For an increasing number of small business and startup owners, the challenge with running a profitable company is not necessarily branding or drumming up interest in products. Instead, it’s getting the products to the customers who purchase them.
This is part and parcel of the global economy fostered by the rise of the Internet, and is one reason that Amazon Prime (powered by FBA) has become such a juggernaut. However, it’s often a difficult tightrope to walk, particularly if you choose to go the in-house fulfillment route. Many companies choose to perform in-house fulfillment operations, only later deciding to outsource due to a number of complications that can arise.
Why Opt Out of DIY Fulfillment?
Why would a small but growing company opt out of DIY fulfillment? Really, it takes just a bit of experience to see why. Sure, it might seem cheaper at the outset, but once you dig into the situation, you realize that it’s incredibly costly in terms of time and effort, even if the owner is doing the work without being paid. Eventually, these companies will grow to the point that they have to pay an employee to do nothing but shipping. That money might be better spent with a fulfillment company. However, it may not be that simple.
Many Fulfillment Companies Shy Away from Startups
Although working with a fulfillment company might be the best way to spend your money while ensuring better customer satisfaction, time savings, and other benefits, you may learn—to your chagrin—that it’s not as simple as choosing a partner and inking a deal. In fact, most fulfillment companies find it challenging working with startups. One of our partner firms, Sweetwater Logistics, who works largely with start-up and growing companies, says that they find that in most cases, the new business has failed within just two years. The challenge becomes filling the pipeline – perpetually finding new businesses to work with because many of them won’t be in existence within a few years.
Additionally, quite a few fulfillment companies will not work with startup businesses or have very serious reservations about such a partnership. These reservations generally focus on the fact that startups usually take up the most time of all potential clients. This applies to the amount of time needed to get the company set up because of their lack of track record and limited information, as well as the amount of time needed to answer questions and hold hands during the setup process.
Further complicating the situation is the fact that most startups don’t have much in the way of funding, because they have few or even no orders at the moment. This means that the fulfillment center isn’t going to make much (or any) profit on the account. Fulfillment is a high-volume, low-profit business, and fulfillment companies need to make smart decisions when it comes to the clients they take on to ensure that they 1) have a product that is in demand current, 2) have the finances to be a valuable partner, and 3) can sell in the volume needed to help the fulfillment company maintain profitability.
There’s Still Hope
With all of that being said, working with a fulfilment center is still an excellent option for startups and smaller businesses. It gives you the ability to outsource all of your fulfillment needs to a company with the expertise, experience, and knowhow necessary to ensure timely delivery, accurate inventory counts, and more.
By working with a fulfillment company, you’re able to reduce the burden on your own company. It allows you to focus on what you do best—growing your business. That’s a win-win for both your firm and the fulfillment company. Plus, there are specific companies out there that focus on serving the needs of startups and that can offer more competitive prices and better suited services.
How Do You Find the Right Fulfillment Company?
Finding the right company starts with having as much information as possible. Remember that the fulfillment company will be screening you just as rigorously as you are screening them. You want to find a fit that works for both partners. The fulfillment company needs a partner that’s financially stable, has products that are in-demand, and will be around for longer than a couple of years. You need a partner that offers flexible solutions tailored to the sometimes-chaotic needs of small businesses and startups, and that is able to offer better pricing than what a general fulfillment company might be able to provide.
When you start discussing partnerships with potential companies, you’ll need to make sure that you can provide them with the things they’ll need to see. These include the fact that you are a business entity with a company name, office phone, business email address, and at least a basic website to your credit (this is especially true if you’re an ecommerce company). They will also want an idea of the volume you’ll be sending in terms of product/inventory, as well as when it will arrive.
Finally, you need to be clear about any requirements your products might have, including temperature control, fragility/specialty packaging, and more. If possible, share your formal business plan with the company you’re partnering with, as this can prove that you’ve not only done your research, but you are also committed to long-term success.
In regards to the fulfillment company, you should look for a single-location provider in most instances, as multi-location providers are usually more expensive. You should also look for firms that say they’re “startup friendly” and have low or no minimum requirements. Of course, you’ll want to see competitive pricing and flexibility in terms of how unique you can make fulfillment using your own logo, packaging, and the like. It might also be beneficial to partner with a firm that provides you with a dedicated service representative to answer your questions, as well as a company founded with an entrepreneurial spirit that can help with building your own business.
Ultimately, working with a fulfillment company is not only possible, but it’s an excellent idea for small business and startup owners looking for better efficiency, time savings, and the benefits that come from partnering with an expert capable of handling all of their fulfillment needs.