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Why eCommerce Relies So Heavily on 3PL Warehouses

Posted by Justin Harris in Resources Ecommerce Articles
Why eCommerce Relies So Heavily on 3PL Warehouses

If you’re looking to buy a successful eCommerce company, have you thought about operating in a niche space that eCommerce heavily relies on? A smart investment would be a business providing 3PL warehousing to eCommerce shops and other retail sellers. This has become a vital resource for thousands of eCommerce shops that stock inventory for maintaining orders.

3PL warehousing has given eCommerce companies a major advantage. Since so many smaller eCommerce companies don’t operate out of a central office, they’ve been able to expand operations and hold down costs at the same time with these services. The beauty of third-party logistics services is they effectively allow you to partner with pros who manage your warehousing needs, while the shop owners can focus instead on marketing and customer satisfaction.

As 3PL becomes a more important aspect of eCommerce, an investment in owning your own 3PL warehouse company seems like a very safe financial investment in the future. Since the eCommerce market has grown exponentially in the past few years, the 3PL market is now projected to reach $1.75 trillion by 2026.

But first, let’s explore why Third-Party Logistics Partners are in such high demand today.

Why are 3PL Services Booming Today?

Once relatively new eCommerce companies experience a steady increase in sales, their next big challenge is managing inventory. More often today, those growing pains are prompting eCommerce companies to rely on third-party logistics, which provide a host of services having to do with the logistics of the supply chain. Warehousing, packaging, transportation, and freight forwarding are among the services they provide.

Having a third party manage their inventory and logistics is enormously appealing to eCommerce companies, particularly those scaling their business. It gets harder to focus on marketing or developing new products when so much of your time would be spent negotiating shipping contracts.

It’s not just eCommerce companies recognizing the tangible benefits of 3L services. Studies show that 90% of Fortune 500 companies use third-party logistics providers for assistance. 3PLs are in high demand because these shipping and fulfillment experts can house your inventory in their warehouses, then pack and ship products to your customers.

Why are 3PLs so popular with online businesses?

Third-party logistics companies focus on more than just shipping products and often provide services to key locations and geographic areas. Those services can include:

  • ▶ Integrated shipping services
  • ▶ Order processing
  • ▶ Public and contract warehousing
  • ▶ Different types of freight transportation
  • ▶ Transportation management software
  • ▶ Reverse logistics (returns)

3PLs have also demonstrated that warehousing today is about more than storing products awaiting shipment. Technology has given the industry the tools to also make forecasts, provide in-depth reporting, and handle the auditing of freight bills.

3PLs have also become a global entity. A growing number of logistics providers are now embracing globalization, expanding their reach worldwide to become available to a significantly larger client base. This is particularly useful for eCommerce companies that market their products and services internationally. Most eCommerce businesses depend on multichannel selling and a 3PL can support all your sales channels and track the progress of your orders in real-time online.

How Can 3PLs Help eCommerce?

3PLs are popular in the eCommerce industry because third-party logistics providers can improve logistics operations for a business regardless of its size. A new, smaller company may only need warehousing of their products and shipping services, even as a larger company may want 3PL to manage their entire supply chain.

This kind of outsourced logistical support is popular since warehousing can be a challenge for retailers regardless of their size, and most eCommerce companies simply don’t begin with the in-house expertise to manage all their logistical needs.

That’s made a 3PL provider an invaluable asset today for taking over the day-to-day management of your logistics needs so the company’s owners can focus on growing their business.

3PLs also recognize the way online shopping has evolved along with customers’ expectations. Products need to be shipped in the right quantity and delivered to the right address without damage and in the right condition. 3PLs have experience in doing that.

They can accept special requests for deliveries, such as custom requests, notes to the buyer, custom boxes, or extra gifts, and they can provide eCommerce owners with discounted pricing and negotiated rates with the major carriers to reduce the cost of shipping and fewer out of pocket costs.

Speed and accuracy when it comes to shipping is a hallmark of the best 3PLs, and the best warehouses put a high premium on security, with warehouses that are locked, alarmed, gated, and have 24-hour video surveillance inside and out, guaranteeing the highest level of protection for your inventory.

What are the Basics of Third-Party Logistics?

Most 3PL companies own and lease warehouse space to their clients and contract with other carriers for freight and shipping.

For the clients, this means they’re outsourcing their order fulfillment and don’t own the warehouse and instead rent out shelf space where the warehouse employees receive your products and place them into inventory—the 3PL contracts with various carriers to deliver orders to your clients.

The appeal of 3PLs is they maximize speed and efficiency, enabling a company to handle the extra volume as their business grows. 3PLs also have the expertise to help reduce shipping costs and delivery times. That kind of experience and focus has become invaluable to many small and medium-sized eCommerce companies.

Under this system, outsourcing your fulfillment means your products ship directly from the factory to the 3PL warehouse.

Warehousing remains one of the industry’s most centralized offerings. The company can store inventory for you, making it a vital link between your manufacturers and customers, who clearly want your order fulfillment operations to run smoothly.

3PLs can be highly diverse. Some 3PLs specialize in “cold” fulfillment (food products that need to be refrigerated or frozen), storing and shipping hazardous materials, heavy and bulky products, and very expensive high-value products. Businesses can find a 3PL for virtually all their needs.

Third-party logistics companies have the kind of experience with inventory management that most eCommerce companies simply don’t have. Many of the account reps have years of experience managing inventory for eCommerce companies and know how to ensure fast and reliable deliveries, ensuring the success of the eCommerce shop’s future.

Buying a 3PL is a smart investment because as eCommerce continues to become a larger share of the retail world, their services will be needed for years to come.

The Bottom Line: A Great Long-Term Investment.

Owning a 3PL means owning a business that has come to serve a vital function in eCommerce today, and as thousands of new eCommerce stores come online in the next few years, the demand for third-party logistics will only get stronger.

If you are planning to buy an eCommerce business in 2023 but haven’t decided yet on the right industry to operate in, contact the brokers at Website Closers for some guidance. Our experienced and professional brokers have sold every conceivable type of online business and can help you find one that matches your interests and goals.

You can also search our database of current businesses for sale by industry and price, and once you’ve found one that you feel is right for your future, we can help you get started on buying the company of your dreams.