The Real Cost of International E-commerce Fulfillment—And How to Reduce It

Cross-border e-commerce fulfilment entails various operational costs that impact a company’s overall profitability at every stage of the fulfilment process. Efficient cost management streamlines global operations.

Here, we have explained the cost of international e-commerce fulfillment and ways to reduce it.

The Building Blocks of Fulfillment Costs

Several components come together to make up fulfillment costs:

• Receiving and Inbound Handling: Charges are levied for unloading, inspecting, and sorting inventory upon arrival at a warehouse. Usually, the basis for such charges is hourly.
• Storage Fees: Costs vary depending on the storage bin, shelf, or pallet used. Additionally, the inventory stay duration influences the cost. Overstocking or slow inventory turnover can lead to increased storage fees.
• Pick and Pack Charges: These are labor charges for selecting items and securely packing them into packaging. Custom packaging involves additional charges.
• Kitting and Assembly: If bundling, labeling, or creating a set is required, a fee for this additional service is applied.
• Shipping Charges: Shipping charges vary depending on the destination, weight, dimensions, desired delivery offset, and selected courier. International shipping accounts for a significant portion of overall fulfillment costs.
• Returns Management: It encompasses inspection, restocking, disposal in certain instances, and reverse logistics.
• Technology and Platform Fees: This may include software tools provided by Third-Party Logistics (3PL) partners or partnerships with e-commerce platforms.

Customs, Duty, and Tariffs Make Things More Complicated

Most countries charge import duties and tariffs on incoming shipments depending on the product classification and declared value. Such charges widely differ from one destination to another and are based on trade regulations.

Also, companies must deal with:

• The Harmonized System (HS) Codes
• De minimis levels as laid down by countries
• Unexpected alterations in trade agreements or import laws

In cases where the planning process fails, there will be untimely delays, unexpectedly high costs, and unhappy customers.

How to Cut Down on International Fulfillment Costs

Reducing international e-commerce fulfillment costs must never be at the expense of meeting customer expectations.

Here are concrete ways to cut costs and still maintain the level of customer service:

1. Smart Inventory Distribution

Store your goods as close as possible to large customer bases. It reduces the need for expensive cross-border shipping. Utilize local fulfillment centers in targeted regions to enhance local deliveries and reduce high international freight costs.

2. Packaging Optimization

Optimize packaging size to minimize dimensional weight charges. Do not overpack, and switch to light-weight materials wherever possible.

3. Create Bargains for the Fulfillment Process and Shipping

Agree to contract with 3PLs that provide competitive volume pricing. Utilize pre-negotiated shipping rates and consolidate shipments whenever possible to reduce costs.

4. Demand Estimation

Predict demand patterns using historical data. This will prevent the accumulation of excess inventory, decrease storage duration, and reduce the need for emergency shipments.

5. Automation on Order Processing

Utilize automation to minimize errors and reduce labor costs. Use software to help with:

• label generation
• inventory tracking
• packing
• picking

6. Returns Consolidation

Instead of processing returns separately across borders, consolidate returns in key locations. Local return addresses or refund-without-return policies are good ways to save.

7. Duty Optimization Strategies

Classify products correctly to avoid paying excessive duties. Utilize trade agreements and Free Trade Zones (FTZs) whenever possible to minimize tariff exposure.

How Technology Can Improve Visibility Costs

Using fulfillment software equipped with analytics can provide you with real-time visibility regarding order-level costs, inventory levels, and carrier performance. This, in turn, helps to:

• Improve demand forecasts
• Transfer inventory at the right time
• Identify expensive bottlenecks in fulfillment
• Implement smarter and leaner business operations

Closing Thoughts

International e-commerce fulfillment is complicated, but controllable. Businesses that understand what makes up fulfillment costs and implement strategies to reduce them can achieve better margins without compromising on delivery targets.

With the smartest warehousing, efficient packaging, automation, and strategic partnerships in place, e-commerce brands can soar globally while controlling their operating costs.