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7 hidden costs of self-fulfilment and how Eshopbox helps

Versha Kamwal
April 7, 2021
7
mins read

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Running an ecommerce business entails a lot of responsibilities. As an ecommerce business owner, there's too much on your plate, and you have to juggle between a plethora of business functions while finding ways to save money wherever possible.

In theory, do it yourself (DIY) everything may look like the best solution to cut costs. But when it comes to a crucial ecommerce business function such as order fulfilment, it is usually a bad idea: the stakes are too high, and most importantly, there are hidden costs that can increase your total order fulfilment cost significantly. Fulfilment is the process of storing, packaging and delivering your products to the customers.

In this blog, you'll uncover the hidden costs that self-fulfilment entails and how Eshopbox can help you curb them.

What is self-fulfilment?

Self-fulfilment is when an ecommerce business chooses to keep inventory storage and order processing like packing boxes and shipping orders in-house. It’s common among new ecommerce businesses to handle order fulfilment at their residence, workplace, or a temporary storage facility instead of outsourcing it to a 3PL service provider.

If you choose to fulfil orders yourself, then the DIY fulfilment model will include the following operations:

  • Finding a storage facility, i.e. a warehouse
  • Investing in a workforce and its training
  • Purchasing the necessary equipment for the warehouse
  • Getting a Warehouse Management System (WMS)
  • Processing the orders
  • Procuring the right packing materials
  • Packaging the orders
  • Labelling and shipping the orders
  • Tracking the package to its final destination
  • Notifying customers about their orders
  • Handling returns

How can outsourcing order fulfilment to Eshopbox help you save hidden costs?

With the decision of self-fulfilment, it's crystal clear that you need to have adequate space for storing your products, whether it's in your living room, garage, or your warehouse. You need to hire staff, and if they are unskilled, you also have to invest time and money in their training. These are some direct costs which you already have an idea of, but there are some hidden costs which you need to consider as well.

However, outsourcing your order fulfilment to a tech-enabled 3PL like Eshopbox can unravel multiple benefits. It can provide new and innovative ways to improve logistics effectiveness and save unnecessary costs. Let’s take a look at a few:

1. Cost of maintaining adequate infrastructure

You must have accounted for the cost of building an infrastructure for self-fulfilment but have you considered the cost that you will incur in its constant maintenance and upgrades? Buying or renting a storage facility, equipment, and more for storing your inventory and fulfilling your orders, isn’t a one-time investment; you have to incur the following costs periodically:

  • Fixed cost of storage rental
  • Maintenance cost of the facility
  • Maintenance cost of the assets that you are using, such as computers, printers, handheld devices, storage racks, and more

With Eshopbox's pay-as-you-go pricing, you can outsource your order fulfilment without draining your financial resources. You do not incur fixed costs of infrastructure and only pay depending on your usage of the facility. Moreover, you don't have to worry about the maintenance cost of the facility or the assets used in the order fulfilment process.

2. Cost of packing materials and supplies

When you fulfil your orders, you require a variety of packaging materials and supplies in ample quantity, such as:

  • Bubble wrap, packing peanuts, air pillows, and other cushioning products
  • Boxes, poly mailers, and envelopes
  • Packing tape
  • Labels and paper
  • Printer and ink

Packaging materials and supplies
Packaging materials and supplies

Self procurement of these supplies means you have to vet multiple vendors, compare their offerings and negotiate their rates. However, as rates will be based on your individual consumption, you won't be able to gain economies of scale. Apart from procurement, you also need to ensure timely reordering of the packaging material and supplies when they are depleting without disrupting your operations.

Eshopbox operates at higher volumes, making procurement of these supplies economical through bulk buying, thus making the rates better. Moreover, you don't have to worry about depleting supplies as Eshopbox takes care of the replenishment.

3. Cost of higher shipping rates

One of the biggest costs in ecommerce order fulfilment is the shipping cost. In self-fulfilment, you would be shipping orders to the customer from one or limited locations. And as your customers can be located anywhere across the country, it would not only take a significant amount of time to deliver the order but cost you more money. To get optimal shipping rates, you need to consider the following:

  • Do you have high order volumes to negotiate rates with the shipping providers?
  • Can you distribute your inventory across India to leverage local and zonal shipping? As local and zonal shipping is 30-40% cheaper than national shipping.

As Eshopbox ships high order volumes and has strong tie-ups with shipping providers, you will get negotiated shipping rates. Moreover, to serve customers across the country in multiple zones, you can distribute your inventory in Eshopbox’s distributed network of fulfilment centres to leverage local and zonal shipping. It will not only save you national shipping fees but also help you reach your customers faster by reducing the transit time.

