In August, we conducted our annual warehouse costs and pricing survey. This year, we had more participation that ever, and we’d like to thank everyone that took the time to fill out the confidential survey.
Before we launch into the results, it’s important to point out some of our assumptions. First, we did not record which answer was associated with a particular warehouse. This was done to allow vendors to confidentially answer questions without fear of providing key information about their specific company. Second, if we found any of the survey answers to fall far outside of the extremes, we did not include the results in the averages outlined below. For example, if someone indicated that they paid $75 per square foot per year for warehouse space and the next highest amount was $18, we did not include the result. Unreasonably high or low answers to our survey questions could have been a result of misunderstandings related to the question. Third, we did not segregate the results by geography. We acknowledge that this definitely has a tendency of skewing some of the results, as we do have vendors that operate in the United States, Canada and Europe. Fourth, in cases where results were given in various formats for a single question, we made our best attempt to compute averages based upon the most common answer type given. As an example, some respondents answered that they pay a warehouse management employee a salary, while others indicated that they paid an hourly salary. Similarly, some respondents provided answers to how much they charge for pick and pack per order as a flat order fee, while others responded that they charge a per order plus a per item fee. Finally, if there were any responses that warranted further explanation, we elaborated on those responses in our discussion below, so that readers of the results can understand the various responses received.
Below are the results – we hope that they help you to gauge your costs and pricing versus the average out there in the industry.
In order to make the results easier to digest, we’ve segmented them into the following categories:
- Performance Data
- Agreement Terms
- Warehousing Costs
- Pricing and Discounts
For performance data, our main objective was to see how many fulfillment providers use performance data to gauge the quality of their work. We asked the following questions:
- Do you measure performance?
- What is your picking accuracy?
- What is your inventory shrinkage rate?
- What percentage of customers do you retain each year?
In the survey, we found that 87.18% of companies polled measure their performance in some way. The average picking accuracy for order fulfillment companies was 99.51%, and the average inventory shrinkage was .65%. Respondents, on average, retained 97.82% of their clients.
We get a number of questions, both from warehouses as well as prospects, about the standard terms of agreement that fulfillment houses employ. In our survey, we asked:
- What terms do you offer on your agreements? (month to month, annual, multi-year, or no term) This question allowed warehouses to respond with multiple agreement types, since many firms are flexible and offer different terms to different customers.
- Do you increase your pricing on a regular basis?
- If you do increase your pricing, what percentage do you increase pricing?
In the survey, we found that 56.41% offer month-to-month agreements, 38.46% offer annual agreements, 25.64% offer multi-year agreements, and 10.26% don’t require an agreement in all cases. Month-to-month agreements have risen in popularity, as is evidenced by the results. Furthermore, 53.85% of all respondents said they do increase pricing yearly, and the average increase in rates per year was 2.37%.
It’s helpful for warehousing companies to see what others are paying to maintain their warehouse. In the survey, we asked:
- What is your yearly cost per square foot of your warehouse space?
- What is your starting hourly rate of your warehouse staff?
- What is your annual pay for a warehouse management employee?
- What is your corporate profit?
The average cost per square foot of warehouse space was $6.53. The average starting hourly rate of warehouse staff was $11.44, and the average annual pay for a warehouse management staff was $47,478. The average corporate profit came in at 8.83%.
Pricing and Discounts
In order to get a feel for the going rates of fulfillment companies, we polled warehouses and asked them questions relating to their pricing and discounts that they offer. For pick and pack fees, we asked:
For order fulfillment pricing, we asked:
- What is your average pick and pack price for a single item direct to consumer order?
- What is your average pick and pack price for a business to business order?
- Do you offer discounted pick and pack rates?
- If you do offer discounted pick and pack rates, what is the break with which you offer the discount and how much of a discount do you offer?
The average pick and pack fee for a single item B2C order was $2.64, whereas the average fee for a B2B order was $3.74. A whopping 74.36% said that they do offer discounted pick and pack fees based upon volume of orders, and the average discount was applied at 1,800 orders per month (with the highest frequency of responses in the 1,000 to 2,000 and 5,000 orders per month range. Discounts ranged from 3% up to 10%.
For storage pricing, we asked:
- How do you charge your customers for storage?
- What is your average price for storage?
- Do you offer discounted storage fees?
- If you offer discounted storage fees, at what breaks do you offer discounts and what discount is offered?
The most common way of charging for storage was pallet storage (79%), followed by cubic footage (35.9%), per bin (30.77%) and lastly per square foot (23.08%). These percentages reflect that companies, in many cases, offer more than just one storage pricing. The average pallet storage fee came in at $13.02, the average cubic footage charge was $.54, the average cost per bin was $2.14, and the average cost per square foot was $.88. A full 56.41% of respondents offered discounted storage solutions (mostly at pallet levels), and the average discount was 14.17% given at roughly 250 pallets.
Finally, we asked warehouses about their shipping pricing and discounts. Questions included:
- How do you charge for shipping?
- If you offer shipping discounts, what discount do you give for ground, express, and LTL shipping?
With regard to shipping pricing, again we found that many companies offered a number of approaches. The most common approach (41.03%) was to offer a discount off of published rates. Not far behind, however, was the option of allowing customers to use their own freight account (38.46%). About a third of the respondents (30.77%) offer cost plus pricing, and just over 10% (10.26%) responded that they don’t apply a discount at all. When discounts were offered, the average shipping discount for ground was 24%, for express was 31% and for LTL was 44%.