Understanding whether Fulfillment by Amazon (FBA) or a 3PL is more affordable can help inform how you run your ecommerce business. By examining the cost structures of Amazon FBA vs a 3PL using the real-life situation puts the pros and cons of each in context. This article provides a straightforward cost comparison of both options, breaking down key expenses to help you make an informed decision.

Key Takeaways

• Amazon FBA offers convenience but comes with various fees, including fulfillment, storage, and additional costs that can be challenging to manage for small businesses, especially in the critical peak holiday season.
• 3PL providers offer flexible pricing and storage solutions, allowing for better cost management and customization, which can lead to significant savings and reduced operational costs.
• The choice between Amazon FBA and 3PL depends on business size, control over branding and the customer relationship, international shipping needs, and the specific demands of the marketplace.

Understanding Amazon FBA Costs

Amazon FBA (Fulfillment by Amazon) is a popular choice for many ecommerce businesses, offering a comprehensive suite of services that includes storage, picking, packing, shipping, and even customer service. However, these conveniences come with a variety of fees that can be challenging to predict, particularly for small businesses or those with low-margin products. Understanding the key cost components (separate from the referral fees that are paid regardless of who is fulfilling the order) is essential for making an informed decision.

Fulfillment Fees

Fulfillment fees are one of the primary costs associated with Amazon FBA. These fees are calculated based on the size and weight of each product, with tiered pricing. This means that larger or heavier items will incur higher fees, which can impact your profit margins as they change through the tiers, especially if you’re selling bulky goods. The ability to manage costs effectively is job numero uno for any business owner, so many Sellers use Amazon’s Revenue Calculator to predict their expenses and plan accordingly.

One advantage of Amazon FBA’s fulfillment service is its low level of accessibility that allows even brand new businesses to compete. Outsourcing fulfillment to Amazon allows businesses to concentrate on startup operations, expanding sales channels, and improving customer satisfaction, with the assurance that orders are managed efficiently.

Despite the higher fees in some cases, the potential for quick and efficient shipping costs can be a strong motivator for many ecommerce businesses.

Storage Fees

Storage fees for Amazon FBA are another critical cost to consider. These fees are charged monthly based on the volume of inventory stored at Amazon’s fulfillment centers at the end of each month. The rates can fluctuate significantly, ranging from $0.78 to $4.28 per cubic foot, depending on the size of the product, the seasonal period, and how long the items have been in storage.

And it’s essential to be aware of long-term storage fees, (aka ‘Aged Inventory Surcharges’), which apply to inventory held for over 180 days. These storage fees can range from $0.50 to $6.90 per cubic foot, depending on the age of the inventory.

Additionally, Amazon imposes storage limits and surcharges for aged inventory to encourage timely turnover. For businesses with slow-moving products, these additional charges can add up quickly, making it crucial to manage inventory levels very carefully.

Additional Fees

In addition to basic fulfillment and storage fees, Amazon FBA has several extra costs that can surprise businesses. Examples include removal fees for unsold inventory, disposal fees per unit, and returns processing fees. These additional fees can vary based on the weight and size of the products, as well as the specific services required.

Amazon also imposes charges for necessary unplanned services they perform on a Seller’s behalf, such as labeling items that arrive without the required FNSKUs, distributing inventory across multiple warehouses (placement fees) to ensure high probability of on-time delivery to customers, inbound defect fees, among others.

By being mindful of these potential fees and ensuring that they are only billed for necessary services and storage space, businesses can better control their overall fulfillment costs.

Analyzing 3PL Cost Structure

Third-party logistics (3PL) providers offer an alternative to Amazon FBA, with a different approach to cost structures and services. A primary advantage of 3PL providers is their increased flexibility and control over the supply chain. These providers often offer competitive pricing and flexible terms, which can help businesses manage their fulfillment costs more effectively.

Examining Transparent Pricing, Flexible Storage Fees, and Value-Added Services reveals how 3PLs can benefit your ecommerce business.

Transparent Pricing

One of the significant benefits of working with 3PL providers is their transparent pricing models. Unlike Amazon FBA’s fixed costs, 3PLs typically offer customizable logistics solutions that can be tailored to a business’s specific needs. This flexibility allows businesses to negotiate contracts and optimize costs based on their unique requirements.

Specialized 3PL providers often offer even more transparent and flexible pricing structures, resulting in significant cost savings for businesses that need them.

Flexible Storage Fees

When it comes to storage fees, 3PL providers often have an edge over Amazon FBA due to their flexibility. They can offer personalized services that accommodate varying business sizes and seasonal demands, making it easier for businesses to manage their inventory effectively. 3PL providers can offer lower storage fees that are not punitive like FBA’s, which is particularly beneficial for long-term warehousing. This flexibility can lead to cost savings, especially for businesses with large or slow-moving inventory.

Moreover, similar to FBA, 3PLs utilize advanced technology and analytics to enhance inventory control, which helps in predicting inventory needs and preventing overstocking. This can significantly reduce storage expenses and improve overall cost management.

Offering real-time visibility into stock levels and specialty storage solutions such as climate-controlled storage, and storage for fragile items, 3PLs help businesses maintain optimal inventory levels in their ideal environments without excessive costs.

Value-Added Services

3PL providers also offer numerous value-added services that can enhance the overall efficiency of a business’s supply chain. These services include things like custom packaging, custom inserts such as thank you notes or requests for customer reviews, and supply chain management solutions. These customizable services enable 3PLs to optimize logistics operations and create significant value for businesses.

Additionally, 3PL providers support business scalability by allowing flexibility and adaptability during periods of growth.

Comparing Fulfillment Costs: Amazon FBA vs. 3PL

Having a clear understanding of the cost structures of Amazon FBA and 3PL providers allows for a direct comparison of these two options. The comparison will focus on Order Fulfillment Costs, Inventory Storage Costs, and Hidden Costs, helping you determine which option is more affordable for your business.

Order Fulfillment Costs

When it comes to order fulfillment costs, Amazon FBA offers a cost estimator tool that helps Sellers forecast their expenses based on usage. The predictable nature of the fixed pricing model can benefit small businesses in particular by allowing them to manage costs with some level of certainty. Leveraging Amazon’s vast network of warehouses, businesses can achieve quick and efficient shipping, which is crucial for Prime customer satisfaction.

On the other hand, 3PL providers offer various pricing models, including all-in rates and transactional pricing, to suit different client needs. These flexible pricing structures can be more cost-effective for businesses with fluctuating order volumes, diverse product catalogs, or items with complex fulfillment requirements.

A company handling peak season orders efficiently can easily manage a 15-fold increase in volume using 3PL services, especially when taking advantage of Amazon’s Order Handling Capacity automations. This flexibility enables businesses at any stage to scale operations and fulfillment processes without prohibitive costs, making 3PL a viable option for many types of Sellers.

Inventory Storage Costs

Inventory storage costs can vary significantly between Amazon FBA and 3PL providers. Amazon’s storage fees vary based on inventory volume and time of year, with higher rates during peak seasons. Additionally, an aged inventory surcharge is applied if items are stored for over 180 days, which can wildly impact margins and profitability. Watch out if your products are big and bulky which are penalized and accrue at an even higher rate.

In contrast, 3PL providers often offer more flexible and lower storage fees, particularly beneficial for businesses with large or long-term inventory needs. Advanced analytics and real-time visibility into stock levels allow 3PLs to help businesses manage inventory more efficiently and reduce storage expenses. In addition, the ability to procure more inventory at more favorable prices and not be penalized with aged inventory surcharges can mean a stronger bottom line.

