What Is Shopify Fulfillment & How Does It Work? Everything You Need To Know
Are you selling via a Shopify website — or thinking about setting up one for your online sales? If so, you’ll want to take a look at Shopify’s in-house fulfillment service, known as Shopify Fulfillment Network or SFN. It can be a great solution for handing off the tedious and time-consuming work of order fulfillment.
Outsourcing fulfillment is a good option for many small business owners. But is Shopify’s in-house option right for your small business? How much does using SFN cost, and how exactly does it work? Read on for the answers to these questions and more.
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What Is Shopify Fulfillment?
Let’s face it: Pulling merchandise off the shelf and packing it up to fulfill customers’ orders isn’t really the most glamourous part of doing business, nor for many the most enjoyable. Maintaining warehouse space is an added expense. And does anyone really need another trip to the post office or UPS store to drop off a load of packages? How much time could you free up in your day if you didn’t have to worry about these kinds of mundane details?
That’s where fulfillment services come in.
When you use a fulfillment service to deliver orders to customers, you hand off the hassle but retain full confidence that customers will receive the right products in the right amount of time. You send your products to a fulfillment center, or fulfillment warehouse, and when orders come through your online store your fulfillment partner pulls items from your stored stock, packages them up, and sends them out to your customers.
There are lots of fulfillment operations to choose from, including quite a few that can integrate seamlessly with your Shopify store. You can even set up your Shopify store to work with Fulfillment By Amazon. But there’s only one in-house option. And when you choose Shopify Fulfillment Network as your fulfillment partner, you keep many of your major sales-related logistics and expenses in one place, making it easy to track and control.
Are Your Products Eligible for Shopify Fulfillment?
Shopify Fulfillment Network debuted in the summer of 2019, and it’s still a developing service. At this point, only vendors selling from the United States are able to participate, with a limited rollout happening now in Canada. If you use SFN, you are able to ship products overseas; the requirement is that shipments originate domestically.
Although SFN is expanding to include sellers of all sizes, for now, the main requirements include:
- Fewer than 2,000 SKUs (stock keeping unit)
- Ship between 10 and 10,000 orders per day
- No regulated or perishable goods, such as alcohol, meats, or cheeses
Additional restrictions on fairly common products include:
- Adhesives, pastes, and sealants
- Adult items and toys
- Shelf-stable food items
- Pressurized canisters, including aerosols
- Cosmetics, hair products, toiletries, and beauty supplies
- Jewelry valued at more than $5,000
- Microchips, computer chips, microprocessors, CPUs, and mobile telephones
- Nonprescription medicine and supplements
- Perfume, cologne, and scented items
- Products packaged with lithium batteries
- Artwork, collectible objects, and antiques “of high value or considerable age”
Shopify has a lengthy list of restricted items, including items containing animal products and skins; alcohol, tobacco, smoking, drug, and vaping paraphernalia; weapons and ammunition; precious metal and stones; devices used in gambling; flammable items, poison, and raw chemicals; and more. If you ship unusual or unconventional items, be sure to check out the full list of ineligible products and shipping restrictions. You’ll need to enter product information when you apply to participate in Shopify Fulfillment Network.
Products requiring serial, lot, or batch tracking and items requiring a first-in-first-out (FIFO) inventory policy are not eligible for SFN. Finally, to be eligible for shipment, products must meet these qualifications:
- At or under 50 pounds total package weight
- The longest package side is no more than 48 inches
- Second-longest side is no more than 30 inches
- Total package length plus girth is no more than 165 inches
Each product variant (think color, size, and so on) will need a unique SKU, its own barcode, and an accurate weight. If you ship internationally, you’ll also need to supply a tariff code.
How Does Shopify Fulfillment Work?
Simply put, when you use Shopify Fulfillment Network, you take all the work out of fulfilling customers’ orders from your Shopify store. Yes, you’ll do a little work on the front end, but after that, you can sit back or turn your focus to other parts of your business that need your attention, instead of worrying about making sure each and every order goes out the door on time.
