and more environmentally friendly delivery, a wide range of services, and many others.

The result is satisfied customers and the e-commerce business itself, which has a comfortable, comprehensive, and long-term solution for logistics.

Saving on an important part of the e-commerce business is not necessarily a good and beneficial solution. In the long run, outsourcing logistics to a third party is worth paying extra for the quality and stability of the services offered, as well as the overall experience that the fulfillment company has.

The services and years of experience of Fulfillment by FHB Group

Fulfillment by FHB Group has been operating in the logistics market for over 15 years, during which time we have helped many e-commerce clients and processed millions of shipments. Our priority is long-term and constantly increasing service quality, with a focus on advanced automation and digitization of the fulfillment process.

Because of this, we are not classified as cheap fulfillment companies but rather as high-quality companies with complex services for our clients. Thanks to this, we have managed to establish ourselves as a leader in the fulfillment market in Central and Eastern Europe.

We approach our service prices responsibly, and e-commerce clients often save on logistics costs in the long run compared to doing it themselves. Our goal is to constantly progress, so we regularly expand our storage capacities or transportation park and also invest millions of euros in the latest technologies.

An example are our transportation lines that leave daily throughout Europe, which enable us to deliver packages faster than couriers. We also have our own state-of-the-art information system, as well as various technologies such as automated sorters, conveyors, carts, elevators, and our fully automated packaging line, among others.

We view logistics from a long-term perspective, anticipate trends, adapt to consumer demands, and therefore offer first-rate logistical solutions. If you are interested in our services or have any questions about individual processes, please contact us through the form below, and we will be happy to answer and help.

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