Hidden Costs

Hidden costs can naturally impact the overall affordability of using Amazon FBA. FBA Sellers may face unplanned costs for inventory removal, automatic approval of returns and the resulting processing fees, and other unplanned service fees, which Amazon determines at their discretion and can add up over time. These unexpected fees can make it challenging for businesses to maintain profitability, especially those with lower margins.

In contrast, 3PL providers often offer clearer communication of pricing structures and flexible opt-in operational solutions, helping businesses avoid hidden costs and ensuring they understand potential expenses upfront. Sellers using 3PLs also control their customer service experience and define their own returns policies (within Amazon’s well-known guidelines). This transparency can lead to better cost management and improved profit margins.

Cost Savings Strategies with 3PL Providers

Choosing the right fulfillment partner can lead to substantial cost savings and enhanced profit margins. Fulfillment providers offer several strategies to help businesses reduce operational expenses, including negotiating contracts, optimizing inventory management, and leveraging multi-channel fulfillment.

Implementing these strategies enables businesses to optimize their supply chain, enhance customer satisfaction, and achieve significant cost savings.

Negotiating Contracts

Negotiating 3PL contract terms can help businesses secure better pricing and service standards aligned with their objectives. Regular discussions with your 3PL partner can uncover new cost-saving opportunities and ensure favorable contract terms.

This proactive approach can lead to substantial cost savings and more effective fulfillment services, ultimately enhancing overall profitability.

Optimizing Inventory Management

Effective and flexible inventory management is key to containing costs and growing market share. Outsourcing fulfillment to a 3PL provider allows businesses to streamline the process, reducing operational costs and enhancing efficiency. For example, 3PLs that offer deeper supply chain support can put more of the end-to-end work under one roof, allowing for improved inventory procurement and management. High-quality and efficient fulfillment strategies can drive repeat purchases and increase revenue.

Leveraging Multi-Channel Fulfillment

Amazon’s Multi-Channel Fulfillment (MCF) service uses the FBA network and inventory to fulfill orders from non-Amazon channels. There are several challenges to the MCF program, from fulfillment fees that are 2.5 – 3X higher than FBA, to having lower priority than FBA (Amazon.com) orders, to shared inventory storage limits. There is a solution to the latter problem, but an expensive one. Amazon’s Capacity Manager enables Sellers to essentially bid for extra storage space. you can tell Amazon how much extra space you need and when, and how much you’re willing to pay for it (this “reservation fee” is separate from standard storage fees). So, you can get more space to cover both your FBA and MCF orders, but you’re competing with other Sellers for the space, and you have no idea what the going rate is at any given time. So if you need it, you’re going to have to bid high or it will go to someone else.

3PL capabilities for multi-channel fulfillment are much more flexible and encourage businesses to support and manage operations across various ecommerce platforms, marketplaces, B2B channels, etc., enhancing reach and flexibility. Integrating with multiple sales channels, including custom platforms, allows 3PL providers to maintain high order fulfillment efficiency, (treating all orders as important), and facilitate returns processing. This leads to improved customer satisfaction and better overall business performance, ultimately driving long-term revenue growth.

Impact on Profit Margins

Fulfillment costs (including shipping) are central to determining a business’s operational profit margin. Higher costs can significantly reduce profitability, so choosing the right fulfillment process and strategy is essential.

Both Amazon FBA and 3PL providers offer unique advantages that can impact cost efficiency and revenue growth, depending on the specific needs of the business.

Cost Efficiency

Cost efficiency is a significant factor in maintaining healthy profit margins. Optimizing supply chain processes and ensuring quick and efficient shipping help businesses achieve significant cost savings and improve overall profitability. By way of example, one Cahoot client reported a 30% reduction in fulfillment costs after transitioning to the fulfillment provider, from streamlined shipping expenses.

Revenue Growth

Effective fulfillment strategies can greatly influence revenue growth by enhancing customer satisfaction. A notable case involved a Cahoot client that grew 90% year over year in their first year with the new provider, AND saved 40 labor hours per week. Focusing on quick and efficient shipping drives repeat purchases and fosters long-term revenue growth.

Key Factors Influencing Your Decision

The choice between Amazon FBA and 3PL hinges on a business’s specific needs and objectives. Factors such as Business Size and Order Volume, Brand Control and Customization, and International Shipping Needs all play a unique role in making this decision.

Considering these factors helps businesses select the fulfillment strategy that best aligns with their goals and resources.

Business Size and Order Volume

Higher sales volumes often make Amazon FBA a more appealing choice due to its efficiency in handling large orders. However, 3PL providers offer more tailored solutions for businesses with unique inventory management requirements or seasonal fluctuations in sales.

Considering their specific needs allows businesses to choose the fulfillment center option that best suits their order volume and operational demands.

Brand Control and Customization

Brand control and customization are critical for businesses looking to establish a unique identity and enhance the customer experience. Unlike Amazon FBA, which limits branding options, 3PL providers offer extensive customization capabilities, including branded packaging and personalized unboxing experiences. This control can significantly impact customer relationships and loyalty, with over 50% of online shoppers likely to return due to positive packaging experiences.

Businesses prioritizing brand experience may find choosing a 3PL provider advantageous. 3PLs allow the use of custom packaging, inserts (e.g. handwritten notes, coupons for future purchases), and shipping materials, providing greater control over customer interactions and enhancing the overall brand experience. This emphasis on brand customization not only improves brand recognition but also fosters customer loyalty.

International Shipping Needs

International shipping is essential for businesses looking to expand their reach and serve customers globally. Amazon FBA provides integrated international shipping options, making it easier for Sellers to manage shipments and comply with customs regulations.

However, 3PL providers offer customizable international shipping solutions, (e.g. delivered with duties paid or unpaid, wider carrier selection, etc.), that can provide greater flexibility and might be more cost-effective based on specific shipping needs. Evaluating international shipping requirements helps businesses choose the fulfillment option that best supports their global expansion goals.

Summary

Both Amazon FBA and 3PL providers offer unique advantages and cost structures that can benefit ecommerce businesses in different ways. Amazon FBA provides seamless integration with Amazon’s vast customer base, quick and efficient shipping, and comprehensive (overly customer-centric) customer service. On the other hand, 3PL providers offer flexible pricing, customizable services, and greater control over the supply chain and the customer relationship. By carefully considering factors such as business size, order volume, brand control, and international shipping needs, businesses can make an informed decision that aligns with their goals and resources. Choose the fulfillment strategy that best supports your growth and profitability, and watch your business thrive.

Frequently Asked Questions

What are the main costs associated with Amazon FBA?

The main costs associated with Amazon FBA are fulfillment fees, storage fees (including aged inventory surcharges), and any extra charges for removal or disposal of inventory, inventory prep such as barcoding, placement fees, inbound defect fees, and possibly others. Make sure to factor these into your pricing strategy!

How do 3PL providers offer transparent pricing?

3PL providers ensure transparent pricing by offering customizable logistics solutions and engaging in contract negotiations, which allows for clear and flexible pricing options. This way, you know exactly what you’re paying for and can budget accordingly.

What strategies can businesses use to save costs with 3PL providers?

To save costs with 3PL providers, focus on negotiating better contracts and optimizing your inventory management. Also, consider leveraging multi-channel fulfillment and inventory sourcing to streamline operations and reduce expenses by putting everything under one roof.

How do fulfillment costs impact profit margins?

Fulfillment costs (including shipping) can really eat into your profit margins, so keeping them low is essential for maintaining profitability. The more you spend on fulfillment, the less you ultimately make.

What factors should businesses consider when choosing between Amazon FBA and 3PL?

When deciding between Amazon FBA and 3PL, think about your business size, order volume, and how much control you want over your brand and shipping process. These factors will help you choose the best option for your needs.

