Yesterday, I blogged about when you may not want to use a Drop Ship Supplier. Check it out here if you have not read it because it plays into today’s post. If you can’t find a drop ship arrangement, just about your only other choice is to purchase the products in bulk. For a home-based business, this presents an essential problem – where to store the goods?
If you don’t want to rent storage/warehouse space or fill your garage with saleable goods, then one choice is to use a fulfillment service. Fulfillment services such as EFulfillment Service and Webgistix will accept your merchandise directly from the supplier, store it in their warehouse, and ship it for you upon demand. These type of services fit well with home-based, internet-based business models where physical products are sold.
But as you might expect, these services carry costs. The costs typically associated with fulfillment services can usually be broken down into 4 categories.
Storage Costs – These business must charge for storage as part of their service offering. Usually it is quoted in a per-pallet monthly charge with some kind of minimum. You can expect something like $10 to $15 per pallet, with a monthly minimum of something like $50.
Account Maintenance Costs – This cost comes under various names such as “Software Fee”, “Integration Fee”, but it’s the fee the business charges for setting you up and maintaining you on their system. Expect this to be in the $100 to $150 per month range.
Per SKU Costs – With a fulfillment center, there are charges for each SKU you carry. Something like $2 per SKU. That means if you carry a quantity of 20 of one SKU, you will only pay $2. But if you carry a quantity of 1 of 20 different SKU’s, you will pay $40 ($2 x 20).
Per Shipment Costs – Finally, there are per-shipment transaction costs. Each time the fulfillment center ships an order for you, there is usually a fee – something in the range of $3 to $5.
As you can see, using a fulfillment center is not without costs. This is not a service you would typically use upon startup of your home-based, web-based business. Typically this is used when a home-based business reaches a large number orders per day. But it is something you would be able to look at as part of your growth plan. And please remember to keep focusing on your goals and business growth, just like any business!