Third-party order fulfillment companies help retailers handle their orders for a set of monthly fees. The primary costs include fees for receiving inventory, storing it, packing orders, and shipping them out.
Key Takeaways
Here are the typical costs associated with order fulfillment:
- Inventory Receiving: $25–$50 per hour (or $5–$15 per pallet)
- Storage: $5–$40 per pallet, per month
- Pick and Pack: $3–$5 per order
- Outbound Shipping: Varies based on size, weight, and destination of your products. This is usually the largest expense. Fulfillment companies typically offer 10%–50% discounts off standard shipping rates.
Other costs can come from processing returns, restocking, initial setup, account management, inbound shipping, packaging, custom labeling, and special requests, like kitting. The total cost depends on the company, your products, and the order details, making it important for retailers to understand the breakdown of these expenses.
Fulfillment Center Pricing Overview
Fulfillment center pricing isn’t uniform across the industry; each provider has its own set of rates. We showed a typical range of what you might encounter from different fulfillment companies above.
Additional fulfillment center costs include a one-time onboarding fee (which can range from $100-$1,000+ depending on how big and complex your business is), inbound shipping fees, return handling fees, and account management fees (typically ranging from $75-$100/month). Services like custom packaging and product kitting or assembly will incur additional costs.
How Order Fulfillment Costs Work
Fulfillment centers vary greatly in how they structure their fees—some fulfillment partners itemize and quantify each service, while others use flat-rate overall charges. In either case, it’s typical that the customer’s storage usage, order quantity, and shipping fees are calculated monthly and impact the total cost.
Instead of openly publishing pricing online, a large percentage of fulfillment companies require interested businesses to contact them for a custom quote.
Additionally, fulfillment partners often model their pricing to work for a specific type of retailer. For example, Red Stag Fulfillment optimizes its shipping and storage costs for large and heavy goods, while Fulfillment by Amazon offers significant discounts for small and light items.
Some retailers choose to do their own order fulfillment and shipping in-house rather than outsourcing the task to a third-party company. When it comes to efficiency and cost-effectiveness, this method usually works best for startups and small-scale sellers. Check out our in-house vs outsourced fulfillment comparison to learn more.
Here’s a more in-depth look at fulfillment center pricing:
Typical Fulfillment Costs Categories
Since our Last Update in March 2023: Order fulfillment fees have generally increased due to inflation, gas prices, and rising wages.
It’s becoming increasingly popular for fulfillment centers to charge an all-inclusive ‘fulfillment fee’ that includes pick and pack labor, packaging, and shipping, and varies based on each order’s details as well as your negotiated pricing. However, many companies still use more itemized costs.
We used the average fulfillment center costs from a 2023 survey by WarehousingAndFulfillment.com to compare two common pricing models in the table below.
Model A features an itemized pricing structure that charges based on the usage of each fulfillment service. Conversely, model B uses an all-inclusive ‘fulfillment fee’ structure that charges per order. The two models also contain different methods and fee structures for other cost centers—such as inbound shipping (your own account vs the provider’s account) and receiving (per hour vs per unit).
Average Fulfillment Costs by Pricing Models
Pricing Structure (Model A) | Fee (Model A) | Pricing Structure (Model B) | Fee (Model B) | |
|---|---|---|---|---|
Onboarding | One-time fee | $377 | Included in your fulfillment fees | $0 |
Inbound Shipping | Use your fulfillment provider’s partnered shipping company | Discounted | Choose your own shipping company | Full price |
Receiving | Hourly rate | $38.93/hour | By unit | $8.69/pallet OR 25 cents/item OR $2.50/SKU |
Storage | By cubic foot | 55 cents/cubic ft per month | By unit | $18.30/pallet OR $3.20/bin per month |
Pick and Pack Fees | B2C (business to consumer) | $3.00 per order | B2B (business to business or wholesale) | $4.31 per order |
Outbound Shipping | Use your fulfillment provider’s shipping accounts | Discounted | Use your own shipping accounts | Full price |
Return Fees | Per returned order | $3.60 per order + 50 cents/returned item | Included | Included in pick and pack fee |
Account Management | Monthly | $261.80 | Included | Included in fulfillment fee |
Kitting Fees | Per unit | 25 cents–65 cents/unit | By the hour | $39/hour |
Standard Packaging | By package | 58 cents/box (varies by size) | Included | Included in pick and pack fee |
Here’s a closer look at each of these fulfillment fees, how they are calculated, and how much you can expect to pay:
When first partnering with a fulfillment company, a sizable amount of setup must be done, including integrating your online store, creating storage infrastructure, and training staff to handle your goods.