Looking for the best 3PL companies to handle your Amazon Seller Fulfilled Prime logistics? This article ranks the top 7 providers for 2025, highlighting their services and key features to help you make the right choice.

Key Takeaways

• Third-party logistics (3PL) providers offer essential services like order fulfillment, inventory management, and shipping, enabling ecommerce businesses to save time and costs while improving efficiency.
• Choosing the right 3PL provider involves evaluating their capabilities, their pricing transparency, and their ability to exceed the Amazon Seller Fulfilled Prime performance metrics requirements.
• Key features of top 3PL companies include advanced technology for real-time inventory management, strong customer service, and a robust partner network that optimizes logistics and enhances customer satisfaction.

Understanding Amazon Seller Fulfilled Prime

Amazon’s Seller Fulfilled Prime (SFP) program gives businesses a chance to combine the perks of Prime eligibility with the freedom to handle their own shipping. Introduced in the mid-2010s and revamped in 2023, SFP allows Sellers to ship directly from their warehouses or through trusted third-party logistics (3PL) providers, all while showcasing the coveted Prime badge.

This program is an excellent fit for Sellers who can meet Amazon’s tough delivery standards and want to avoid some of the restrictions and costs of Fulfillment by Amazon (FBA). By joining SFP, businesses gain access to millions of loyal Prime members, making it a potentially game-changing opportunity.

How Seller Fulfilled Prime Works

At its core, SFP puts Sellers in charge of the entire fulfillment process—from storage to shipping. This control comes with significant responsibilities, particularly when it comes to delivery speed. Sellers are expected to:

• Offer nationwide one-day delivery for at least 30% of their standard-size product page views, and two-day delivery for 70% of product page views.
• Meet delivery speed goals of 10% one-day page views and 45% two-day page views for oversized items. Offers for oversized items may use regional shipping templates (as opposed to the nationwide coverage requirement for standard-size products).
• Ensure extra-large products can be shipped with at least 15% of page views meeting the two-day delivery promise. Offers for extra-large items may use regional shipping templates.

Note that page view metrics must be met regardless of whether or not a purchase was made, and this simply means that the estimated delivery date displayed to the customer on your listing page was either 1 or 2 days from today if the view was before 2pm local time, or 1 or 2 days from tomorrow if the view was after 2pm local time. Amazon fully controls page views, it is out of a Seller’s hands.

To meet these expectations profitably, businesses need a well-oiled logistics setup, often involving multiple warehouses and a streamlined shipping process that ensures same-day shipping including carrier origin scans.

Program Requirements and Performance Metrics

Amazon holds SFP participants to high standards. The key metrics that Sellers must consistently meet include:

• On-Time Delivery Rate: At least 93.5% of orders should arrive as promised.
• Valid Tracking Rate: A minimum of 99% of shipments must include accurate tracking numbers using authorized carriers.
• Cancellation Rate: Sellers need to keep pre-fulfillment cancellations below 0.5%. This means no overselling which Amazon considers a bad experience.

New Sellers go through a 3-month trial, during which they must fulfill at least 100 Prime orders while meeting these benchmarks. Falling short can lead to warnings, suspension of Prime eligibility, or even removal from the program. Sellers who are removed can reapply after completing a fresh trial period.

Pros and Cons of Seller Fulfilled Prime

The SFP program offers compelling advantages. Products with the Prime badge often see a boost in visibility and sales, with some businesses reporting significant growth. Sellers also have more control over their inventory and branding, which allows for custom packaging and better alignment with their overall business strategy. By avoiding Amazon’s storage fees, especially in the punitive 4th quarter peak holiday season, they may also save substantially on costs.

However, SFP is not without its challenges. Sellers must invest heavily in logistics infrastructure and technology, especially if they need to cover nationwide delivery. Meeting Amazon’s high standards consistently requires operational excellence, and shipping costs can add up, particularly for larger or expedited orders.

The Role of 3PLs in Supporting SFP

Third-party logistics providers play a critical role in helping businesses succeed with SFP. The right 3PL partner offers the expertise, tools, and infrastructure necessary to meet Amazon’s stringent requirements. Important traits of a reliable 3PL include:

• Cutting-edge technology: Systems that support real-time inventory tracking, multi-warehouse management, and seamless integration with Amazon’s platform.
• Tailored solutions: Customized fulfillment strategies for unique products like oversized items or goods that need special handling.
• Strong shipping partnerships: Relationships with reliable carriers to ensure timely pickups origin scans, and deliveries.
• Deep understanding of Amazon policies: Knowledgeable support to help Sellers stay compliant with SFP requirements.

Companies like Cahoot, ShipMonk, and Ware2Go are well-regarded for their ability to support SFP Sellers. They provide essential services, including automated order routing and advanced tracking tools, to help businesses consistently hit their performance goals.

Leading 3PL Companies for Seller Fulfilled Prime

A third-party logistics provider can be transformative for growing ecommerce businesses. These 3PL companies offer a myriad of benefits, including time, energy, and cost savings. Moreover, they provide access to shipping discounts, data analytics, and affordable warehousing solutions, which are indispensable for scaling operations. Ecommerce businesses can focus more on their core activities while ensuring seamless logistics management by tapping into the infrastructure and expertise of a third-party logistics company.

However, with numerous third-party logistics companies in the market, ecommerce businesses often grapple with determining the best fit for their specific needs. 3PL companies provide a range of services such as order fulfillment, inventory management, picking, packing, and shipping, making them an integral part of the ecommerce ecosystem.

A 3PL partnership allows merchants to automate fulfillment processes, enhance efficiency, and deliver a superior customer experience.

In-Depth Comparison of 7 Top SFP 3PL Providers

Selecting the right 3PL provider necessitates a thorough comparison of their capabilities, services, and network reach. The top 7 3PL companies for Amazon Seller Fulfilled Prime in 2025 have been selected based on their ability to meet stringent SFP requirements, provide efficient logistics services, and support business growth.

These top providers leverage a global network of fulfillment centers and supply chains, enabling strategic inventory placement for faster and cost-effective shipping. Having multiple warehouses allows inventory to be stored closer to customers, significantly enhancing delivery speed and reducing shipping costs. There’s no way to participate in nationwide Seller Fulfilled Prime without an efficient distributed inventory solution that minimizes final mile costs by shipping using economical Ground services. A minimum of 4 locations is required to support SFP, but realistically, 6 locations is what will achieve > 90% of 1 and 2-day shipping using Ground. There will always be some expensive air shipping required to deliver orders on time, but above 6 locations, we start to see diminishing returns on the additional investment in inventory (capital) and inventory management (time).

This section will dig into the unique offerings of each provider, helping you understand which third-party logistics company aligns best with your business needs.

Cahoot

Cahoot operates a peer-to-peer fulfillment network, specifically designed to meet the rigorous requirements of Amazon Seller Fulfilled Prime. This innovative model allows for efficient sharing of fulfillment resources among partners within the network, optimizing logistics operations and reducing costs. Cahoot ensures compliance with Amazon SFP standards, making it a reliable choice for ecommerce businesses seeking to enhance their fulfillment processes. And, if you already have a trusted 3PL that can support SFP but just doesn’t have enough locations to support it profitably using Ground shipping, Cahoot is the only solution that will allow you to BYO3PL (Bring Your Own 3PL). We can onboard your 3PL seamlessly into the network to fulfill orders in the regions that they can support.

Partnering with Cahoot not only guarantees adherence to Amazon’s stringent criteria but also provides ecommerce merchants with the tools and infrastructure needed to streamline their logistics operations across all sales channels under one roof, so to speak. And flexible features, such as supporting branded packaging, are attractive benefits. This makes Cahoot an attractive option for businesses of just about any size.

