Shopify Ecosystem

Shopify Fulfillment Network Review: Key Things You Need To Know

shopify-fulfillment-network-review:-key-things-you-need-to-know

Patrick, co-founder and CEO of Supply, tells us about his experience with the Shopify Fulfillment Network

Inventory management and order fulfillment are often two of the more time-consuming tasks of running a Shopify store. However, the ability to ship orders on time is also key for ecommerce businesses to deliver a great customer experience. In fact, 22% of online shoppers will abandon their order if they see that it will take too long to be delivered.

Relying on a third-party fulfillment solution is one way to mitigate the challenges of order fulfillment and provide the speedy fulfillment services that today’s customers have come to expect. Of the various fulfillment providers online retailers have available, the Shopify Fulfillment Network is one great option to consider.

In this Shopify Fulfillment Network review, we’ll cover everything you need to know about outsourcing your order fulfillment responsibilities to Shopify. We’ll dive into what the program is and how it works, the biggest benefits it offers to online retailers, comparable alternatives, and a conversation with Supply CEO and co-founder Patrick Coddou on his company’s experience with Shopify Fulfillment Network.

Summary Review: 

Don’t have time to read our full review of the Shopify Fulfillment Network? Here is the quick and dirty version of our thoughts on the program:

Joining the Shopify Fulfillment Network won’t reduce your order fulfillment expenses. As a matter of fact, it will more than likely increase them due to the various fees that Shopify charges as part of the program. However, what joining the network will do is allow you to completely outsource your inventory management and order fulfillment responsibilities while at the same time offering faster and more reliable fulfillment. This can be a huge benefit for business owners with more money to spare than time. However, if your business sits on the opposite side of the fence, you may want to consider a comparable alternative.

What is the Shopify Fulfillment Network?

The Shopify Fulfillment Network (SFN) program is similar to Amazon’s FBA (Fulfillment by Amazon). It lets you ship your products in bulk to a single Shopify warehouse, where they are then distributed to a network of fulfillment centers across the United States and Canada.

Along with inventory storage and warehousing services, SFN also offers ecommerce fulfillment services. When a customer orders one of your products, Shopify will pick and pack the product from the nearest fulfillment center and ship it to the customer on your behalf.

This program allows business owners to reduce the tedious tasks associated with ecommerce fulfillment. It also offers additional benefits as well, such as the ability to provide faster shipping and access to powerful analytics for demand forecasting and improved inventory management.

The launch of Shopify Fulfillment Network: A brief history lesson

In June 2019, Shopify announced that it would be spending $1 billion to launch the Shopify Fulfillment Network. A few months later, in October 2019, this plan was accelerated when Shopify acquired 6 River Systems — a company that produces robotics for warehouse management.

By October 2020, the SFN had increased its shipping volume by 2.5x compared to the first quarter of 2020. One driving factor behind the network’s faster-than-expected growth was the increase in online shopping driven by the COVID-19 pandemic. In comments made to the Wall Street Journal, the program director stated that the pandemic pushed the program’s development forward by about 10 years.

In 2022, the SFN continues to go through some understandable growing pains. The program continues to add new merchants and fine-tune its services. Today, the network has nine different centers in North America that are all operated by third-party fulfillment partners.

The key benefits of the Shopify Fulfillment Network

Joining the Shopify Fulfillment Network offers merchants plenty of benefits, allowing them to create a fulfillment operation that essentially runs itself. Along with streamlining your supply chain, the SFN offers several other noteworthy benefits, including:

Free customizable packaging

One key benefit of the SFN compared to similar networks such as FBA is that the SFN lets you customize your product packaging. This enables you to develop branded packaging for your products to help market your store instead of shipping your packages in Shopify-branded packaging. This gives you greater control over your branding and marketing overall.

Best of all, packaging comes free to SFN merchants. While there is still a fulfillment cost associated with using the FSN (and it might be higher than your current shipping costs — more on that later), paying for packaging is not one of those expenses.