This step is often labor-intensive on the provider’s end, so some companies charge a one-time onboarding fee to cover it. The charge ranges from $100 to multiple thousands based on the scale of your business, complexity of your inventory, and number of sales channels you use—but small businesses pay an average of $377.
However, many small business-friendly fulfillment partners require no onboarding or setup fees.
You’ll pay the freight or container shipping cost to send merchandise from your supplier to your fulfillment center, which varies depending on the quantity, size, weight, and origin of your goods.
Many fulfillment partners receive discounted rates negotiated with shipping carriers and extend these savings to you. This can help decrease your inbound shipping costs substantially.
Receiving your stock includes coordinating shipments plus unloading, inspecting, tagging, and sorting your goods—all of which require lots of time and manpower. For this reason, it’s usually billed by the hour.
Expect to pay about $25–$50 per hour to receive your merchandise unless your provider charges a flat rate per unit. This cost averages $5–$15 per pallet.
Some fulfillment centers waive the receiving fee if your inbound shipments adhere to specific guidelines, like labeling and quantity requirements. This allows employees to quickly process entire boxes or pallets into their system without the need to count, inspect, tag, sort, or organize each unit, consequently lowering labor costs. FBA and ShipMonk are examples that use this fulfillment center pricing model.
Storage fees are primarily charged based on the space your inventory takes up. You will also need to pay higher rates for climate control or if your products need extra security. Fulfillment partners charge anywhere from $5–$40 per pallet monthly to store your goods, with the average cost running $18.30 per pallet, according to a survey by WarehousingAndFulfillment.
Some companies calculate this cost using cubic feet (averaging 55 cents per cubic foot) or individual bin occupation instead ($3.20 per bin on average per month). It’s also common for providers to assess the amount of space your inventory is occupying on a daily basis, then add up the cost of each day at the end of the month. This ensures you’re only paying for the exact amount of storage space you used.
During peak dates (usually October–December), some providers (namely Fulfillment by Amazon) will drastically increase their storage costs due to volume and demand fluctuations. It’s not a common factor, but review your contract for seasonal inflation.
If your goods require special services like refrigeration or hazmat handling, storage costs will include a premium of about 73% on average.
This fee covers the labor of retrieving items from storage and packing them into boxes or envelopes for an order.
Often, fulfillment companies charge a flat per-order fee, usually about $3–$5. Some providers refine this cost by using a slightly cheaper base fee and tacking on an item charge per additional unit in the order, such as $2.50 + 50 cents per item. Others include this cost in an ‘all-inclusive’ fulfillment fee that also accounts for packaging and shipping.
In many cases, items that you provide for your orders, such as custom boxes or package inserts, will be counted as an additional ‘pick’ that contributes to the total fulfillment cost for the order.
Unless you provide custom packaging, fulfillment centers keep a large range of boxes and envelopes on hand to choose the most appropriate outer packaging for each order. Seventy-one percent of providers charge separately for these materials, but some companies will provide them for free.
If packaging incurs a separate cost, you’re typically billed based on the type, size, and durability of the package your order requires, with the average box cost ranging from 50 cents to $1.50+.
Fulfillment companies usually offer significantly discounted shipping rates, but you should still expect your shipping costs to be the greatest cost center in your monthly fulfillment spend.
