Case Study Why 3PL is Important these days when Marketplace like amazon increases their Fees every year

Our achievements over the years as a 3PL prep service company

Over the past four years, from 2018 to 2022, the company experienced significant growth in sales, increasing from $300,000 to $2,700,000. However, this growth came with challenges as Amazon fees and other marketplace fees steadily rose, putting pressure on profit margins.

As seen in the data, Amazon fees as a percentage of sales grew from 33% in 2018 to a projected 56% in 2022. Additionally, the cost of goods and operating costs also increased substantially during this period, further squeezing profitability.

In 2023, despite sales remaining flat at $2,700,000, the company was projected to incur a loss of $5,000, with net profits declining to -1.50%. This situation prompted the company to reevaluate its operations and explore strategies to improve efficiency and profitability.

One of the key initiatives undertaken was the decision to outsource warehousing and storage operations to a 3PL provider specializing in prep, shipping, and logistics services. By leveraging the 3PL’s expertise and infrastructure, the company was able to streamline its supply chain and reduce overall operating costs.

The impact of this strategic move can be observed in the 2024 figures, which represent a 3-month snapshot. Despite sales being lower at $67,000, the company was able to achieve a profit of $23,450 and a net profit of $17,961, primarily due to the significant reduction in operating costs facilitated by the 3PL partnership.

While Amazon referral fees remained a considerable expense at $12,457, the company’s ability to optimize its logistics and warehousing operations through the 3PL provider allowed it to better manage costs and maintain profitability, even in the face of escalating marketplace fees.