Fulfillment by Amazon (FBA)

Fulfillment by Amazon (FBA) is a well-known service that allows marketplace Sellers to ship products as they are sold, leveraging Amazon’s extensive network of fulfillment centers. While FBA is primarily focused on Amazon’s platform, it also supports some other ecommerce channels under the Multi-Channel Fulfillment program, making it a versatile option for Sellers.

One of the key benefits of FBA is its support for Seller Fulfilled Prime, enabling marketplace Sellers to flag their listings for Prime two-day free delivery without being bound by FBA’s limitations. This flexibility allows Sellers to maintain control over their logistics while still providing the fast shipping options that Prime customers expect.

Ware2Go

Ware2Go offers a flexible and scalable fulfillment network designed to adapt to changing market demands. This agility makes it an excellent choice for ecommerce businesses looking to efficiently manage their logistics operations and meet customer expectations in a dynamic market environment. As a UPS company, however, be aware that the flexibility to ship using more economical services is not supported.

Staci Americas

Staci Americas supports Amazon Seller Fulfilled Prime, providing real-time success insights through an easy-to-use web portal that displays order status, inventory, trend reports, and metrics. This transparency helps ecommerce businesses track their fulfillment performance and make data-driven decisions. Additionally, Staci Americas allows items to be shipped in the Seller’s branded box, enhancing brand visibility and customer experience.

One significant advantage of Staci Americas is the ability to control costs by paying predictable rates for only the space and services used, unlike FBA, which has high storage costs that can rise during the holidays. Their knowledgeable customer service is available whenever needed, offering a level of support that FBA may not provide.

Red Stag Fulfillment

Red Stag Fulfillment specializes in shipping heavy items that require special handling, catering primarily to small businesses that ship such products. With two warehouse locations in the US, Red Stag ensures efficient logistics operations for its clients, providing targeted support to American ecommerce businesses.

The company utilizes a cloud-based system and integrates with various ecommerce platforms like Shopify, Amazon, and eBay. Custom integrations are also available via an API, enhancing their service offerings.

This combination of specialized services and advanced technology makes Red Stag Fulfillment a valuable partner for businesses with unique shipping needs. However, only having 2 locations limits RSF’s ability to support Seller Fulfilled Prime. Sellers must either only sell items in the Oversize and Extra Large size tiers in those two regions (regional fulfillment), or they must absorb 1 and 2-day air shipping costs to deliver orders for Standard size products to nationwide customers.

Fulfyld

Fulfyld is recognized for its cost-effective ecommerce fulfillment solutions tailored for online merchants. Founded in 2014, Fulfyld has established 8 fulfillment locations in the Southeast United States and integrates with popular platforms like Shopify, Adobe Commerce (formerly Magento), and BigCommerce. Fulfyld meets Amazon Seller Fulfilled Prime (SFP) requirements, however, only having warehouses in the Southeast creates the same problem that Red Stag has. Regardless of how fast and accurately orders can be shipped, Sellers are either limited to selling large and bulky items in the Southeast only (regional fulfillment), or they must absorb 1 and 2-day air shipping costs to deliver Standard size products to nationwide customers.

In addition to its fulfillment services, Fulfyld offers FBA prep services, including quality assurance checks, barcode labeling, bundling and kitting, and various packaging options like poly-bagging and shrink wrapping. These comprehensive fulfillment service options make Fulfyld a good choice for ecommerce businesses looking for efficiency and cost savings.

ShipMonk

ShipMonk provides comprehensive multi-channel fulfillment services designed to streamline operations for ecommerce businesses. One of the notable services offered by ShipMonk is support for Seller Fulfilled Prime, allowing Sellers to manage logistics for this exceptionally rigorous program efficiently.

With an extensive network of fulfillment centers strategically located to ensure fast and efficient Ground shipping across various regions, ShipMonk can meet the demands of modern ecommerce. This makes ShipMonk a reliable partner for businesses looking to enhance their fulfillment capabilities.

Key Features to Look for in a 3PL Company

Identifying the right 3PL provider is essential for ecommerce success, as each company offers unique capabilities tailored to business needs. Most outsourced fulfillment partners can help streamline logistics processes enhancing delivery speed and accuracy, but top 3PL companies offer high-quality customer service, advanced software, and transparent pricing, avoiding hidden fees to allow for better management of your logistics costs.

Benefits of Distributed Inventory and Multi-Warehouse Fulfillment

Utilizing multiple distribution centers can significantly lower shipping expenses and enhance delivery speed to customers. Distributing inventory allows businesses to manage risks better, as alternative fulfillment options are available during emergencies. Amazon doesn’t care if an order is shipped and delivered late because of a snowstorm or other type of weather event. So, distributing inventory ensures that orders can be rerouted and fulfilled from the nearest operating distribution center to the customer.

Faster shipment through distributed inventory also leads to higher customer satisfaction and potentially increased sales. Just because Amazon says an order needs to be delivered in 2 days, doesn’t mean that it can’t be delivered in 1-day with Ground shipping. Shipping and delivering early will delight your customers and keep them coming back.

Intuitive Software and Technology

Intuitive software and technology play a vital role within the logistics industry to aid in the successful management of inventory including placement and replenishment. To support Seller Fulfilled Prime using distributed inventory, advanced order routing is required to ensure that all orders are assigned to the cheapest warehouse to fulfill and ship based on real-time rate shopping across all carriers and services. Also, easy-to-use software that natively integrates with leading ecommerce platforms and marketplaces ensures that products are correctly listed across channels and that orders make it into the fulfillment queue so they can be fulfilled accurately and on time, every time. Features like real-time updates to and from sales channels allow businesses to respond promptly to changes in inventory, shipping status, cancellations, and returns, and enable shipping and delivery confirmation messaging which adds to the overall user experience.

Advanced 3PL software makes it easy to create inbound work orders, create discounted parcel shipping labels for the inbounds, or schedule LTL or FTL pickups, container drop-offs, etc. They also provide in-depth management, data analytics, and an easy-to-understand interface for effective order management. Automated inventory management systems help reduce manual errors and enhance operational efficiency, making them indispensable tools for ecommerce businesses.

Strong Partner Network

A robust partner network enhances logistics flexibility and efficiency, enabling 3PLs to provide specialized services and innovative solutions tailored to client requirements. This network allows 3PL providers to offer a wide range of services, from warehousing solutions to freight forwarding (import/export), ensuring comprehensive logistics support.

Cahoot and Staci Americas, for instance, provide tailored solutions for Seller Fulfilled Prime, enhancing support for merchants engaged in Amazon’s fulfillment program. This kind of specialized support is a testament to the value of a strong partner network in meeting the diverse needs of ecommerce businesses.

Competitive Shipping Discounts

3PL companies often negotiate much better shipping rates than an ecommerce business can by aggregating their volume, sometimes including freight volume. This allows them to pass on the benefits of reduced costs to merchants, enhancing overall logistics cost efficiency. These negotiated shipping discounts can improve margins substantially, making these top 3PLs attractive ecommerce partners.

For example, Red Stag Fulfillment offers shipping discounts for various carriers, particularly for oversized items. Cahoot has multiple rate cards across carriers and services to optimize shipping cost for certain sizes going to certain zones at various speeds. So whether you’re shipping small and light, bulky and light, large and heavy, or somewhere in between, there’s a solution for minimizing parcel shipping cost.

It’s worth noting that Cahoot is the only fulfillment solution in this list that allows you to bring your own negotiated carrier accounts. So for example, if you only want to outsource your SFP volume to Cahoot and keep non-SFP volume in-house, you can keep all your shipping postage on your carrier accounts to maintain your rates for all seller-fulfilled orders.

