5 Logistics Costs Every Merchant Should Be Aware Of

What your customers want is simple: Low shipping costs when buying products online and a great delivery experience. So how can you as an eCommerce, B2B, or Retail company guarantee a speedy delivery with less overhead and reduced direct costs at all times?

First of all, it’s key to understand the What before we go into the How. No matter, where you want to sell products or to whom - at the end of the day, you need to store, fulfill and deliver your products in a? cost-effective way in order to stay in business in the long run. In this article, we’ll dive into what direct logistics costs to expect when choosing professional third-party logistics (3PL) providers. To keep it short and simple, we’ve summarized the essentials of our detailed Logistics Cost Guide below. In case you’d like to learn more, feel free to click on the links.

When engaging in logistics operations with external logistics providers, it is important to understand the price structure during different stages in the fulfillment process.

There are two variables that determine logistics costs for most use cases: time and volume. So, if the stages along the supply chain involve standardized and frequent tasks with high volumes, higher efficiency and economies of scale are achieved – resulting in lower time spent per fulfilled order and thus lower logistics costs. What’s more, the operational specialization of a 3PL also makes a big difference. In fact, prices may vary up to 50% for the same service depending on the operational excellence, product vertical, location and many more factors. Keeping this disclaimer in mind, let’s break down the average price ranges you should expect - there are 5 main cost drivers.

Warehousing Costs: Incoming goods

In most commerce cases, you need to have products available before selling them. This means you need to send your inventory from your manufacturer to your dedicated warehouse locations. When incoming goods arrive, all shipments are usually checked by a logistics provider before they are stored in the warehouse. For standard service levels for incoming goods, including visual inspections and exemplary counting, the costs range from €3.5-6 per single SKU pallet. Find out how single SKU parcels are usually priced.

Warehousing Costs: Storage

During storage of products, it’s paramount that merchants are only being charged by actually used pallets and shelf space - not a monthly retainer or a fee based on certain thresholds. What’s more, depending on the storage conditions, shape and size of the product, the costs for used shelf space can differ. On average, pallet spaces for standard products range between €6-9 per month. Here’s how much you can expect for shelf storage costs for single parcels.

Fulfillment Costs: Picking & Packing

Once an order is made, your 3PLs start with the fulfillment, also called the pick & pack process. The costs for picking and packing are directly related to the number of units per order,? the size of the products and what packaging material is being used. Clearly, any other value-added services like personalized inserts will also affect the pricing. For standard eCommerce products, which typically weigh less than 1kg, the average pick & pack costs of an order with one SKU lies between €1.2-1.7 - excluding packaging material. Find out what other typical fulfillment costs you can expect.

Shipping Costs: Last-mile delivery

When it comes to order delivery, shipping costs highly depend on the chosen carriers, transport method, the delivery destination and parcel dimensions. For a >2kg parcel shipped nationally within Germany, average shipping prices should range between €3.0-3.3. Shipping costs for larger parcels and pallets are clearly more expensive.

Return Costs: Returns

The eCommerce industry benchmark for returns amounts to? 20% on average and can go up to 30% during peak seasons. When customers send back orders to a warehouse, merchants usually bear the shipping costs (about €4.0 per parcel). Once a return arrives at a 3PL, return processing fees usually range from €2.0-4.0 per return order.

Hidden Costs: Indirect OpEx

Besides all direct costs, commerce businesses often underestimate the amount of manual work that’s part of ensuring seamless operations. When B2B, Retail and eCommerce companies work with conventional logistics providers, it’s often these hidden costs occur due to overheads, manual intervention and other important bottlenecks during daily operations in the fulfillment processes. To understand these hidden costs better, you can also read our Case Study to learn how much manual efforts and resources normally arise when handling thousands of orders per month.

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