As a retail partner, you can use your own carrier account (like FedEx, UPS, or USPS) or go through the company’s account with their preferred services. Though each option comes with benefits, it’s important to keep in mind the deep discounts offered to fulfillment providers due to the massive volumes that they regularly ship. If you choose to go with the fulfillment company’s carrier, you’ll likely see 25%+ discounts on your standard rates.
The actual cost of shipping your orders depends on the dimensional (DIM) weight, and destination of your parcels, as well as the carrier sending them.
Handling your customers’ unwanted orders is a service that not every fulfillment company offers but is a valuable amenity for most ecommerce sellers.
Fulfillment providers who have a returns service will incorporate charges for processing and restocking. The total fees are usually charged at about the same rate as the pick and pack step, plus the cost of return shipping. If elevated inspection is required to determine whether returned goods meet your store’s standards, it will likely incur an additional fee.
Some fulfillment providers charge a monthly fee that covers any additional services performed to keep your account functioning smoothly. This involves communicating with you and your suppliers, handling incidentals, updating software, and more.
The cost itself varies substantially based on your business’ size, complexity, and needs, but usually ranges from $30–$1,000 per month (with an average of roughly $200). Some providers calculate a flat monthly rate that covers account administration for the length of your contract, while others charge $40–$60 an hour for any tasks involved.
Optional & Add-on Fulfillment Costs
Depending on the specific needs of your business, you may incur additional fulfillment fees, including:
If any of your goods need to be assembled or grouped together into a set ahead of time, fulfillment providers can help. They charge anywhere from $30–$50 per hour for these services, which often breaks down to as little as 25 cents–$1 per kitted unit.
Some fulfillment partners can take care of customer service-related tasks for you, like answering customer queries or handling escalations. The cost of this add-on is largely dependent on how the fulfillment company is set up—some centers have large, dedicated teams of customer service reps fluent in multiple languages, whereas others may simply extend their account administration staff into customer care. Call center services averaged $1.28 per minute in 2023.
One of the biggest advantages of using FBA, for example, is that reputable, 24/7 customer service is included in your fulfillment center pricing.
Your fulfillment partner can help take your branding further with tailored packaging elements or custom-printed inserts for your orders. While few fulfillment centers produce these materials in-house, they can typically coordinate with a partnered packaging provider.
There are a wide host of variables that contribute to the cost of this option, like materials, design labor, and quantity. Others will use the custom packaging that you provide.
ShipBob says branded packaging ranges from 10 cents to $10 per box. Premium packaging sets crafted to promote an extravagant unboxing experience can cost upwards of $30 per order. Plenty of options exist in between those two extremes, such as stickers, printed tissue paper, stylized boxes, and thank-you notes.
After all service fees are said and done, order volume is one of the dominant variables in determining ecommerce fulfillment pricing. When working with retailers who receive large quantities of orders, most fulfillment centers offer a significant discount on their services.
Fulfillment Contracts & Legal Fees
Ecommerce fulfillment pricing is only part of what you need to consider when hiring a fulfillment service. A fulfillment agreement is a legal contract between you and your fulfillment company that clearly defines the basics—such as fee structure and payment requirements—and less obvious, crucial details like insurance and liability.
Each contract is different, but common considerations include:
- Term Length: The minimum amount of time you agree to pay for and use the company’s services
- Charges: A thorough and explicit description of how your fees will be calculated and how frequently they will be charged
- Annual Price Increases: The anticipated adjustment of your costs to reflect inflation and changes in the provider’s expenses
- Error Rates: The level of accuracy guaranteed by your fulfillment provider
- Claims: An explanation of the procedure used to handle losses and damages
- Insurance: The details of insurance policies held by the fulfillment company, its employees, and its shipping partners as they affect your property
- Arbitration: A section defining how disputes between parties will be handled
Page 1 of a 12-page fulfillment agreement
(Source: FulfillmentCompanies.net)
These agreements are usually lengthy and intricate, and the stakes of fulfillment relationships are high—you’re entrusting your valuable merchandise and the loyalty of your customers to a separate enterprise.
