Starting an online store is one of the most approachable ways for an entrepreneur to start making money. There are no buildings to lease, utilities to pay, and – in most cases – employees who need to be hired. The only things you really need is the ability to set up a Shopify store and source some products to sell.
But, of course, those products need to ship. Starting out, many entrepreneurs embrace the hands-on approach of self-fulfillment, valuing the control and personal touch it provides. However, as any seasoned store owner will tell you, that gets old really quickly.
Many successful eCommerce store owners outsource fulfillment to a third-party company. This is actually why our company exists – because the demand for this kind of service is so high!
But sending your inventory to a fulfillment center when you’re just getting started is overkill. Early on, it makes more sense to ship your own orders.
In this guide, we’re going to talk about when self-fulfillment works and when it doesn’t. Then we’ll talk about the hidden costs of self-fulfillment and when it makes sense to hire some help.
Self-Fulfillment Makes Sense At First
When you first start selling online, it really does make sense to ship your own orders. Fledgling businesses usually don’t have a massive stream of orders. Limited order volume here means that you can spend a bit of time every day packing orders and arranging pick-ups from companies like UPS. You can print postage from home and buy shipping supplies on Amazon.
This works pretty well for a while. In fact, it only really makes sense to get an order fulfillment company involved once you’re shipping 100 orders per month or more, as a general rule of thumb. Before then, you are unlikely to break even, and many fulfillment centers will be hesitant to take you on as a client due to what is – in their eyes – low order volume.
It’s also really helpful to start with a hands-on approach. You can really immerse yourself in the process, understanding your customers’ needs firsthand. Early in your enterprise, the ability to directly change processes around shipping and observe the impacts is huge.
Being directly involved allows for a personal touch that is hard to scale. You can package items uniquely, add hand-written thank-you notes, or just generally check every item’s quality before it goes out. Third-party companies can help you do all of this to some extent, but it’s not exactly the same as doing it yourself.
Then, of course, there’s the financial aspect. Self-fulfillment is cheaper than hiring a fulfillment center early on, full stop. Fulfillment centers need steady volume to turn a profit, and the ones that don’t have minimum order volumes usually have recurring account fees to make up for this fact. Self-fulfillment lets you avoid this overhead entirely.
But bear in mind – these benefits are eclipsed by hidden costs as order volume goes up.
The Hidden Costs of Self-Fulfillment
At first glance, self-fulfillment may seem like a cost-effective option. This is true for a while, but, as ever, the devil is in the details.
First, you have to value your time. Packing, labeling, and processing each order are not just about placing items in a box. It’s a serious ongoing commitment, requiring hours of meticulous attention, especially as order volumes grow. Shipping two orders per week isn’t so bad. Shipping two orders per day is manageable.
But shipping dozens per day, every day? With no sick days? No vacation? On the holidays?
You certainly didn’t sign up for that when you made a Shopify account!
Next, there’s the matter of storage. Whether you’re renting a dedicated space or converting a section of your home, there are costs – both overt and hidden. Rent, utilities, and even the potential opportunity cost of using space that could be better employed can quickly add up. Even the mere presence of clutter can reduce your productivity and harm your well-being.
It’s also really easy to mess up shipping if you do a lot of it. Without highly standardized processes, it’s possible to ship the wrong items or ship to the wrong address. Returns and exchanges are pretty much always a pain in the neck to do DIY. It’s also easy to accidentally ship items in a way that breaks in the mail, which fulfillment centers have enough experience to prevent. Calculating how much this impacts your profits is a Sisyphean task, but you can be sure that it costs something.
Lastly, postage costs a lot. Fulfillment centers get huge discounts on postage because they buy so much, and they often pass on the savings to their clients. This is often enough to offset the cost of the fulfillment center’s labor, storage, and account fees.
At a small scale, all of these problems are manageable. At a larger scale, they are not.
4 Situations Self-Fulfillment Falls Short
Hiring help with fulfillment eventually becomes more cost-effective than self-fulfillment. Not too long after that, though, hiring help stops being optional. The reason is that self-fulfillment just doesn’t scale. There are four main reasons for this.
1. Business Growth
Shipping a few orders per day is an annoyance. Shipping hundreds per day while running an eCommerce store and, presumably, doing things like eating and sleeping, is close to impossible.
Somewhere in the middle, depending on your personal tolerance for pain, you have to hire help. This might mean hiring a part- or full-time worker. It might mean hiring a fulfillment center. But either way, it’s just not a responsibility you can take on alone or without dedicated staff.
2. International Shipping
International shipping is complicated. Sending the occasional item overseas is fine, because all you need to do is fill out a customs form for each one and pay extra for the shipping. But once you have a significant volume of shipments going out internationally, either the time spent filling out those forms or the cost to ship those items internationally is going to become unmanageable.
3. Physical Space
Physical space, the final frontier. You’re going to run out of it eventually. It’s possible to store boxes and maybe even pallets in your home or office. Sometimes you can find a deal on a local storage unit. But by the time you’re working with full container-loads of inventory, this just isn’t an option anymore, and you’ll need to hire a fulfillment center…or build one in-house.
4. Managing Quality & Speed
As you scale your business, you’ll run into the dual challenge of maintaining the quality and speed of fulfillment. Juggling between expanding your business and ensuring each order is processed with care can lead to compromise.
Time spent dealing with any of the above three issues can lead to being unable to balance quality and speed. And this can be devastating for your business since customers are so invested in seeing packages arrive shortly after they order them. Delays in getting orders out the door can quickly crush your customer retention, which is key to long-term business success.
How To Know You Need Help Fulfilling Orders
So how do you know it’s time to hire help, exactly? It’s not exactly like there are rules written in stone somewhere.
The first clue often comes in the form of consistent shipping delays. If your desk is continually piled with orders awaiting dispatch and “I’ll send it out tomorrow” becomes your daily mantra, then it’s past time to hire help.
Alternatively, if your customers start complaining, that’s another good sign. When it comes to shipping and delivery, occasional hiccups are part and parcel of business. Frequent complaints are not normal, though. Customers value prompt and reliable service. Fall short on this and you’re burning money.
We touched on this earlier, but it bears repeating – if you’re running out of physical space, it’s time to hire help. A cluttered workspace not only disrupts efficiency but can also lead to costly mistakes.
It’s also a good idea to take a look at your postage costs. Even though it seems like UPS, FedEx, USPS, and the others make iron-clad prices that can’t be negotiated with, that’s just not the case. Fulfillment centers can get price breaks of up to 90% on postage in some cases. Those are not accessible to you if you ship in-house!
Finally, if you just find yourself unable to meaningfully think about growing your business because you’re too busy running it, that’s another sign. Order fulfillment is probably the easiest part of business to outsource. Marketing comes in a distant second.
Don’t get us wrong – self-fulfillment can and often is the right choice for your business! But it’s important to know its limits before you find yourself too busy shipping to make yourself less busy shipping.
Need help finding an order fulfillment partner? Here’s a video on the subject to help you learn more.
Final Thoughts
Self-fulfillment is a great way to bootstrap a small eCommerce business. It works well for a while and will give you a chance to keep costs down, personalize the shipping experience, and witness firsthand the importance of good order fulfillment practices.
But you can’t do it forever. Eventually, it will be time to hire help, be it another person or an order fulfillment center. What you need to do is figure out exactly when to make that leap.
You’ve done everything by the book. Your Kickstarter campaign is almost ready to launch.
You made a great product. Built an audience. Set up a campaign page.
But how do you ship it?
We put this checklist together to help you get started. It's free.
