In the rapidly expanding landscape of ecommerce, understanding the costs associated with fulfilment is vital for businesses in the UK. Ecommerce fulfilment involves the entire process from receiving an order to delivering it to the customer’s doorstep.
This article provides a detailed breakdown of the various fees and prices involved in ecommerce fulfilment in the UK market.
Ecommerce fulfilment costs examples
Below is a table illustrating example total costs for ecommerce businesses of various sizes in the UK. These figures are estimates and can vary based on several factors such as product type, shipping distances, and specific fulfilment service providers. To understand what these figures mean, see the rest of our guide, below.
| Business Size | Monthly Order Volume | Average Order Value | Receiving Fees (£) | Storage Fees (£) | Pick and Pack Fees (£) | Shipping Costs (£) | Return Processing Fees (£) | Total Monthly Cost (£) |
|---|---|---|---|---|---|---|---|---|
| Small | 100 | £30 | 50 | 100 | 150 | 300 | 50 | 650 |
| Medium | 500 | £40 | 200 | 300 | 750 | 1500 | 200 | 2950 |
| Large | 2000 | £50 | 500 | 600 | 3000 | 6000 | 500 | 10600 |
Key assumptions
- Receiving Fees: Assumed at an average rate of £0.50 per item for small, £0.40 for medium, and £0.25 for large businesses due to economies of scale.
- Storage Fees: Estimated based on the space required for the inventory, increasing with the size of the business.
- Pick and Pack Fees: Calculated at an average rate of £1.50 per order.
- Shipping Costs: Assumed at an average of £3 per order. This can vary significantly based on weight, size, and shipping distance.
- Return Processing Fees: Estimated at £0.50 per order, assuming a 10% return rate.
Notes
- The Total Monthly Cost is a summation of the monthly expenses in each category. It’s important to note that these are estimates and should be used as a guideline.
- The Average Order Value is used to estimate the scale of the business operations but does not directly impact the fulfilment costs.
- Seasonal variations and special requirements (like fragile items or custom packaging) could lead to additional costs not accounted for in this table.
Components of ecommerce fulfilment costs
1. Receiving and storage fees
- Receiving Fees: These are charges for accepting and managing inventory at a fulfilment centre. The fees may vary based on the volume and frequency of shipments.
- Storage Fees: Businesses pay for the space their products occupy in a warehouse. These fees are typically calculated based on the amount of space used (per pallet, shelf, or bin) and the duration of storage.
2. Pick and pack fees
This refers to the process of locating and packaging products for shipment. Fees are generally structured per item or order, and they can increase with the complexity of the packaging requirements.
3. Shipping costs
Shipping fees are a significant part of fulfilment costs. They depend on:
- Weight and Dimensions: Heavier and larger items typically cost more to ship.
- Destination: Longer distances increase costs.
- Shipping Speed: Expedited shipping incurs higher charges.
4. Return processing fees
Handling returns is an integral part of ecommerce. Return processing fees cover the inspection, restocking, or disposal of returned items.
5. Additional services
Additional fees can be incurred for services like custom packaging, kitting (assembling multiple products into one package), or special handling for fragile items.
Average ecommerce fulfilment costs breakdown in the UK
To give a general idea, here’s an average cost breakdown:
- Receiving Fees: £0.20 – £1.50 per item
- Storage Fees: £10 – £30 per pallet per month
- Pick and Pack Fees: £1 – £3 per order
- Shipping Costs: £2 – £15 per package (varies widely based on factors mentioned)
- Return Processing Fees: £1.50 – £5 per item
These figures are indicative and can vary based on specific business requirements and the scale of operations.
Factors influencing fulfilment cost
Scale of Operations
Larger operations often benefit from economies of scale, potentially reducing per-unit costs.
Fulfilment partner
Costs can vary significantly between different fulfilment service providers. It’s crucial to compare services, pricing structures, and terms.
Product characteristics
Fragile, large, or heavy items typically incur higher handling and shipping costs.
Seasonality
During peak seasons like Christmas, costs can rise due to increased labour and shipping demands.
Tips for getting the best fulfilment prices and keeping costs down
Ecommerce businesses in the UK can employ several strategies to ensure they get the best prices for fulfilment services while keeping costs manageable. Here are some practical tips:
1. Negotiate with multiple providers
- Get Quotes: Obtain quotes from several fulfilment service providers to compare costs and services.
