Is Hiring a Fulfillment House Your Best Option?
Need a Fulfillment House?
When you build a business website, and you integrate a gift store into your site, you are in a great position to start generating some great passive income. One of the considerations you will have to deal with is whether or not to use the services provided by a Fulfillment Business.
Generally speaking, we recommend online gift store owners begin using a fulfillment center once you are generating ample sales to warrant the added expense. The truth is you may never need one, but a fulfillment house can be great if you have a solid foundation for your online store, and find the right one.
A Personal Fulfillment Story
When we (Mark and Kim, the creator's of this site) first started selling products online from our store, A Zen Gift, we had a little bit of money to invest. We decided we would buy wholesale and store our products at a fulfillment house. We had special branding that we wanted implemented, and we had an option on our site if our customers wanted to have their products gift wrapped, and have a personalized note attached. We also had a special coin which was a give-a-way item that was to be placed in every box, regardless of whether the customer wanted gift wrapping.
To make a long story short, we tried to do too much. We were living in Thousand Oaks, California at the time, and the fulfillment facility we chose was in Windsor, Colorado. Everything started out okay. It was a lot of work to set up, but the people that worked there seemed friendly and proficient...at first.
It did not take long for a total melt down to occur. Our first few orders that we had trickling in seemed to get lost. We received "call center" bills from the 1-800 number that could not accounted for, and we found out we were being charged for pallets that were not being used. We actually still tried to work with this fulfillment company, realizing the time and money it would take to move all of our inventory. But as time passed, more problems cropped up, and old problems never got resolved.
We bit the bullet, and moved our inventory to a Fulfillment Center in Sun Valley (now in Chatsworth), California. Without going into too much detail, the entire crew of this Fulfillment business was amazing. The name of this company is called Riverplate Fulfillment. And I give them 12 out of 10 stars. Riverplate (which is also a trucking company) is family owned and operated. The owner is Daniela Rodriguez, and she is an incredible person. You can read about her and her business in this recent press release.
It is interesting that we give this fulfillment facility such outstanding marks for service, because about 1 month after we got all settled there, all of our inventory was destroyed in a fire (no fault of Riverplate). But Riverplate was insured, and we got refunded for our loss. Riverplate and Daniela handled the whole unfortunate episode swiftly. We are still friends to this day.
Given our experience with fulfillment centers, we are in a unique position to offer you advice on going this route for setting up your ecommerce site. The Universe was clearly trying to tell us not to carry any inventory, and, ultimately, we listened...at least for now.
There could come a time when we change our minds, and start using a fulfillment center again. And if we do we will use Riverplate Fulfillment-and we highly recommend that you do, as well.
The Pros of Using a Fulfillment House
You may be wondering why we would ever want to use a fulfillment house given our string of bad luck. Well, the truth is, a fulfillment house can be a wonderful help to a growing business.
A fulfillment facility is used when you are buying in bulk (wholesale), from your manufacturers, and you require space for storage, and a system in place whereby you can have a communication between you (and your business), your customer that purchases your products, and the fulfillment house that is responsible for packing them up and shipping them out.
Here are a few of the services that a fulfillment house takes care of:
- Ample storage is supplied for your products
- Insurance is usually covered for products stored on the Fulfillment Center property
- A Fulfillment Facility usually provides an inventory management system, so that when the fulfillment house is running low on your product, they will let you know
- A call service is usually provided (1-1800 number), so that your customers will be directed to the facility
- Fulfillment workers can answer questions about your products as well as take orders
- A Fulfillment Center can provide a credit card system if it is not already in place
- Fulfillment workers can pick and pack your products any way you like, if any special assembly or kit is needed
- Special gift wrapping, with gift bows and a personalized gift card can be implemented
- Any special branding that you would like on your packing boxes or use of stickers can be handled by the fulfillment workers
- A Fulfillment Facility automates your business, leaving you to attend to more creative matters
So, from the bulleted list above, it is obvious why a Fulfillment House is a great choice. For bigger companies they are essential, but for the small business owner who is working from home it may not be the wisest choice.
The Cons of Using a Fulfillment House
The cons of using a fulfillment facility, are very clear in our minds. Given our past episode that we experienced in Windsor, Colorado many of the following cons come from that time:
The Cost
Depending on the fulfillment house you use, the fees can be substantial. Riverplate Fulfillment has the most reasonable rates anywhere.
No Oversight
Unless you have complete trust in the fulfillment facility you are working with, you have to trust that they are charging you appropriately, and they are shipping out your products the way you want them to be shipped to your customers.
Extra Insurance Required
Even though the fulfillment center should be covered in case the facility is burned down, you can't be sure the cost of your inventory will be completely covered unless you carry a separate policy, unless you have a very good business insurance policy.
Less Flexibility with Inventory Change
When you buy in bulk, and a fulfillment house inputs all your data into their system (sku#s and prices), it is difficult to keep your fulfillment center go-to person up to speed if you like to make changes on a regular basis. It can be done, but you have to be in constant and clear communication.
Complicated Set Up
We were amazed at the amount of work involved in showing our fulfillment center what products we had, and how we wanted them shipped. And, keep in mind, we had a small online business. We were housing less than 50 of our products. It was an insane headache.
The good news is once you are set up, it runs pretty well on its own. Again, this is provided that you choose well. Having an ecommerce site and selling gifts and products is a lot of work, we can not lie. But, the truth is, it is so much fun at the same time. When you are in the midst of building your site, designing the concept, and picking out gifts, and creating pleasing images, and writing compelling copy you are creating something that can last a lifetime. And as the name of this site says, you can manifest passive income.
So hang in there, and follow your gut. Get help if you need it (we offer lots of free advice here), and keep moving forward. If you think you might want to wait on the whole fulfillment center scenario, and want to look into setting up various drop ship accounts with manufacturers, visit our Drop Ship Companies page. There is great advice as well as a list of companies to contact.
Then come back to this page. Use your best judgment, and then stick to it. Fulfillment house or drop ship, be smart and...
Do Your Homework
Fulfillment House 101
If you do want to explore the option of using a Fulfillment Business, do your homework by calling several different companies from all over the country (if you operate in the United States).
Here is a list of questions you should ask every Fulfillment House on your list:
1. Do you have a set up fee? If so, what does that include?
2. Do you have a minimum monthly fee? If so, what is that?
3. What does that monthly fee include?
4. Are my products covered by insurance?
5. What is the name of your insurance company?
6. Do you, as the owner, have additional insurance on the property?
7. What is the extent of the insurance? Under what circumstances are they covered, and what is the dollar amount?
8. If I am unhappy with the service at your Fulfillment House can I get a refund? Are there any stipulations on this refund?
9. How big are your pallets - what are the exact dimensions?
10. Can I come down to the fulfillment house, and see how my products are stored?
11. Can I meet with the workers of the fulfillment house, and explain (and show) to them exactly how I would like my products shipped?
12. How do you charge for your gift wrapping service? If it is by the time, how do I know how much time should be allowed for this service?
13. Do you have a 1-800 number service at your fulfillment house?
14. Can the people answering the phones be instructed as to the nature of the products we carry?
15. Can I make changes to my inventory-add and subtract products, change prices of products, etc., whenever I want?
That's it on the whole fulfillment house issue. You know our recommendation - try drop shipping first, till you build your business. But if you choose a fulfillment facility, go for it-and definitely check out Riverplate Fulfillment-and tell Daniela that Kim and Mark McGinnis sent you!
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