Simplified inventory management

Even if you sell from multiple marketplaces and sales channels, partnering with the Shopify Fulfillment Network makes inventory management a breeze. All you have to do is ship your products in bulk to a single SFN fulfillment center, and Shopify and its partnering third-party logistics companies will take care of the rest. Shopify even provides recommendations for minimum inventory levels, allocation, and when it’s time to reorder products. 

All these tedious logistics being handled elsewhere can be a huge weight off your shoulders — and a great way to lighten the load on your employees as well.

By simplifying your inventory management responsibilities, joining the SFN can free you up to focus on other tasks and ensure that you don’t encounter any inventory management mistakes that lead to out-of-stock products and unhappy customers.

Real-time analytics for demand forecasting

Another way that the Shopify Fulfillment Network helps simplify inventory management and ensure fulfillment success is through insightful real-time analytics that you can use for demand forecasting. Members of the SFN can look forward to having a wealth of customer data at their disposal — data to forecast demand so that your inventory is kept at optimum levels all year long.

Potential same-day fulfillment

One of the biggest benefits of the Shopify Fulfillment Network is the potential for expedited shipping. Thanks to the network’s streamlined and automated order fulfillment process and its strategic inventory distribution, the SFN can ship products to most U.S. customers within two days. In many cases, merchants who are members of the SFN can even offer customers same-day fulfillment.

Given current customer expectations, this ability to offer faster shipping is something that could make your products far more appealing to online shoppers. Research by Deloitte indicates that 67% of online shoppers want their items delivered in two days or less.

Seamless inventory distribution through machine learning

One of the ways that the Shopify Fulfillment Network can expedite order fulfillment is through an optimized inventory distribution strategy. By distributing products across a network of fulfillment centers that spans the U.S. and Canada, the SFN can ship orders from the fulfillment center closest to the customer for faster delivery times. And faster delivery times lead to greater customer satisfaction.

Shopify doesn’t just spread products across these warehouses blindly, though. Instead, the SFN uses machine learning to predict demand and strategically distribute inventory. This is a strategy that large corporations have been using to optimize their supply chains for several years now. Thanks to the SFN, it’s a strategy that ecommerce stores of all sizes can now leverage to meet consumers’ increasingly short delivery window expectations.

Shopify Fulfillment Network cost

There’s no denying the fact that the Shopify Fulfillment Network offers great functionality and a number of considerable benefits. However, these benefits do come at a cost.

There are several different fees that you will incur as a member of the SFN, and these fees will vary depending on factors such as your inventory volume, the number of product returns that are processed, and more. Shopify doesn’t provide pricing for most of these fees and instead requires merchants to apply for the program to receive a custom quote.

One of the more substantial fees that you will incur as a member of the SFN is storage fees. Shopify doesn’t charge storage fees for products sold within six months of being shipped to an SFN fulfillment center. But if your products sit for longer than six months, you will begin incurring storage fees of $2.25 per cubic foot per month. This makes it essential to develop an inventory management strategy that limits the number of products sitting in storage for long periods.

If you have any additional requirements, such as the need to put together special bundles for the holiday season, you will have to pay a one-time “special projects” fee. This fee is variable depending on the project’s scope but can often be substantial.

Is it worth it? A review of the Shopify Fulfillment Network

Now that we’ve looked at the benefits and costs of the Shopify Fulfillment Network, the question is whether its benefits outweigh its costs. As with the fees themselves, though, the answer to this question will vary from business to business. To help you decide if joining the SFN is the right choice, let’s look at a few instances when it is and is not worth the cost.

There comes a point in a company’s growth when many business owners have more money available than time. If you are trying to scale your ecommerce store but are too bogged down by day-to-day responsibilities such as order fulfillment, the SFN can be a great way to take a lot of burdens off your shoulders. However, it won’t reduce your shipping costs and will likely increase the money you spend on inventory management and order fulfillment rather than reduce these expenses.

Of course, you need to factor the potential revenue-boosting benefits of the SFN into this calculation. Along with freeing you up to grow your company and make it more profitable, the expedited shipping that the SFN allows may also directly boost your sales by making your offerings more appealing to potential customers.