- Negotiate Terms: Use these quotes as leverage to negotiate better rates, especially if you have a high volume of orders.
2. Optimise packaging
- Reduce Size and Weight: Use packaging that adequately protects your products while minimising size and weight to lower shipping costs.
- Eco-Friendly Options: Consider sustainable packaging, which can be cost-effective and appealing to customers.
3. Streamline inventory management
- Regular Inventory Audits: Keep track of your inventory to avoid overstocking, which can lead to higher storage fees.
- Just-in-Time Inventory: Adopt a just-in-time inventory system to reduce storage costs by keeping lower stock levels.
4. Analyse shipping methods and carriers
- Carrier Comparison: Regularly compare shipping rates from different carriers and choose the most cost-effective options for different types of shipments.
- Consolidate Shipments: Consolidating orders can reduce shipping costs per item.
5. Understand your business’s unique needs
- Analyse Order Data: Understand your most frequently ordered products and their shipping profiles to tailor your fulfilment strategy.
- Seasonal Adjustments: Plan for peak seasons by scaling up or down your inventory and staffing to meet demand efficiently.
6. Leverage technology
- Automation: Use software for inventory management and order processing to reduce errors and save time.
- Data Analysis: Utilise data analytics to predict trends, optimise stock levels, and improve customer service.
7. Build relationships
- Long-Term Partnerships: Building a long-term relationship with a fulfilment provider can lead to better rates and service over time.
- Feedback Loops: Regular communication with your fulfilment provider can help identify areas for cost savings and process improvements.
8. Consider outsourcing vs in-house fulfilment
- Cost-Benefit Analysis: Weigh the costs and benefits of outsourcing fulfilment against handling it in-house, considering factors like scale, expertise, and resource availability.
9. Focus on customer satisfaction
- Reduce Returns: High-quality customer service and accurate product descriptions can help minimise returns, thus reducing associated costs.
10. Regularly review and adapt
- Continuous Improvement: Regularly review your fulfilment processes and costs, and be open to making changes as your business and the market evolve.
By employing these strategies, UK ecommerce businesses can not only secure competitive fulfilment pricing but also maintain a lean and efficient operation that can adapt to changing market conditions.
Conclusion
Understanding the nuances of ecommerce fulfilment costs is essential for businesses in the UK. While this article provides a general overview, it’s advisable for businesses to conduct thorough research and obtain quotes from multiple fulfilment service providers to find the most cost-effective and efficient solutions for their specific needs.
FAQ about ecommerce fulfilment costs, fees, and prices
Ecommerce fulfilment costs typically include receiving fees, storage fees, pick and pack fees, shipping costs, and return processing fees. Additional costs may arise from special handling, custom packaging, or kitting services.
Shipping costs are usually based on the weight and dimensions of the package, the destination, and the shipping speed. Different carriers have varying rates, and costs can significantly differ for international shipping.
Yes, businesses can negotiate lower fulfilment costs, especially if they have a high order volume. Obtaining multiple quotes and negotiating terms with different providers can lead to better rates.
The cost of storing inventory is influenced by the amount of space used (e.g., per pallet, shelf, or bin) and the duration of storage. Larger items or a higher inventory level will result in higher storage fees.
Some fulfilment services might have hidden fees, such as account setup fees, long-term storage fees, or fees for special services. It’s essential to review the contract in detail and clarify all potential charges.
Larger and heavier items generally incur higher handling and shipping costs due to the additional space they occupy and the effort needed for handling and transportation.
A pick and pack fee is a charge for retrieving items from storage and packaging them for shipment. This fee is usually based on a per-item or per-order basis.
Yes, fulfilment costs can vary seasonally, especially during peak times like Christmas or Black Friday, when demand is higher. This can lead to increased labour and shipping costs.
Returns add to fulfilment costs through return processing fees, which cover the inspection, restocking, or disposal of returned items. High return rates can significantly impact overall costs.
The cost-effectiveness of in-house versus outsourced fulfilment depends on the scale of the business, the volume of orders, and available resources. Small businesses might find in-house fulfilment more cost-effective, while larger businesses may benefit from the economies of scale offered by third-party fulfilment services.