The Role of Customer Service in 3PLs

Customer service is a critical component of any successful logistics partnership. A reputable 3PL provider should adapt to evolving business needs and support growth effectively. High-quality exceptional customer service ensures smooth operations, quick issue resolution, and proactive communication, positively influencing business outcomes.

Automated solutions for returns, offered by many 3PLs, streamline the process and improve customer satisfaction. A well-structured returns process can enhance customer retention and drive brand growth. Pre-vetted recommendations from a 3PL also help ecommerce businesses by providing solutions that have worked for other customers. Modern 3PLs can support newer and more profitable returns business models such as peer-to-peer solutions. Once a return is approved, it’s automatically relisted as an open-box item at a pre-determined discount. You never have to touch the return or pay for the reverse logistics. Everybody either saves money or gets a reward for their participation.

Dedicated Account Management

Having a dedicated account manager stimulates personalized communication and promotes deep understanding of a business’s specific needs. This personalized support is particularly beneficial for high-volume shippers, or those with large or complex product catalogs, or those with specialty project needs such as selling on Good Morning America or The View where advanced planning and rapid execution are required, or for those with specialized needs such as assembly of custom shipping containers for exceptionally fragile products. A dedicated account manager tailors customized services for businesses with unique needs, and Cahoot is well-known to support all of these types of clients and more.

Multi-Channel Support

Multi-channel customer support, (primarily email, live chat, and phone support), is essential for ensuring effective communication and problem resolution between businesses and their 3PL providers. Responsiveness and availability of support across different channels can positively impact customer satisfaction through efficient use of time for issue resolution.

Advanced Fulfillment Solutions

As the ecommerce fulfillment landscape becomes increasingly competitive, innovative fulfillment solutions are essential for delivering positive customer experiences. Advanced fulfillment solutions, such as same-day shipping and delivery options, and effective returns management, not only streamline logistics operations, but they’re part and parcel of the Amazon SFP program. So make sure your fulfillment partner can accommodate.

Many 3PL providers offer additional services like inventory refurbishment and refreshing damaged retail packaging so units are sellable in new condition, which increases resale opportunities, increases margins, and reduces waste. Implementing these advanced solutions allows ecommerce businesses to stay ahead of the competition.

Automated Order Fulfillment

Automation in order fulfillment operations can streamline processes and improve overall productivity within logistics operations, but more importantly, it reduces fulfillment defects which leads to increased customer satisfaction and loyalty, and reduces return rates which increases profitability and helps to retain what could have been lost revenue.

Strategically locating inventory in multiple warehouses is crucial for achieving 1 and 2-day shipping coverage. For instance, merchants need to strategically locate inventory in four warehouses to ensure 2-day shipping coverage across the continental U.S. Achieving 1-day delivery necessitates positioning inventory in at least 6 fulfillment centers, but as many as 9 may be needed depending on the size and weight of your products.

Real-Time Inventory Management

Real-time inventory tracking enables businesses to more easily manage the supply chain and fulfill customer expectations effectively. Real-time tracking automatically updates stock levels as inventory moves, enhancing visibility and aiding in effective decision-making regarding fulfillment and procurement. Consistent and regular inventory cycle counts ensures that the accurate available quantity is known at all times.

Technology that automatically synchronizes inventory counts and prices across multiple sales channels helps eliminate listing issues that lead to overselling and pre-fulfillment cancellations (which is one of the SFP performance metrics that is closely monitored by Amazon).

Reverse Logistics and Returns Management

3PLs streamline ecommerce returns by offering an easier process, including prepaid return labels and return tracking. Effective customer support for returns includes real-time communication and transparency, enhancing engagement and satisfaction.

Utilizing peer-to-peer returns can lead to significant savings on shipping expenses and a decrease in the time needed for warehouse processing. The immediate restocking of returned products upon request can drastically reduce the processing time typically required at warehouses, and thus, reduces the time to resale. This approach helps businesses manage returns efficiently and improve overall customer experience.

Overcoming Challenges and Ensuring Success

Thriving in the SFP program requires a combination of smart planning and solid execution. Sellers need to position warehouses strategically, ideally near major population hubs, to optimize delivery speeds, (for example, states located in the Northeast, Southeast, North Central, South Central, Northwest, and Southwest regions of the US). Monitoring performance metrics regularly and making real-time changes to promotions to drive eyeballs (page views) is another key to success. This allows sellers to identify and address any issues or dips in metrics before they escalate. Partnering with a capable 3PL provider that offers SFP consulting is also a wise move, as their expertise can help businesses navigate challenges and adapt to Amazon’s unforgiving requirements.

Summary

Amazon’s Seller Fulfilled Prime program is a powerful way for sellers to tap into the Prime customer base while keeping control of their fulfillment process. With the right approach, businesses can use SFP to enhance their visibility, increase sales, and build a stronger connection with their customers.

Preparation is the cornerstone of success. Sellers should invest in the right technology, establish a strong logistics network, and choose 3PL partners who can support their goals. The top 7 3PL companies highlighted in this blog—Cahoot, Fulfillment by Amazon, Ware2Go, Staci Americas, Red Stag Fulfillment, Fulfyld, and ShipMonk—each offer unique capabilities that cater to different business needs. From leveraging distributed inventory and ensuring fast delivery to providing advanced software and exceptional customer service, to specialty solutions such as Cahoot’s Bring Your Own 3PL and Bring Your Own Carrier Accounts programs, these 3PL providers can help streamline your logistics operations and drive business growth. By understanding the key features and benefits of these top 3PL companies, you can make informed decisions that enhance your business and meet your customers’ expectations. For those willing to rise to the challenge, SFP offers an exciting opportunity to thrive in ecommerce.

Frequently Asked Questions

What are the benefits of partnering with a 3PL provider for ecommerce businesses?

Partnering with a 3PL provider significantly boosts your ecommerce business by providing cost savings, scalability, and access to shipping discounts. This allows you to automate fulfillment and concentrate on what you do best—growing your business!

How does Cahoot’s peer-to-peer fulfillment network benefit Amazon SFP Sellers?

Cahoot’s peer-to-peer fulfillment network significantly benefits Amazon SFP Sellers by streamlining logistics and ensuring compliance with Amazon standards, making operations more efficient and effective. This collaborative approach helps Sellers thrive in a competitive marketplace!

What makes Fulfillment by Amazon (FBA) a versatile option for Sellers?

FBA’s extensive global fulfillment network enables quick shipping, making it a flexible choice for Sellers. Additionally, it allows participation in Seller Fulfilled Prime, offering the benefits of Prime delivery while supporting orders across various ecommerce platforms using the Multi-Channel Fulfillment (MCF) solution.

How does real-time inventory management improve supply chain operations?

Real-time inventory management greatly enhances supply chain operations by allowing businesses to quickly respond to stock levels and customer demand, preventing stockouts and fostering informed decision-making. This increased visibility and synchronization across platforms ensures that accurate stock levels are maintained, leading to improved efficiency and satisfaction.

What are the advantages of using multiple warehouses for ecommerce fulfillment?

Using multiple warehouses for ecommerce fulfillment greatly improves efficiency and customer satisfaction by lowering shipping costs and speeding up delivery times. This strategic approach also helps in better risk management, ensuring a smoother operation overall.

Listen to podcast here.

