At Proxii, we prioritize talking with eCommerce companies on an almost daily basis. Having these conversations is critical in shaping and guiding our overall product strategy. Since my co-founder and I started on this journey at the beginning of the year, we have had the privilege of talking with well over 100 unique eCommerce and 3PLs (Third Party Logistics) companies.
A few months back I had a conversation with a founder of a booming swimwear brand trying to navigate the rough waters of selecting their first 3PL. Despite COVID’s attempt to cancel Summer 2020, these co-founders found a way to weather the storm and sell A TON of swimsuits. As we chatted about their growth, I noticed in the corner of my Zoom video feed that there was a massive stack of poly bubble bags and corrugated boxes piled 10-high right behind the founder’s desk…
I asked the founder how many other bags and boxes she had stashed out of frame in her California apartment. She proceeded to pan her laptop camera revealing a WALL of orders due to be picked up by USPS later that day. Half-jokingly, I asked her when she first knew it was time to scale-up and outsource warehousing and fulfillment to a 3PL. Her response, “About a month ago I spilled a box of cereal on my kitchen floor. I went to my closet to get the vacuum and the door was completely obstructed by boxes. At that moment I knew, almost instantly, that I needed to reclaim my apartment and get rid of the damn boxes.”.
The journey of almost every successful eCommerce company undergoes the same significant inflection point – the moment when the management team or founders decide it is time to scale-up their fulfillment operations. I define “scale-up” as the fork in the road when a team is presented with 3 options:
1. Accept the status quo, and continue to trip over boxes in your living room
2. Invest in leasing warehouse space, staff up a team, and build out their own more robust fulfillment operation
3. Outsource the warehousing and fulfillment operations to a 3PL
After my call with the swimwear company, I decided to make a conscious effort to ask more founders when they knew it was time to scale-up their fulfillment. Below is a compilation of 5 trends I deduced from my conversations to date. I hope that you may be able to learn from their successes and their mistakes on your own journey as you build the next great eCommerce brands and digital DTC companies
YOU’VE RUN OUT OF SPACE TO STORE YOUR INVENTORY
This is the most obvious one, but you’d be amazed at how many early stage companies I’ve talked to who have inventory jam-packed around multiple rooms of their house or office. If you can’t park your car in the garage because it’s become a quasi-fulfillment center, it might be a pretty good time to consider your options...If either of these descriptions sounds like you, this is the perfect time to investigate scaling your fulfillment. It’s never going to get easier to move your inventory, and you are likely right at the tipping point where if you take action now, you’ll be able to avoid issues like inventory loss and fulfillment errors before they start to have a big impact on your business.
YOUR FULFILLMENT IS BECOMING SLOW OR INACCURATE
Another pretty clear sign here, but this one is worse because it directly affects your customers. If you’re still picking, packing, and shipping your own orders and you notice an uptick in customer complaints around delayed shipments or packing mistakes (an increase of 10%+ is a good threshold), that should be a bright red flag for you to take immediate action. Thanks to The Amazon Effect, we live in an era where customers demand free and fast shipping, and their buying behavior is heavily influenced by how quickly they can get their hands on your product. Failure to maintain high quality fulfillment accuracy and speed is a surefire way to lose new and repeat customers alike.
THE MANAGEMENT TEAM IS SPENDING TOO MUCH TIME ON FULFILLMENT
Everyone has heard the tale of Bezos and Co. packing books into boxes all night in the early days of Amazon. It’s a nice story that demonstrates that startup company management teams need to get their hands dirty to succeed. In fact, getting in the weeds of logistics and fulfillment can be hugely beneficial – if you do decide to outsource, you’ll know what to look for in a 3PL, how to measure their performance, and more. However, you didn’t start the company to pack boxes, and your time is almost certainly better spent on other parts of your business. If you find yourself spending an inordinate amount of time (think 3+ hours per day) on manual fulfillment work, that’s a solid signal that it's time to outsource that part of the job. Your focus on areas like product, sales, and marketing will create more meaningful impact to your growth.
YOU HAVE SPECIAL PACKING REQUIREMENTS AND DON’T KNOW WHERE TO START
If you have your eyes on introducing custom packaging for your product, or plan to expand your distribution to Amazon or retail stores, the complexity of your fulfillment will expand significantly. Custom packaging and FBA (Fulfilled by Amazon) prep can be highly labor-intensive activities that done alone or with a small team can consume a workday. Many 3PLs specialize in providing these services and can help advise you how to do so most efficiently.
YOU’RE JUST PLAIN SICK OF FULFILLMENT
I get it, the nitty gritty of logistics and fulfillment isn’t for everyone. While it may be a necessary evil, the bright side is that you really don’t need to do it yourself. Proactively outsourcing to a 3PL can not only solve your packing woes – partnering with the right 3PL can yield strategic insights and options that create upside in your distribution and customer experience. Let’s take the swimwear company I referenced earlier as an example. Their 3PL did more than take their fulfillment off their plate – they provided expertise on returns policies, advised on how to pack their product to improve sanitation standards, and more. If you absolutely loathe doing it yourself, make it an opportunity to form a strategic partnership with an expert in the field, and transform your hate into upside.