The e-commerce industry has experienced tremendous growth in recent years. While in-store shopping still earns businesses in the United States more revenue than online shopping, online retail sales are projected to grow by roughly 9% between 2024 and 2029.
As online order volumes gradually rise, more e-commerce businesses face logistics challenges such as managing inventory levels, navigating supply chain issues, and meeting customer expectations for fast delivery.
Are you struggling to deal with these and other logistics hurdles? Keep reading to discover how working with a third-party logistics (3PL) provider can help you overcome various obstacles and support your e-commerce growth.
The Role of 3PLs in E-Commerce Expansion
Handling logistics in-house may suffice if you run a small business that receives a few orders. However, handling logistics in-house may be unfeasible as your business expands and serves more customers. That's where 3PL providers come in.
A 3PL provider can relieve you from handling complex logistics tasks, allowing you to focus on core aspects of your e-commerce business.
Ways 3PLs Support E-Commerce Growth
Running an e-commerce store involves many tasks, such as running marketing campaigns, handling customer complaints, and monitoring on-site behavior. Juggling these tasks while handling logistics can prove challenging, especially if you have a lean team.
Fortunately, 3PL providers can support your e-commerce expansion by providing the following 3PL services:
Warehousing
Many businesses, particularly small ones, often struggle to secure warehouse space due to competition for space from large-scale retailers and manufacturers.
3PL providers can support your e-commerce growth by providing ample storage for your goods until delivery. And best of all? 3PLs tend to offer access to multi-location warehouses, expediting delivery times.
Inventory Management
Inventory management is a huge headache for many e-commerce businesses. In fact, according to a recent report, 98% of Shopify merchants stated that they struggled to align inventory and production with changing consumer demand.
3PLs can relieve you from the hassle of managing inventory. 3PLs typically have vast expertise in inventory management, and they use advanced inventory management tools with real-time tracking capabilities to help e-commerce businesses maintain optimal stock levels.
Last-Mile Delivery
Most online shoppers expect to receive online orders within at least 48 hours or less. 3PLs can help you fulfill this expectation by transporting packages promptly from distribution centers to customers' homes. For instance, at QuickBox, we offer a two-day ground shipping option that covers 95% of the U.S.
Returns Management
While returns are the last thing you'll want to deal with, they're inevitable. In fact, 20% of items purchased online are returned. This means that for every 100 products sold, 20 are returned, costing online stores nearly $600 billion annually. 3PLs can help with reverse logistics, allowing customers to return items with minimal hassle.
Technology Integration
E-commerce stores use multiple tools to conduct business online, such as e-commerce platforms, customer relationship management (CRM) tools, and electronic data interchange (EDI) software.
Whether you require simple or advanced integration, a 3PL can help you connect your in-house tools seamlessly with its custom technology solutions.
Order Fulfillment
Fulfilling a few orders can be relatively hassle-free. However, as your business grows, it may be tough to fulfill large order volumes. Thanks to their order fulfillment expertise, 3PLs can support your e-commerce growth by quickly processing, picking, packing, and shipping your orders.
Benefits of Partnering with a 3PL for E-Commerce
Working with a 3PL fulfillment company can be a boon for your online business. Whether you run a small e-commerce store that receives hundreds of orders monthly or a large one that receives thousands of orders, here are the 3PL advantages of partnering with a 3PL for e-commerce.
Cost Savings
Working with a 3PL can significantly reduce e-commerce logistics costs, with eight out of ten 3PL users stating that partnering with a 3PL enabled them to lower overall logistics costs. This is undoubtedly one of the biggest 3PL benefits.
By partnering with a 3PL, you won't need to allocate funds toward building and maintaining a warehouse or keeping logistics personnel on your payroll. Plus, you'll lower your transportation costs because 3PLs often get carrier shipping discounts.
Enhanced Customer Satisfaction
Customers want to receive their orders promptly. It's no wonder more than 50% of supply chain professionals consider meeting customer expectations for fast delivery one of their biggest challenges.
3PLs have the expertise to process orders accurately and ship them fast, improving customer satisfaction. Some 3PLs also offer additional services like returns processing and custom packaging, further enhancing the customer experience.
Focus on Core Business
Handling e-commerce logistics processes can be tedious, especially if you have a lean team and lack logistics expertise.