Podcast: The Future of 3PL Fulfillment in the Face of Amazon Warehouse Distribution (AWD)

In a conversation between Manish Chowdhary, founder and CEO of Cahoot and Neil Twa, host of the High Voltage Business Builders podcast, the two discuss Amazon’s inventory limitations and the impact it has on ecommerce sellers. Amazon has different teams with different priorities, causing confusion among sellers who cannot rely on any one order fulfillment solution. The company has cut down on inventory shelving space for some ecommerce sellers while launching new services, such as Buy with Prime, which could pose a threat to marketplace delivery services like Shopify. Shopify recently banned Buy with Prime, which Manish argues cuts into the heart of revenue. To avoid being beholden to any order fulfillment service, sellers must have a backup that is not Amazon. The experts caution against putting all your eggs in one basket and encourage ecommerce sellers to move beyond Amazon if they want to grow their ecommerce brand.

Below is the transcript of their conversation, edited for clarity:

Neil Twa:

Welcome to the High Voltage Business Builders, a show where we interview entrepreneurs growing and scaling their income through e-Commerce and showing you the path to make your first or next million.

All right, Manish, thanks for joining the call, my friend, from Connecticut today. How is things out there on the East Coast for you?

Manish Chowdhary:

Things are a bit cloudy here, but it’s still a great day, and thank you for having me, Neil.

Neil Twa:

Yeah, it’s great to have you here, man. So, we’re talking a little bit about things that are obviously relevant to E-comm, but in different channels, not just Amazon. I know you handle multi-channel fulfillment.

Let’s talk a little bit about that, because I know it’s a big piece of what you do in your business model. Tell us what are you seeing, what’s most relevant right now. If someone’s listening to this and they’ve got a Dropshipping or an Amazon store or some other thing else, what’s something they should know right now that you feel is important for them to hear?

Manish Chowdhary:

Well, one of the things that… I just got back from Search Summit last week, you hear conflicting sets of information, right? I mean, Amazon is rolling out new services. You brought up a little while earlier, Amazon warehouse and distribution. So they’re ready to take on everything. Then I hear from a very large seller, very successful seller, just two days ago that their inventory limit has been cut to 1/3rd (of what it is presently).

Yeah, one side, Amazon is ready to take on everything you’ve got, and the second side is the people that are in need of that inventory today don’t have that. So Amazon has different teams working. You really can’t believe one thing or the other, because they’re all just simply trying to get in the limelight. So, it’s a lot of confusion out there for sellers.

Neil Twa:

Yeah, there is definitely, because they said, “We’re going to do 5% of you only (whom they said they would reduce inventory for). We’re going to have to make some holiday changes, we got inventory issue.” Now if I just look at our group, our businesses and we come back, there was more than 5% of the people in our group who got that notification just within our group. So I’m like, “Well, I don’t think that was quite 5%.” I think they kind of just placated those numbers just a little bit.

So they killed it on one end by halving down the shelving space we had on one side of the house, and then they’d say, “Hey, well, we got this new Amazon warehouse distribution (AWD) thing, and you could have unlimited storage over here all of a sudden.” It’s kind of like, “Well, I mean, were you playing the shifting shelves game here?” What do you think is going on?

Manish Chowdhary:

Well, I mean, again, Amazon is a very large company. There are different product owners, each one has their own agenda, so they may have gotten certain amount of space allocated. There’s also Amazon launched Buy with Prime service that is probably also run by a separate group, that they’re ready to take on order fulfillment for Shopify merchants or just about anyone.

So, it is very unnerving if you are a seller like yourself or people in your group, that if you see your inventory limits cut down, what confidence, what trust would you have in other services? So one thing that we at Cahoot like to educate our sellers or give them advice on is that you’ve got to have a backup, and it cannot be Amazon.

Amazon cannot be Amazon’s backup. You’ve got to have an independent third party that has your interest in mind, that is going to help you navigate the turbulent Amazon waters, and that’s not going to end anytime soon. It’s not a Q4 issue, it’s not a Q1 issue.

As long as you play in the Amazon ecosystem, that will continue to remain a challenge no matter how large, how many services they roll out.

Neil Twa:

Yeah, it’s a very valid point, and I love the way you speak Manish, because you’re a very pragmatic guy. I can tell in the way you look at these things. Because obviously with adding the Buy with Prime button, it’s added on a whole additional line of sellers from Shopify and other stuff, which I don’t know if they were aware maybe of what that would do. I know a lot of people have suddenly implemented that. I know for sure they’re going to take over a lot of Shopify’s opportunity for marketplace delivery they were trying to bring up.

Manish Chowdhary:

Well, but Shopify just came out last week I think, and banned it. So Shopify has publicly gone on record to say that installing the Buy with Prime button is against Shopify’s terms of service. So there you have it. Shopify wants to ban Buy with Prime, Buy with Prime wants to get on Shopify. Nobody wants to take FBA forwarding. It’s a big challenge if you’re a seller, you just cannot be beholden to any platform centric order fulfillment option.

Neil Twa:

And there it is. So we talk about pros and cons, and we’re very open about both of those things with Amazon, we don’t want people to be Amazon channel locked. So you need to move a brand beyond Amazon if you start there and incubate it or if you’re off Amazon, obviously you need the combination of the multi-channel aspect really for E-comm today. But like you said, you can’t put all your eggs in one basket, and as soon as you have the opportunity to split out profits, you should move another channel, another opportunity. I didn’t actually hear that update on Shopify, so that’s interesting news. I can see why they would do it. The marketplace is getting extremely competitive, and that opportunity was going to cut into their delivery systems, they were trying to ramp up.

Manish Chowdhary:

Well, it’s not even delivery system. It cuts into the heart of their revenue.

Neil Twa:

Well, for sure, for sure.  I mean, you can see why we do these kinds of things and have these kind of conversations. If you’re out here just trying to flounder around on your own. For us, having the experience levels we do, and you too it’s even confusing at times to try to rationalize this stuff in the middle of all the experience we have versus people who are just trying to get going. So if you’re new and you’re just like, “Okay, I got an Amazon channel, I don’t necessarily have a 3PL yet, or I’m looking to get one.” What are the top three things you want people to know when they’re looking for a 3PL company that they should consider? What are the things they should know about it?

Manish Chowdhary:

First and foremost, I think it’s very important to make data-driven decisions. A lot of sellers just simply reach out to 3PLs and we get many of those inquiries. “Give me a price rate card.” Most 3PLs specialize in something. Not everyone specializes in everything. There’s micro – What we call mom-and-pop 3PLs. These are one location, two location, 3PLs, and then there are chains, and then you have networks like Cahoot. So it’s very important for the 3PLs to understand what kind of products are they going to deal with, what’s the inbound and outbound frequency, what kind of services you’re expecting, what is most important to you if you’re simply looking for an FBA forwarding service, or are you looking for DTC fulfillment? What kind of products, because there’s the shipping cost.

I’ll give you a very simple example. You can get dirt cheap order fulfillment, let’s just say even in the hottest market, Southern California, let’s say dirt cheap storage. But if most of your orders are going to New York or the East Coast, you are going to pay Zone 8 shipping prices for moving that item from California to New York on an individual basis. So net net, you actually will lose money even though you thought you got a great deal. Those things are very important. If this 3PL is going to take one or two days extra to ship from a lead time or if they’re going to use downgraded services, that will take longer for the consumer to receive. All of those things are very important to understand upfront as to what are you trying to solve for. And that is one thing that is very important. At least at Cahoot, we don’t blindly hand our pricing because we don’t know if we are going to be the best fit and only information and data tells us whether we are going to be the right fit.

So I would encourage sellers to really think about – how many SKUs? What kind of orders are you fulfilling? The count of orders? Let’s do averages over the last six to 12 months to make sure what’s the typical inventory storage requirement? How long do you store that inventory for? And having all that information and what the shipping cost is going to be, because many 3PLs do not do that. They charge the shipping cost, so you could lose a lot of money on that front. And how does it compare to FBA trying to make any comparison with FBA? So you know exactly for what products you’re going to come out ahead, what products are going to cost more. Because we going to admit FBA is very competitive for Small and Light, very attractive. So anybody who tells you they’re going to beat FBA prices across the board, they’re most likely lying.

