How a 3PL impacts ROI (Return On Investment) of an ecommerce brand: Only facts and zero myths
April 9, 2023
Outsourcing some or entire business operations has become a standard practice in modern times and ecommerce is no different. Instead of carrying out fulfilment in-house, ecommerce brands are hooked on superior fulfilment services offered by 3PL (third-party logistics) providers.
The main reason why brands outsource is to improve efficiency and reduce fulfilment costs. However, the return on investment (ROI) is important when considering the use of a 3PL partner—which is often overlooked. So it’s crucial to weigh ROI against various benefits a 3PL is offering to ascertain business performance and ensure profitability in the long run.
In this blog, you will learn the benefits of outsourcing order fulfilment to a 3PL, what is Return On Investment (ROI) and how a 3PL impacts the ROI of a brand.
A distributed network of fulfilment warehouses across India allows ecommerce brands to gain a geographic footprint—enabling them to achieve lightning-fast shipping speed and maximise their ranking in search results of marketplaces.
Superior inventory management to relay accurate inventory levels in real-time and prevent overselling, avoid under-stocking and overstocking, and ensure timely replenishment
Advanced reporting and insights to gain visibility into their performance and make informed decisions and seamless adjustment to changes in order volume to manage the demand fluctuations of an ecommerce brand
Seamless and automated reconciliation across sales channels to monitor and track the fees charged to them and the payment received from the various service providers
Now that we know what are the benefits, let’s measure the return on investment of utilising a 3PL to ensure that the costs associated with the service outweigh the benefits.
What is Return On Investment (ROI)?
Return on Investment (ROI) is an ecommerce metric used to evaluate the efficiency or profitability of an investment made by an ecommerce brand. ROI is expressed as a percentage and is calculated by dividing an investment's net profit (or loss) by its initial cost.
Let’s take an example, suppose a man invested INR 10,000 in his online business in 2017. After a year, his net earnings were 12,000. To calculate the return on this investment, divide the net profits (12000 - 10,000 = 2000) by the investment cost (10,000), which is 20%.
Note: If an investment’s ROI is positive, it is worth investing in. But if other opportunities with higher ROIs are available, you must select the best option. Likewise, investors should avoid negative ROIs, which imply a net loss.
A 3PL like Eshopbox enables you to leverage robust technology to keep the supply chain agile and embrace ecommerce automation to save time and money—without making heavy investment on your own.
You can reduce shipping costs by up to 45% by splitting your inventory in Eshopbox’s distributed network of fulfilment centres and taking advantage of zonal and regional shipping instead of national shipping.
You to take advantage of negotiated pricing and bulk order volume as a 3PL service provider like Eshopbox has strong tie-ups with shipping carriers
The pay-as-you-go pricing offered by a 3PL like Eshopbox ensures seamless ecommerce order fulfilment without draining your financial resources. This usage-based pricing ensures that you won't pay for a service you're not using.
3PLs like Eshopbox operate at higher order volumes, making procurement of packaging supplies economical through bulk buying, thus making the rates more affordable and reducing your fulfilment costs.
2. Revenue maximisation
3PL providers play an essential role in an ecommerce brand’s success by accelerating their growth and boosting their revenue. Let’s see how:
3PLs like Eshopbox enables brands to sell on multiple sales channels simultaneously to increase ecommerce sales by 45% with 2-click integrations and creating A+ product listing on marketplaces that helps increase visibility.
3PLs help you run promotional events like a flash sale and festive sale on your brand website and participate in sales on marketplaces by ensuring seamless fulfilment even in peak season
3PLs enable you to stick to guidelines and policies when selling marketplaces to maximise profit, visibility, and sales. Else, your seller account can be suspended.
Ensuring proper inventory management to prevent stockouts at the time of purchase is tricky. 3PLs help you with on-time inventory replenishment.
Ecommerce returns drain brands financially. 3PLs like Eshopbox manage your returns in the right way that ensures profitability. They align the pickup with an upcoming scheduled delivery in the same or nearby location—saving you costs. Then returned items are restocked for re-selling after quality checks and refurbishment—recapturing revenue.
3PLs like Eshopbox enable you to activate badges that instil customer trust and boost sale like Free Shipping, Express Shipping, Same-Day Delivery, Easy Returns and Exchanges.
3. Time savings
3PL services will enable you to focus on improving and expanding your online business. You can ensure seamless ecommerce logistics without deploying any internal resources. Thus, you can manage high-priority business objectives (business development, product development, marketing, product reseach and more) while a 3PL service provider like Eshopbox delivers online orders much faster, safer, and more accurately.
Furthermore, 3PLs enable ecommerce brands to reduce errors and wastage of efforts and costs related to them. They follow a Standard Operating Procedure (SOP) to streamline and optimise various operations.
Measuring the ROI (return on investment) of a 3PL is an important part of making an informed decision about whether or not to outsource to a 3PL. By looking at the cost savings, time savings, increased efficiency, productivity, and improved revenue and customer experience that a 3PL can provide, ecommerce brands can ensure profitable and long-term success.