Start by applying to join the Network. After you’re approved, simply log on to your Shopify admin. There, you can select certain products to include in the Shopify Fulfillment Network. You could select your entire eligible inventory, or you can choose to start small, with just one or a few items. You’ll receive suggestions for where you should send inventory, and how much, based on where your customers are. SFN has a network of multiple fulfillment centers, so when you ship your inventory in bulk to the right warehouses, you can expect quick deliveries to customers and lower shipping costs too.
SFN uses robotics in its fulfillment warehouses to pull orders, ensuring speed and accuracy. In fact, Shopify promises 99.5% order accuracy across its network. And you won’t have to worry about keeping track of inventory levels. You’ll receive a notification when inventory levels start running low, based on order history.
Best of all, with SFN you maintain as much control of the customer experience as you want. Your orders can be sent out in custom packaging that reflects your brand, including any package inserts you want customers to receive with their orders. And you always maintain control of your customer, sales, and inventory data. That compares favorably to another big fulfillment service, Fulfillment By Amazon. When you use Amazon’s service, your products go out to customers in Amazon-branded packaging, you don’t have access to customers’ data, and you’re not allowed to include anything that shows website information other than Amazon’s. When you use Shopify’s fulfillment services, you own the entire customer experience, from end to end, but you allow SFN to take care of the work for you.
How Much Does Shopify Fulfillment Cost?
Shopify Fulfillment Network can take all the work out of fulfilling customers’ orders. And while that can be a wonderful thing for small business owners, it does come with a cost. How much you’ll pay for SFN convenience depends on a few factors.
Shopify provides custom pricing for vendors, so it’s not possible to give an exact cost; you’ll need to apply to participate in SFN and receive your own quote. The fee you can expect to pay depends on four things:
- Inventory Storage: Calculated daily, your storage rate will be based on how much space your inventory takes up in the fulfillment warehouse.
- Pick & Pack: You’ll incur a fee every time SFN pulls an order from your inventory and puts it into a box or envelope to send out to customers.
- Transportation: Shipping rates are calculated automatically for every order, so you always receive the best shipping rate. Shipping charges are based on package weight, dimensions, and distance shipped. SFN uses a zone-based shipping model. The more zones your package passes through, the higher the cost.
- Special Projects: Special treatment like bundling, inbound receiving, marketing inserts, and branded packaging are welcome; you’ll just pay more.
One advantage of using SFN for order fulfillment is that your costs will be bundled into your current Shopify subscription. Although your costs will be higher, you’ll still be making just one payment, keeping your accounting just a little bit simpler. You’ll see two types of charges: per-fulfillment charges for picking, packing, and shipping; and per-month charges for storage and special projects. You can check SFN charges each month from your Shopify admin. And when you use SFN, you gain access to dedicated support from Shopify’s Fulfillment Success Team, including 24/7 phone and email support.
As you’re budgeting, be sure to include the costs of shipping inventory to the Shopify fulfillment warehouse. You’ll need to arrange and pay for that on your own.
The Pros & Cons Of Using Shopify Fulfillment
Is the thought of passing off responsibility for shipping orders attractive enough to make you want to sign on the dotted line, right now? Before you go all-in, take a look at the downside of outsourcing order fulfillment. Even when you rely on a trusted partner, outsourcing isn’t the best choice for every small business. Take a look at these pros and cons before you make up your mind.
Shopify Fulfillment Pros
There’s a lot to like about using Shopify Fulfillment Network. Here are some of the greatest benefits:
- Free Up Your Time: How long is your to-do list? How many projects are simmering on the side burner? When you pass off the responsibility for pulling and packing customer orders, you’ll be able to spend your precious time on managing the priorities that only you can handle.
- Lower Staff Costs: Maybe you’re already paying a staffer to manage your inventory and ship out orders to customers. Or maybe your sales volume is just now getting high enough that it’s almost time to make a new hire. Instead of putting your money towards another salary and benefits, consider letting a fulfillment partner do the work for you.