Neil Twa:

Yeah. Because of this infrastructure, their multi-channel services usually can win to some degree. You just have to look at it from a strategic perspective and not the lowest race to the bottom pricing. Because I know that’s what happens to a lot of those people with rate cards is they’re selling $10, $12 products and they’ve got razor thin margins and it’s hard to beat Amazon’s FBA pricing at that level because they’re already at razor thin and Amazon’s trying to beat all the competition for pricing. So you got to be smart about your numbers. And usually people who are just asking for rate cards don’t really know what their numbers are. And they may not even know what Zone 8 means if they’re listening to this. But guys by the way, that’s the farthest distance from one location to another at shipping costs.

If you’ve ever tried to ship something and like US Postal Service go down and look, they have a Zone card and you’ll notice some of the locations are some of the farthest away, and you got to be smart about where your sales are coming from. If you’re on DTC, it’s a little easier. You can do a quick analysis and see where’s the majority of my orders going to from people who are buying. On Amazon, you got to wait a little bit and figure out where Amazon’s distribution is sending all your products into which areas you’re getting the most sales from, which may take a little bit of time from the system. But obviously, Manish, you know your stuff. I mean, just listening to you for the last five minutes. You clearly understand this. What is your background in this business model?

Manish Chowdhary:

So I was involved with building the e-commerce platform before the word e-commerce platform was invented. This is going back to early 2000. I was involved with building one of the first Turnkey Shopping Cart Software long before Shopify existed. Magento wasn’t on the market at that time. So built a very successful Shopping Cart Software, Turnkey e-commerce platform as we see now. So I’ve seen e-commerce evolve from its infancy. And then went on to build another similar product, but it’s a full service mid market e-commerce order management system, inventory management system. So I’ve been dealing with online retailers, technologies God, for 22 plus years. So I’ve seen everything and just about anything. I’ve got deep experience with now logistics. I’ve got 10 US patents on business process, orchestration and collaboration. So a lot of experience in anything and everything to do with e-commerce and operations.

Neil Twa:

Yeah, no, that’s a very historic background. I mean, back to 2000, is post dot-com bubble. Did you get out of the bubble somehow into this or did you ride that out okay or what happened there?

Manish Chowdhary:

Yeah, I mean, I think we did phenomenally well because that was the time when e-commerce was just taking off. And I think some of the large, the eToys of the world, they pretty much laid the foundation for the SMBs. SMBs were getting on for the very first time, just like the pandemic did, brought in a ton of people who started to sell online. But in this case, there were businesses that were offline, the brick-and-mortar that suddenly saw themselves as an opportunity to sell online. And this is actually, I think this was before Amazon opened itself up as a marketplace. Amazon marketplace did not exist. Yahoo Shopping used to be the marketplace. May or may not remember that.

Neil Twa:

No, I do. But the eToys thing is taking me back in my brain for a second. I haven’t heard eToys in a long time.

Manish Chowdhary:

Yeah, so those were the early days. So I’ve seen the evolution of that. So I mean every time there’s a crisis as they say, or there’s a challenge, there’s an opportunity. I mean, right now we are going through some historic black swan event with the pandemic and so on, but I think there’s some great businesses that are going to emerge out of this. I mean, yes, for my own business, which is Cahoot, it’s an innovative peer-to-peer order fulfillment services network. For the very first time, if you are a merchant who has a warehouse, you have an opportunity to make money if you have excess space in your warehouse. This is something that did not exist. Similar to what Uber and Airbnb did in 2008 when the financial crisis hit. All of a sudden people were without jobs. So they were going and signing up to become drivers for Uber, which allowed Uber to offer low prices for short-term transportation, which really helped them take off.

Similarly, Airbnb also emerged during that time when people were trying to save on short-term stays. They don’t want to pay large, heavy amounts to the Hiltons and the Marriott’s of the world, and there was a great opportunity for them to monetize their spare bedroom. And so Cahoot is doing something very similar in the order fulfillment and logistics space. So if you have a warehouse and you have your act together and you’ve got spare capacity, for the very first time you can come to Cahoot, join our network and apply to become an order fulfillment partner and make some money.

Neil Twa:

So peer-to-peer order fulfillment services network, that’s new, that’s very innovative.

Manish Chowdhary:

Thank you. Thank you.

Neil Twa:

Yeah. Obviously your innovations and patents and other things have led you to some really new concepts. Where do you see that moving in the next year with some of the challenges around order fulfillment, longer shipping times? Where do you see that going?

Manish Chowdhary:

Yeah, I mean, I think that the order fulfillment companies should be embracing what I call merchant inclusive fulfillment. If you think about a merchant’s needs, a merchant wants to bring in inventory, whether it’s domestically or international. The inventory is going to come into one of the bigger ports. There are some of the less popular ports that I recommend right now. If you’re having trouble getting inventory to Long Beach or Oakland at New York, New Jersey, you can look into Charleston, you can look into Miami, you can look into some of the other ports that are less congested. I mean, I think merchants want a single provider that can handle their B2B, that they can stage their inventory and then drip it to FBA as needed for the items that make sense. They can do the order fulfillment for other channels, Shopify, Walmart, others, I know Walmart launched its Walmart fulfillment services.

Lot of sellers are not super excited about that. They still find that to be in early stages and infancy in its technology evolution. People are going and rushing to build new warehouses. But we believe that there are 2 million merchants in the US. Many of them do order fulfillment on their own, that there’s plenty of capacity available, just like how Airbnb helped unlock millions of rooms as opposed to going out and building new hotels in an already crowded space. When somebody builds a very expensive warehouse, they’re going to charge you something very expensive for their services because they got to recover their expenses. So Cahoot is very unique in that way to leverage existing assets so that we can get higher utilization for what already exists.

Neil Twa:

Fantastic man. And if I’m not wrong, it’s cahoot.ai, is that correct?

Manish Chowdhary:

Cahoot.ai, yes.

Neil Twa:

Okay. And when they show up, what should they expect to give you to get the right information necessary? And we’re talking about sellers who are already in the marketplace in one capacity channel or another, but we’re also talking about those who have additional warehouse space, maybe even other 3PLs who might want to utilize that space, if I’m hearing you correctly, can connect with you as well. Is that right?

Manish Chowdhary:

That’s right. We have two parts of our network. The sellers that are looking to outsource order fulfillment, they can come to Cahoot. If you have a great deal, come out to Cahoot, let us reconfirm that you still have a great deal, no harm done. It’s something to be aware of. Or if you have one location, you want to add a second location because you’re getting orders from nationwide. We have the technology, the software that can make that happen seamlessly. And if you’re super happy with your existing provider, we are not looking to replace them or displace them. That’s just not the way how Cahoot operates. We would invite them to come join the Cahoot network so they can participate and they can stay part of it. Because if you have got a good thing going, we know we have the technology to glue it all together.

And on the supply side, if you are a warehouse that has excess capacity that you want to monetize, then you come join and apply to become an order fulfillment partner. And we invite 3PLs as well to come join as a fulfillment partner. Because let’s face it, let’s say you are an East Coast based 3PL, your customers, your merchants are demanding a location on the West coast. So rather than losing that client entirely, you can come and partner with somebody so you can keep that client and meet that client’s needs. Because if you choose to ignore that client’s needs, because to your point, Neil, Zone 8 shipping from New York to California Zone 8, that’s very expensive however you slice it. And even if your fulfillment providers rates are the cheapest, you are still going to come out in the red because shipping orders cross-country has two problems, higher shipping cost, and longer transit time.