For this reason, many retailers choose to hire an attorney to assist them in reviewing the contract before signing. The guidance you’ll need shouldn’t be extensive, but it’s important to factor in the cost of hiring counsel if it’s an amenity you plan to use.
Some 3PLs offer the opportunity to try their services for a certain period before signing a full-fledged fulfillment agreement. This gives customers the chance to make sure they’re a good fit for the company’s services and fulfillment enter pricing. For example, Red Stag Fulfillment offers a 30-day risk-free trial and promises to waive all fees if you aren’t satisfied with its performance.
How to Calculate Fulfillment Costs
As mentioned above, many fulfillment companies provide custom-quoted pricing, while others publish their fee structure online. In either case, the only way to accurately calculate your expected fulfillment costs is to contact the pros themselves and give them the individual details of your business.
WarehousingAndFullfillment.com provides a matchmaking service that compares your specific needs to hundreds of prescreened partners. Get quotes from multiple fulfillment centers ASAP.
Below are some of the companies from our list of best order fulfillment software. You’ll see that cost breakdown also varies by company.
Top Fulfillment Companies Compared
When comparing fulfillment center pricing (or just analyzing your existing fulfillment method’s efficiency), there are some key metrics to look at. Here are some calculations to use:
- Cost Per Order (CPO): Total fulfillment costs within a time period∕ number of orders fulfilled within the same period
- Cost as a Percentage of Sales: Total fulfillment costs within a time period∕ net sales within the same period ✕ 100
Fulfillment costs comprise a hefty portion of any retailer’s expenses, regardless of how they operate. It’s important to keep in mind the impact fulfillment details have on customer retention and conversion rates. With companies like Amazon shaping high expectations around shipping speed and return policy, having top-notch fulfillment capabilities is necessary now more than ever.
Did You Know?
- Free shipping is a primary driver of online purchases, with up to 75% of shoppers deeming it a necessity. Extra costs may lead customers to abandon their shopping carts.
- Most shoppers will think twice about ordering from a company again after a bad delivery experience. Among all age groups, 86% of Gen Z buyers will not reorder.
- 62% of shoppers expect delivery in three days or less.
Benefits of Outsourcing Fulfillment
The cost of third-party fulfillment may seem high, especially for startups or small-scale sellers that have never had to worry about things like account management fees. When considering hiring a third-party fulfillment company to assist your business, keep these details in mind:
- Labor Cost Management: The fees you pay a fulfillment partner represent the cost of facility, staff, incidentals, and other overhead expenses that you’d inevitably incur running an in-house operation. Even if your fulfillment staff is a one-person team (i.e., you), your hourly time is valuable and should be considered in the outlay you’re comparing.
- Access to Exclusive Discounts: Fulfillment companies, due to their high volumes, secure lower rates on packing materials and shipping, often passing these savings onto their clients. Plus, you may receive discounts from the fulfillment center’s partnered providers, like custom printing services and freight carriers.
- Focus on Business Growth: When your daily priority is processing, packing, and shipping orders, important tasks that actually help to grow your business often take a back seat. Outsourcing your fulfillment duties frees up precious time you can redirect to more profitable areas.
- Scalability of Services: Third-party providers allocate resources as needed, so you never pay for staff and space you’re not using. This is especially helpful during busy holiday seasons and other sales spikes.
Bottom Line
Fulfillment costs are a substantial part of any ecommerce store’s overhead expenses. The process itself has a huge impact on customer experience, sales, and overall profit—making effective fulfillment a worthy investment.
Partnering with a fulfillment company is a step toward maximizing efficiency and driving growth. Fulfillment center pricing is detailed and complex, but the level of personalization those calculations provide means you’re only paying for what you use—which always works to your benefit.
