Outsourcing fulfillment services can help you turn a larger profit?
Yes, if you are willling to give up a little control. Here's how:

When you consider all of the costs involved in maintaining your own warehouse and staff, as well as the new options a fulfillment house may be able to provide you, you will be able to justify the fact that you will have indirect control over the order fulfillment process.

Options such as fixed costs, and flat-rate shipping, will help you to roll these expenses into your cost model. Especially if you ship sufficient volume to allow your fulfillment company to justify giving you a large discount.

If you weigh the costs of employees, benefits, insurance, taxes, unemployment, facilities, etc, to the fixed cost model provided by an order fulfillment provider, you should quickly see that making the switch is justified. You can often save 20-50% over your existing expenses when you compare the costs of outsourcing, and the costs of processing your own orders in house.

The inverse is true as well. If you are running a company all by yourself, or with the help of friends and family, and your costs are down, but you are spending all of your time shipping out orders, purchasing packaging supplies, and reviewing your shipping records. Now, imagine if you took all the people that are working these remedial tasks, and turned them into your marketing / sales team. Send them to trade shows, have them make sales calls, have them negotiate better rates for the products you are selling...

How can fulfillment help with Market Value Destruction (MVD)?

Market value is not a constant, and it determines the price you can sell a product. Changing market values can be influenced by competition, technology costs, supply and demand, as well as other factors. Because of this, the value of your product may change almost daily.

With traditional business models, you have to consider all of your financial factors when evaluating the selling price of your products. This price is influenced by your all of your costs such as manufacture/supply cost, but also by the expenses associated with getting your product in the hands of your customers. These costs are really the difficult part of business. Do you pay someone 40 hours per week to receive new inventory, regardless of how many hours they work, because they must always be available, regardless of the inventory that may be coming in? (consider a fulfillment company with no receiving fees)Do you have customer service employees that are always sitting at a desk, in case the phone rings? (consider a call center with per call fees instead) Do you have a pick and pack crew, that you pay 40 hours a week, because you are unsure of the number of orders that will come in during a day? (consider per order and per item fees from a fulfillment company) Do you lease or own a warehouse that is bigger than you need, because you are unsure of how big you will grow? (fulfillment with fixed storage fees, based on what you use.) I could continue to provide you with examples, but what I am trying to illustrate is that there are so many variables associated with providing your own logistics, that they contribute heavily to the margin that you require to effectively run your company.

Outsourcing your fulfillment can help by making the majority of your variable expenses become fixed costs. This way, you know exactly what you require as a margin to effectively sell your products.

This gives you a competitive edge. If you dropped your prices by 5% would it stimulate enough sales to offset the margin loss? This question is much easier to answer if you know exactly what your costs are.

Many of today's most successful companies (including General Electric, Pepsi, Merck, Home Depot, Wal-Mart, McDonalds, Microsoft, Morgan Stanley) have discovered that outsourcing gives them a competitive advantage.

How can fulfillment help with buying power?

If you have a product that is selling great, you have struggled with the decision to purchase / manufacture higher volumes of the product. With fixed costs, you will be more free to purchase at higher volumes, which means a better price from your suppliers. Also, if you sell a common product, the fulfillment company may be able / willing to act as a consolidated purchaser for you. If they have other clients that sell the same items as you, they may be able to cooperatively purchase larger volumes, so that you receive a larger discount.

Don't underestimate the increased valuation of your company!

One of the often overlooked benefits of outsourcing, is that it makes your profit sheet more favorable. Because you typically only pay for the services that you use with a fulfillment company, your expenses will drop. This will help to lower your fixed assests, and improve your business equity. But, most importantly, it frees up cash for use in areas where there is potential for a higher return on investment.

Improved accuracy?

It may be hard to believe, but a good fulfillment company will have all the right tools to ensure efficient and accurate order processing. They will have sophisticated inventory control systems, streamlined their pick pack methods, and optimized their receiving and returns methods.

A good fulfillment service will be able to improve the accuracy rate. Not only that, but if an error is made, they are accountable, so they should have methods to "make it right," without an additional cost to you.

A good order management / inventory control system will allow you to look at the history or not only orders, but of skus. You should have access to various reports that can help you make wiser decisions on purchasing, which shipping methods to use, and more.

Can a fulfillment company help me increase sales?

That totally depends on the fulfillment company. Some fulfillment providers only care about profits, so they will take on a bunch of accounts, and turn themselves into a storage company. Others, would prefer to help you sell more of your orders, because they realize that the more orders you sell, the more orders they ship.

Fulfillment companies may also be able to help you directly with marketing. There are a number of options that may be at your disposal, depending on the company. For example, you may be able to place promotional materials inside orders that the fulfillment company is sending out for other clients. Or, you may be able to take advantage of marketing services that are provided by the fulfillment company itself.

Remember that fulfillment companies work with a ton of different businesses, and they have extensive understanding and resources when it comes to business development. You could benefit greatly from their experience.

If your business is shipping orders to the US, from another country, consider these benefits.
Shipping over international borders is expensive. If you work with a fulfillment company that is located inside the United States, you will drastically reduce your transportation costs.

You should aslo consider the benefit to your customers. Because the product is shipped within the US, they will not be required to pay customs, duties, or brokerage fees.

US fulfillment companies have negotiated rates with carriers such as UPS, and FedEx, who primarily market their services inside the US. This translates in a savings to you.

Also, if you sell a number of orders to Canadian customers, and you are shipping from another country, you should know that it is relatively inexpensive to ship to Canada from the US. Specifically, if you work with a fulfillment service provider that is geographically located in close proximity to Canada.The value of the USD is dropping,and it becomes even more beneficial to use an fulfillment company located in the US. Service and assembly fees are often lower than outsourcing in other worldwide destinations.

If you found this guide informational, you may also be interested in:
guide to the difference between drop shipping and fulfillment services..
and
Fulfillment House Selection Guide
or, if you are ready view our fulfillment fees