It takes five days for the item to be delivered, sometimes could be up to six, seven days. So we invite both 3PLs and warehouses of capacity to come check us out, apply to become an order fulfillment partner, and for the sellers to look out and find a merchant inclusive fulfillment solution. You got to have a backup. And I’m talking about the seller, Neil, that I spoke with last week. Sellers in the Amazon space – they are plugged in, they’re super smart, you would know them, even they don’t have a backup. And it’s appalling to me that how can you put all the eggs in one basket?

Neil Twa:

Once you get to be a certain size – Risk management needs to be a big part of your operational component. I would be surprised that they didn’t have some of that in place, but I’m sure they could help you. You’re obviously got an innovative, unique idea for both seller and 3PL. And folks, if you’re listening to this, I would encourage you to check it out. The link will be in the show notes, go to cahoot.ai, check out what Manish is doing. Obviously, you can hear he’s a super smart guy who’s figured something out that’s really cool. It will benefit both you and the 3PL provider you might be using at this point. Guys, I would encourage you to go check it out and take a look at that if both, again, you’re a seller and a 3PL. Manish, any other final words of wisdom you want to leave on us today?

.

Manish Chowdhary:

Thank you, Neil. I mean, there’s one more thing in the words of Steve Jobs.

Cahoot has the industry-leading shipping software. So if you are not ready to outsource fulfillment and you have a warehouse, you do order fulfillment or shipping yourself, Cahoot can save you a lot of time in rate shopping. We did a side-by-side comparison between ShipStation and Cahoot, which is a leading product on the market. And of course, as they say, Cahoot came out 21 times faster, that’s just the technology that Cahoot has built that reduces human error. It reduces a human trying to compare UPS, FedEx, USPS rates, figuring out which one to pick. And rather than doing it one order at a time or applying any kind of crude rules, Cahoot’s technology automates all of it. So if you want many hours back in your day, and I kid you not, we have a client that was spending four hours on a Sunday away from their family printing labels so that they could ship those orders out on Monday and they could not fulfill Monday’s orders until Tuesday because they just did not have the capacity.

And so there’s some unique technology even on the shipping software front. If you can save three hours, four hours of labor a day that’s money back in your pocket to do some other things that are more revenue producing.

Neil Twa:

Very smart and interesting angle on that. Definitely. So a shipping station comparison is a very good analogy for what your software does and obviously it’s very powerful. We may have to check that out ourselves, for some of the projects we’re working on. Thanks for bringing that up, man. I appreciate your time today, sir.

Manish Chowdhary:

Thank you. Neil, anything else you’d like to cover?

Neil Twa:

Look, that’s good for me at this point, unless you have something else you would like us to know.

Manish Chowdhary:

No, I mean, I think just merchants should be aware that Amazon FBA has added peak fulfillment surcharge of 6 to 8% for the very first time. That’s I think getting rolled out on October 15th. That’s a fourth increase in FBA fees this year. I think in the first quarter they revamped the Small and Light pricing. April 28th they added 5% inflation surcharge. And then of course the storage triples in Q4, as you know. So I would encourage sellers to go check out their bills and to make sure that nothing in the Amazon FBA world remains as is. So be mindful of that as you’re calculating your profitability, how much you’re allocating to your advertising, return on advertising spend and all that good stuff. And some other big news, I mean, Pharmapacks the number one Amazon seller going out of business –

Neil Twa:

Yeah. Their margins were too thin. And I was just going to cover a little bit of that actually, because on the antithesis side of that, one of the third largest native acquisitions just occurred for a cosmetics company in a $630 million acquisition. So on the other side, you got to look at the differences between the two. Why did one go out of business, and why did one have such a tremendous exit? And then how to deal with the rising costs of obviously inflation or fees, obviously, as you mentioned are going up.

And that’s a good topic because I mean, you got to look at the value of the brand and the value of the products you’re putting into it. That’s one of the things we always drive out here. If you’re going to sell something for $30 or less on Amazon, you better have a very high margin on it or not sell anything less than $30, or you’re going to run into these kinds of really razor thinned margins where you might be making it great or it cost is good, and the product is growing, but all of a sudden that 5% surcharge or changes at this fourth quarter of the year slice your margins down to a dollar in profit, which is really no for a business model.

So we want to encourage everybody on the back of that to remember, keep your product profitability above $10, if not higher to $15 in that profit per unit for your products. If you can’t achieve that on your products currently, you need to get products in the market that will do that. That will raise with price, can raise retail price against inflation and market hedges or of course increasing costs and operations and logistics as we just spoke about, won’t impact you as greatly. Yes, they’ll impact you, but it won’t be devastating. And I know there’s a lot of sellers in the market right now that are going to face that coming into fourth quarter.

As you mentioned earlier, there’s opportunity in everything. For some of us, there’s going to be great opportunity priced correctly and in the profit margins we need, whose fourth quarter this year is going to be great. But I think there’re going to be a lot of sellers who are coming off of a COVID bump who still haven’t right sized their metrics or expectations and rising cost of inflations are going to hurt them in this coming quarter. And many of them may not be able to make it through the end of the fourth quarter, even though they should be doing really well.

Manish Chowdhary:

Right. And business metrics have changed. I mean, if you’re looking to get acquired, that brings massive challenges of its own. Profitability is going to be key. The other advice that we are giving sellers is don’t wait for the last minute. Holiday shopping is going to happen earlier. There’s of course, a lot of talk about a second Prime Day. I mean, just think about it, why is Amazon considering a second Prime Day? It is because they want to push holiday forward. They want to push spending forward because they’ve got tons of excess inventory. We’ve heard from Walmart, lots of inventory challenges, aggressive discounting happening at Target. Their profit plummeted 89.9% year on year. 

Neil Twa:

Yeah. Target is taking big hit, no doubt.

Yeah. And you mentioned Walmart – literally yesterday, I saw an article that said Walmart removed some of the major restrictions. It was making it very difficult for third party sellers to get approved on their platform. And in one day they had the largest spike in signups they’ve had to date since they opened the Walmart ecommerce platform. Because now you can actually get over there and open up your business, which is your name and your business in a few other details now. Whereas before it was highly restrictive. So there may be some additional opportunity for folks looking at Walmart because it has a market potential opportunity.

But you’re right, there are others that they’re suffering for a lot of different reasons. You bring up Target, but Target’s isn’t just operational or profitability. They’ve got other geo and political problems hitting them due to some policies and stuff that affected them, I believe. Just look at the market and the trends, and you can see what I’m talking about. But in terms of market share and stuff, the latest studies show that the even Walmart and Target combined still don’t make up Amazon’s 38% of market share. So if you’re going to play in the market, go with the juggernaut. Right?

Manish Chowdhary:

Certainly, certainly, but also diversify because if you’re successful at one marketplace, you want to dip your toe in the other.

Neil Twa:

Yeah, hints the Walmart point. You can get into Walmart a lot easier now due to those restrictions being lifted. Yep. So you should definitely consider it.

Manish Chowdhary:

That’s right. That’s right.

Neil Twa:

Yeah. Manish, thank you so much for your time, sir.

Manish Chowdhary:

Neil, thank you again for having me and pleasure speaking to your audience and if I can be of any help, please go check us out at www.cahoot.ai.

Neil Twa:

If you like this episode, please share it with people you think will enjoy it as well. Thank you for listening and be sure to tune in next week for a brand new episode of High Voltage Business Builders.

Offer 1-day and 2-day shipping at ground rates or less.

Related Blog Posts