4. Cost of shipping insurance

It is always advisable to protect goods via shipping insurance as they can get damaged, lost or stolen in transit. In such unforeseen circumstances, the insurance company reimburses your financial loss. Thus, it makes shipping insurance a crucial safety cost that can help you deal with contigent losses.

While insuring your shipments, it is essential to select an appropriate insurance value that can provide adequate coverage in such situations. For that, you need to:

  • Get your valuation right on the goods being insured, i.e. by estimating the total value of orders that you will ship for a given period of time (usually one year)
  • Pay insurance premium upfront (calculated as per the policy rate)

With Eshopbox's pay-as-you-go model, you don't have to estimate the premium and pay upfront. You can insure your orders on-demand irrespective of the number of orders at a fraction of a cost, anytime. Additionally, if you face any loss or damage to the order, Eshopbox will file a claim to get the insurance reimbursement with all the necessary documentation. This is insurance on auto-pilot for you.

5. Cost of delayed order processing

Customers expect fast deliveries and the cost of making them wait is to lose them. To meet your customer's expectations, you need to ensure on-time order processing. However, when you're fulfiling orders yourself, there are multiple challenges and various aspects you need to consider for on-time order processing, such as:

  • Running 24X7 operations
  • Availability of skilled and highly-trained manpower
  • Resources to handle order volume surges during promotional events and campaigns such as flash sales

To ensure accurate and on-time order processing, Eshopbox runs 24X7 operations with a streamlined pick and pack process. Additionally, Eshopbox FCs (fulfilment centres) are operational on holidays and Sundays with no additional cost on you.

During promotional events, Eshopbox handles peak order volumes seamlessly. All you have to do is notify about the surge, and Eshopbox will increase the daily pick capacity by allocating more resources, i.e. manpower, storage, and more. So that your big events run smoothly and you scale confidently with Eshopbox's SLA-driven order fulfilment. Thus, you can delight your customers with lightning-fast deliveries, enhance their experiences with your brand, and build loyalty.

6. Cost of prime badges

With the rapid increase in the number of sellers on marketplaces like Amazon and Flipkart, it is challenging to achieve product visibility. As a solution, these marketplaces came up with seller privileges. But the criteria for winning seller privileges are stringent, as you require:

  • Infrastructure investment as per the guidelines put forth by the marketplace
  • Strict SLAs that require faster turn around times for order processing
  • Adequate man power at all times

Moreover, if you underperform on any of the metrics set forth by the marketplaces can lead to account suspension.

With Eshopbox, you are optimised for Amazon Prime and closer to winning Amazon buy box. You need not worry about the stringent fulfilment metrics criteria of Amazon; it is all taken care of by Eshopbox. Additionally, Eshopbox helps you win the F-assured badge as all the facilities meet Flipkart standards to enable smart fulfilment.

Amazon Buy box
Amazon buy box

Flipkart assured badge
Flipkart assured badge

7. Cost of poor returns management

Returns are an inevitable part of ecommerce, you can significantly reduce returns but not 100%. So, it’s imperative to manage returns and revive your losses. You need to:

  • Align quick pickup of the returned product,
  • Conduct quality checks to detect defects and damages of any kind
  • Refurbish and restock the returned product

In case of a returns fraud, if the returned products don't pass the quality check, you need infrastructure, a skilled and sufficient workforce, a set standard operating procedure (SOP), a simplified claim filing procedure with readily available supporting documents, and a periodic protocol to follow up for reimbursement.

With Eshopbox, you can automate your returns tracking, align speedy pickup, perform quality checks, and ensure quick restocking of return products into your available inventory.

Moreover, in case of a returns fraud, Eshopbox simplifies the claim filing procedure for you with its expertise and infrastructure. When you file claims for each type of return, you need to prepare information to support your case with images, videos, and other supporting documents. For that, Eshopbox facilities have dedicated return processing workstations equipped with cameras for photography and videos to provide proof of claim. In addition to this, a highly-trained workforce is dedicated 24/7 to process returns and performs quality checks. Eshopbox also enables you to raise claims and seek reimbursements by generating a Claim Filing Report (CFR) as per the marketplace's guidelines.

Bottom line

As an ecommerce business, handling order fulfilment yourself can seem like your only option when you are on a budget. Self-fulfillment may appear to be cost-effective on the exterior, but there are several hidden costs. To your surprise, when you combine these costs to calculate the total costs of order fulfillment, it's actually more than the cost of outsourced fulfillment. Most importantly, when you evaluate Eshopbox for order fulfilment, you will find out that Eshopbox can help you save significantly in the long run.

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