A few other qualifications can easily determine whether or not your business is a good fit for the Shopify Fulfillment Network. For one, you need not apply to the SFN if you are shipping less than 10 orders per day; the program does not accept merchants with lower volumes, and it wouldn’t be worth your time even if they did. 

The program is also only available to sellers in the U.S. or Canada, and only to companies with under 2,000 unique SKUs.

If you meet all of these qualifications and can justify the fees, joining the SFN can be an excellent way to scale your company without building your own supply chain from the ground up.

ShipBob: A worthy alternative to the Shopify Fulfillment Network

ShipBob is a third-party order fulfillment provider that offers services similar to those of the Shopify Fulfillment Network. Like the SFN, ShipBob enables you to ship your products in bulk to a single ShipBob warehouse, where they are then distributed to fulfillment centers all over the globe.

“All over the globe” is actually one advantage that ShipBob has over the SFN — with ShipBob, you can ship products from 30+ fulfillment centers across six different countries. Ecommerce businesses that sell to a lot of European and Australian customers are therefore likely better off choosing ShipBob than the Shopify Fulfillment Network.

As with the SFN, pricing for ShipBob varies depending on your needs, and ShipBob requires you to contact them for a custom pricing quote. This makes it difficult to compare the cost of ShipBob vs. the cost of the SFN. If you are looking for the most cost-effective option, it may benefit you to apply for a quote from both ShipBob and the SFN to compare the two accurately.

How to apply for the Shopify Fulfillment program

Applying for the Shopify Fulfillment Network is a quick and simple process. All you have to do is create a Shopify account, ensure that your business meets the qualifications to join, and apply online by contacting Shopify. You can start the process by clicking “Learn more” on this page.

Once Shopify receives your application, their team will review your business to see if it is a good fit for the SFN. If accepted, Shopify will provide you with a custom quote detailing all the one-time and ongoing fees you will have to pay.

How Supply was chosen to be in the Shopify Fulfillment Network

To better understand the value of the Shopify Fulfillment Network, we sat down for a discussion with Patrick Coddou — co-founder and CEO of Supply, the personal-grooming ecommerce store. You can listen to our conversation in the last third of this podcast episode:

From what Patrick remembers, Shopify reached out to him about Supply being one of the early adopters of the Fulfillment Network. Since he has long supported Shopify and openly acknowledges that it allowed him to accomplish his dreams, Patrick was excited about the opportunity. He told us that he sees this as another way that Shopify will continue to change people’s lives for the better, and he wanted to be a part of it. He was also interested after hearing all the buzz about Shopify’s new program.

So, he said yes (obviously).

He told us that right now it’s still a small program — almost the equivalent of a beta project — and they have strategically dispersed warehouses that are white-labeled for their merchants. 

We’re here for it. And so far, Patrick is, too: After months of experiencing it firsthand, he’s still loving it.

Supply’s Shopify Fulfillment Center is in Austin, Texas, and across the U.S. there are about three centers in total with approximately 10 or fewer merchants (Note: This is Patrick’s best guess on numbers). As Shopify continues to test and perfect the program, these numbers will undoubtedly increase.

One of the biggest value-adds from the Shopify Fulfillment Network is that the software actually lives in your online store. There’s a fulfillment app, which is how Patrick and the Supply team review their inventory levels, along with other settings that really come in handy. 

Though it’s not a very robust software right now, and merchants such as Supply are still waiting on Shopify to work through some of the kinks, there’s a very clear and strong potential here that could help countless ecommerce businesses.

Optimize your order fulfillment process with Gorgias

Joining the Shopify Fulfillment Network can be an excellent way to streamline your order fulfillment process, speed up your delivery times, and reduce your daily workload. However, it isn’t the only order fulfillment solution available today.

At Gorgias, we recognize how important it is to have effective inventory management and order fulfillment. That’s why we’ve designed our comprehensive customer support platform to integrate with numerous inventory management and order fulfillment solutions, including ShipBob, ShipMonk, LateShipment.com, and more. To learn more about these powerful integrations, check out our full list of shipping and fulfillment integrations.

Special thanks to our friends at Gorgias for their insights on this topic.
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