- Eliminate Storage Space: Financial costs aren’t the only squeeze small businesses can feel. If you’re working in a small space, you may be tightly packed among boxes and boxes of your products. That’s certainly inconvenient, but when you grow so large that you need to rent warehouse space, your budget takes a hit. Keeping a chunk of your inventory at a fulfillment center can take the pressure off your workspace.
- Simplify Accounting: How many checks do you write each month? These days, it’s likely to be electronic payments instead of paper checks, but the fact remains that each payment you make requires a line entry in your books. If you can bundle your costs, you simplify your accounting process. When you use SFN, you make one monthly payment for sales and fulfillment.
- Best Shipping Rates: The shorter the distance you mail packages, the less you pay for shipping. Shopify can save you money by using smart technology to direct you to send your products to the right fulfillment warehouses, as close to your customers as possible. And because SFN ships a huge volume of packages each day, the warehouses can access the lowest possible shipping charges for each package.
Shopify Fulfillment Cons
Convenience usually comes with a cost. Are the benefits of using Shopify Fulfillment Network enough to balance out these negative factors?
- Added Expenses: Whether you’re fulfilling orders yourself or paying a staffer to do so, it takes time and money to prepare orders for shipping. However, if you decide to add a marketing insert to each package, the added cost in staff time is negligible when you fulfill in-house. When you work with a fulfillment partner like SFN, you’ll pay for each extra you add.
- Shipping Logistics: Shopify is good about letting you know when your inventory at the fulfillment warehouse is running low. But they don’t come pick up products from you — you have to pack up merchandise and arrange to have it shipped to the appropriate warehouse. That’s an added cost in terms of time and money that you shouldn’t overlook. You’ll likely need to work with a freight carrier to keep costs down, unless your products are very small and light.
- Reduced Control: When you own your own business, one of the benefits is being in control of your processes and your products. Work with a fulfillment partner, though, and you give up a big chunk of control, handing off your products and your shipping processes to a third party. Is it worth it to regain free time you can spend elsewhere? It’s a personal choice only you can make for your business.
- Frozen Inventory: Your Shopify store may be your main sales avenue. Do you have other ways of selling, such as a brick-and-mortar location, farmers’ markets, festivals, or any other way you bring your products in front of customers? If so, be aware that you’ll need to store significant amounts of products at the fulfillment warehouse. That could mean you have less on hand to sell face to face.
- Fewer Points Of Contact With Customers: Shipping orders to satisfied customers is, well, satisfying! You’ve earned the sale, and putting the product into the box and affixing the label to the package ties up the sale. When you pay someone else to send out your merchandise, you give up that connection with your customers. Are you ready to trust someone else to do it right? Shopify Fulfillment Network boasts a 99.5% accuracy rate, so if you choose to use SFN you can feel pretty confident they’ll get it right.
Is Shopify Fulfillment Right For Your Business?
Despite the benefits of working with a fulfillment center, Shopify Fulfillment Network isn’t the best choice for every business. However, if you’re already selling on Shopify, or if you’re considering a Shopify store for your small business, you may start to find that order fulfillment is taking too much of your time and resources, and distracting you from other business responsibilities. In that case, give Shopify Fulfillment Network a look. You can start the process of signing up for the service, without committing to using it, and in the process, you’ll gain a better idea of how SFN would work out for your business and what it would cost you.
You may decide that you’re ready to outsource fulfillment, but you want to look at options other than Shopify’s in-house fulfillment service. In that case, you can check out some other fulfillment options that may do a better job of giving you what you need. You may also find that just giving your own shipping processes a tune-up may be all you need. Or you might decide that a shipping software solution is enough to streamline your shipping process and save you some money.
After all, shipping an order should be something to celebrate. You’ve earned the sale and your customer is waiting eagerly for that package to arrive. If your shipping experience is leaving you wanting more, act now to improve it.