Note: Outsourcing fulfillment starts making the most sense around 250 subscribers. While there are good reasons to outsource, remember to analyze your business and its unique attributes before making a change.
Fulfillment for subscription boxes demands tons of time, work and patience.
As your business grows, it’s one of the few operations that scales in difficulty as quickly as your subscriber count grows – just one month of large growth can impact how and where you pack, ship and store your boxes significantly.
And here’s the bottom line: You are in business to sell, sell, sell… And then sell some more.
Simply put, subscription businesses shouldn’t focus on becoming great warehouses or fulfillment companies – they should focus on becoming great marketing companies built around unique and compelling product experiences. With one eye on people, space, receiving, packing and shipping boxes, you’re not doing all you can to grow revenue, and you almost certainly aren’t maximizing profitability.
And the underlying formula is pretty simple: Retailers who grow revenue with better margins make more profit. Outsourcing can enable that in a few different ways.
Reason #1: You have better things to do than pack boxes.
Fundamentally, order fulfillment is an expense and not a core competency for a subscription business.
You exist to sell and curate experience, not put things in cartons. Consider the time required behind developing your product, marketing it to your target audience, and optimizing customer experience – it requires a ton of attention and is very complex. That’s what you need to focus on.
On the flip side, putting things in cartons is exactly the core competency of a fulfillment solution. A partner set up to do nothing but order fulfillment will do it more accurately and at less cost.
Reason #2: You lack the technology.
Running an efficient fulfillment operation takes systems – expensive systems.
It’s very costly to be constantly losing track of inventory or shipping orders using the wrong shipping method. Communicating many simple aspects of a client’s order are critical and influence the client’s impressions and comments about your company. A fulfillment company has the technology to capture key data points, such as order tracking and intake quantities, and allow you to communicate with your subscribers in a more timely and accurate manner.
Reason #3: You make too many errors.
Accuracy comes through better processes and experience.
And accuracy is important. Errors are a big expense, and just one mistake can offset the profit margin gained by several other orders. While you may feel doubtful about a third-parties ability to make your unboxing experience “perfect”, the reality is that fulfillment partners have built their entire business around this meticulous attention to detail. By and large, these partners will beat your % rate of breaks, missing boxes, or improperly packed boxes.
Reason #4: You are spending too much on shipping.
Working with a fulfillment partner has another perk: they can often provides access to better shipping rates. Just a small savings per order will add up to big savings for you and can drop straight to your bottom line – maybe even covering the cost of outsourcing.
Reason #5: You are spending too much on supplies.
Dedicated fulfillment operations buy cartons and materials in bulk – think shredded kraft, bubble wrap, shipping labels, tape, peanuts, kraft paper, and more.
Like shipping, these are savings that can benefit you.
Reason #6: You are paying for dedicated space.
Paying a fixed amount for rent on a space you are not fully utilizing? Do you fit comfortably in your space, then suffer with little room and disorganization when you fill your space with product, boxes, and packers?
In both cases, you’ve probably realized something fundamentally wrong: You only need this processing space for 1-1.5 weeks per month, and upgrading/downgrading doesn’t make sense when calculating out the costs behind paying a full month’s rent.
And no: Your garage is not free space.
When you outsource with an order fulfillment partner you only pay for what you use. This means a scalable space, managed by a partner, that can deal with any influx of orders.
Reason #6: Returns are important too.
Returns are inevitable, and being efficient with returns for processing and communication is just as important as being efficient in getting orders out the door in the first place. Fulfillment partners can receive returns, report on totals, and repurpose the boxes.
How to Make the Move to Outsourcing
Making the move to outsourcing is as simple as getting some quotes started:
- Calculate your average fulfillment need for the last 3 months (ie. average 250 boxes per month)
- Write up a short description of the nature of your fulfillment (ie, “We pack 6-8 toiletries in a 8x8x8 box, along with shredded kraft paper, once per month.)
- Head over to the Resources page, and under ‘Packaging/Fulfillment’ contact fulfillment companies and ask for what details they need for a quote
In terms of moving the operation, it’s often as easy as directing your product to the new address, but there are some basics you should expect/require:
- Make sure your fulfillment partner always has stock of your needed packing materials
- Request photos of box configurations & example box builds before boxes are packed
- Request updates when products arrive, if there are breaks, and any surprises that can impact getting boxes out the door.
More questions? Post them in the comment section below:
This guide was collaborated on with the resident experts at Kable Packaging.