Outsourcing logistics processes to a 3PL can offer huge time-savings, allowing you to focus on other core e-commerce business tasks that drive growth, like product development, sales, and marketing.
Global Expansion
Most e-commerce businesses aim to scale their operations by venturing into new markets. However, entering a new market, particularly overseas, can be daunting. But it doesn't have to be if you partner with a 3PL.
3PLs understand the complexities of international shipping and regulatory compliance, making it easy for e-commerce businesses to expand their operations and reach new customers.
Case Study: How a 3PL Helped Bakblade Scale Operations
Bakblade is a company that sells a variety of premium men's grooming tools, specializing in back shavers. In 2016, the company launched a crowdfunding campaign that became unexpectedly popular due to a viral video. This resulted in orders of up to 30,000 units, the highest order volume the brand had ever received.
The team at Bakblade knew they wouldn't be able to handle the sudden large order volume. So, they reached out to a 3PL for assistance.
The 3PL helped Bakblade fulfill its large order volume by offering 3PL solutions such as two-day express shipping, real-time tracking, and custom packaging, enabling Bakblade to scale its e-commerce operations easily. As a result, the company's sales grew by a staggering 291% in under three years.
How to Choose the Right 3PL for Your E-Commerce Business
Selecting a suitable 3PL provider can have a massive impact on the success of your e-commerce business. However, not all 3PL order fulfillment companies are the same. When choosing a 3PL partner, here are key factors to consider:
- Industry experience: Look for a 3PL with a proven track record of working with various e-commerce stores — preferably in your industry.
- Scalability: Partner with a 3PL that can grow with your business. Ideally, your chosen partner should be able to provide more warehouse space, transportation, and labor, depending on your evolving business needs.
- Technology: The best 3PLs leverage advanced technologies such as real-time tracking, warehouse, and transportation management systems to enhance their operations. Choose a 3PL that uses these technologies to stay ahead of the competition. However, remember to choose a 3PL that offers integrations compatible with your existing systems.
- Cost: Cost is the top priority for nearly nine out of ten companies during contract negotiations with 3PLs. While cutting costs is a key factor when evaluating potential 3PL providers, you should also consider the overall value a provider offers, focusing on areas like technology, geographic coverage, and customer service. This will ensure you don't compromise on quality in favor of the cheapest option. Also, shop for quotes from multiple 3PLs to compare pricing across various providers. Finally, some 3PL quotes can be relatively complex. So, when evaluating quotes, be sure to request a detailed breakdown of every item to avoid incurring unexpected costs.
- Custom solutions: There's no one-size-fits-all 3PL that's ideal for all situations. That's why it's essential to select a 3PL that provides solutions tailored to your business needs. For instance, if you offer a product with unique packaging requirements, an ideal 3PL partner should be able to provide a bespoke packaging solution.
Powering E-Commerce Success with 3PLs
Working with a 3PL provider can offer your e-commerce business numerous benefits. By outsourcing logistics processes to a 3PL, you can reduce operational costs, boost customer satisfaction, and expand your operations with minimal hassle.
Best of all, you can focus on aspects of your business you excel at while allowing the 3PL to worry about logistics issues such as warehousing, inventory management, and returns management. It's no wonder 89% of companies acknowledge that working with 3PLs has contributed to improved service.
Ready to provide better service and scale your e-commerce business? Let us help! Contact us today to learn more about our 3PL services.
SOURCES:
Online vs In-Store Shopping Statistics. (December 2024). Capital One Shopping.
Online Shopping Behavior in the United States - Statistics & Facts. (September 2024). Statista.
Small Businesses Squeezed Out by Warehouse Space Shortage. (February 2023). WorldCraft Logistics.
Optimizing Ecommerce Inventory and Performance in 2024. (April 2024). Katana.
Consumers Expect Online Orders to Be Delivered Within 2 Days. (September 2023). OnTrac.
Returns Cost E-Commerce Retailers $600BN Every Year. (June 2023). Retail Insight Network.
2024 Third-Party Logistics Study. (October 2023). NTT Data, Penn State University, and Penske Logistics.
Obstacles Faced by Supply Chain Professionals at Large Retailers in 2023. (June 2023). Statista.