Fulfillment companies are similar to most other businesses in that they attempt to find the right “fit” for potential new customers. Rather than accepting any new client, most providers clearly define an ideal set of criteria to target. Of course, these ideal characteristics aren’t something that they usually broadcast to the world, so that they can hold this valuable information “close to the vest”, allowing for increased negotiating leverage when providing price quotes. In order to help your company negotiate more competitively and earn superior fulfillment pricing, we’ve compiled some of the top characteristics that fulfillment companies look for in a new client – things that will have them beating down your door and lowering their standard rates to bring your products into their warehouse.
Higher Volume of Orders
Fulfillment is a very difficult and competitive industry, with warehouses relying on a high overall volume in order to earn a profit since they typically earn a very low margin on each order sent. While some companies may receive per order fulfillment fees as low as $1 or less, according to a recent FulfillmentCompanies.net survey, the average order fulfillment fee in the US for a one item order is around $2.85, which leaves very little margin. Therefore, it comes as no surprise that higher monthly order volume is at the top of the list of desired characteristics of a new client. If you have a higher volume of orders, you can expect to receive a larger discount off of their standard rate structure. One other point of note: most fulfillment providers make at least a small margin on shipping fees. Because of this, oftentimes they’ll target certain shipping characteristics, such as higher amounts of express shipments international shipping, or heavier items. If you have any of these shipping needs, be sure to use them to your advantage.
Eyes on Growth
Not every company is currently shipping an enormous volume of orders. In this case, fulfillment providers will look at what investment you’re making in terms of growing the business. When they see that you have a solid plan for marketing and selling your products, or when they can see a steady growth of order volume, this is an indication that your company has a strong potential to grow in the future. At the end of the day, fulfillment companies are “taking a risk” in your business, and if your company is poised to grow, this represents a solid risk for the fulfillment company to take that could lead to overall order growth and profitability for everyone. When your company has a lower order volume, be sure to let the competing fulfillment companies know any plans that you have for growing the business so that you can be sure to get the most competitive rates possible.
Sophisticated fulfillment providers always have an eye on “organizational” fit between their company and any new client. Bringing on a new client that doesn’t match their style of business could be a recipe for disaster. One big red flag in particular are companies with management that lean towards being controlling and unwilling to delegate the necessary amount of responsibility. Especially in this time of intense growth in e-commerce fulfillment and new technologies and trends, it’s extremely important for fulfillment providers to be able to lead the charge when it comes to keeping pace with change and appropriately handling your account. Furthermore, it’s a drain on everyone if the focus is on the negative instead of the positive. Let’s face it – everyone makes a mistake, and each fulfillment service will send out an order incorrectly. However, these companies will be looking to partner with businesses owners and operators that will be able to move past challenges and collectively solve issues that arise – which can easily be noticed during the negotiation process. During this time, be sure to offer flexibility and “meet them in the middle”. Showing a little bit of compromise and desire to build a warm and collaborative approach to communication will make them more than interested in earning your business.
Perfect Product Match
Some companies focus on fulfilling orders for very specific product types. For example, there are fulfillment companies that specialize in fulfilling vitamins and supplements, others that focus on bulkier and heavier products, and everything in between. Be sure to check out their website or talk to them about their specialties. If you can find a company that really targets your particular commodity type, you may be able to negotiate a better rate structure since your product fits into their ideal “wheelhouse.”
Start-up Versus Established Businesses
As mentioned previously, taking on a new fulfillment client is a risk. Another way that these companies mitigate risk is to either completely avoid or implement requirements for start up companies. Every business has to start somewhere, but unfortunately, start up companies offer a greater risk than most established companies simply because they are an unknown commodity. If you find yourself in this situation, there are still some things that you can do to increase your chances of getting better rates. First and foremost, come to the table with a plan of attack. Many start-ups initiate conversations with fulfillment providers without first reading about the industry in general. Second, make sure that you have a solid business plan in place that shows the provider where you’re headed and how you plan to get there. The more thought that you’ve put into your business, the better suited you’ll be to negotiate a winning deal.