How Much Does It Cost To Start A Fulfillment Business? (In 2024)
Looking to start a fulfillment business?
But curious about:
- how much it costs to start a fulfillment business?
- what are the typical fulfillment business startup costs?
- or the actual cost of starting fulfillment businesses?
Well, we have the data to prove it, supported by real fulfillment businesses and how much they actually cost to start.
Let's go over it.
What is the average cost of starting a fulfillment business?
Based on our data reported by actual fulfillment business founders, the average cost of starting a fulfillment business is between $1,000 and $1,000,000.
Additionally, our data shows that the the median startup costs for a fulfillment business are around $10K.
Remember, though, not all fulfillment businesses are the same - and neither are people's budgets. It's important to distinguish between different levels or types of fulfillment businesses
Real World Examples: How much does it cost to start a fulfillment business?
We asked real fulfillment business founders and business owners how much it actually cost to get started?
Here is what they said:
Jan Bednar
Founder of ShipMonk ($25M/month)
"To expand my package forwarding services to more people and other countries, I created a $100 website that asked what they wanted and where it needed to go."
Jan Bednar is the founder of ShipMonk, a technology-driven fulfillment center that started in 2014 and boasts impressive revenues, scaling up to nearly $30M within just four years.
Philip Karageorgis
Founder of Honest FulPhilment ($2M/month)
"As the fundamental business was in place from our e-commerce operations, it’s difficult to detail the costs involved to get started. In its infancy, we were operating very, very basically, with a free, third-party ERP to manage orders. We didn’t have a massive warehouse or any particularly high overheads, just a very small office apartment. The main expense was paying for shipping and products, but even that was paid by clients in advance. We also had 30-60 day credit on account with China Post, which helped. Looking back, we were fortunate in that respect, not having to fork out tens of thousands of dollars that are typically associated with starting a traditional business."
Philip Karageorgis is the founder of Honest FulPhilment, a sourcing, branding, and fulfillment company that helps eCommerce store owners and drop shippers streamline their operations with services based in China and managed in the UK.
Payton LaCivita
Founder of KO-Pack ($150K/month)
"With this all in mind, we put together a business plan and raised enough capital to do a build-out in a brand-new facility in Chandler, AZ."
Payton LaCivita is one of the co-owners at KO-Pack, a contract manufacturing and private label men’s grooming business that started in 2020 and has been growing by 40-60% YoY.
Chris Koerner
Founder of Send Eats ($385K/month)
"This made cash flow very tight putting us into a short-term negative cash flow. This happens every time we take on a new client so we have to inject our own capital and use credit cards, around $200k+ when we first started."
Chris Koerner is the founder of Send Eats, an eCommerce order fulfillment business that supports Shopify store owners in managing their logistics.
Nick Malinowski
Founder of OTW Shipping ($400K/month)
"So, overall our costs were maybe $5,000 for our legal fees, initial packaging, security deposit, and WMS software."
Nick and Parker are the co-founders of OTW Shipping, an eCommerce fulfillment center that started in 2020 and hit $1M in revenue within its first 12 months.
Enjoyed reading these real world examples?
Our platform is full of case studies of successful fulfillment businesses that you can learn from.
Starting a fulfillment business - what you should know:
Starting a fulfillment business involves several nuanced factors that can significantly impact your overall costs.
Warehouse and Storage Costs
The cost of warehouse space can vary greatly depending on the location. For example, in metropolitan areas, warehouse rental rates can range between $6 to $10 per square foot annually. On the other hand, in more rural areas, this cost can drop to around $2 to $4 per square foot per year. Additionally, you'll need to consider the costs of shelving units, typically ranging from $50 to $200 each, depending on size and quality.
Technology and Software Expenses
Investing in a robust warehouse management system (WMS) is crucial. Basic WMS subscriptions can start at about $100 per month, but more advanced systems with comprehensive features can run upwards of $1,000 per month. Additionally, barcode scanners can cost between $200 and $500 each, and RFID systems may set you back even more, at around $5,000 for the entire setup.
Labor Costs
Labor represents a significant expense. In the U.S., the median wage for warehouse workers is around $15 per hour. However, this can vary based on location, experience, and the complexity of the tasks. Supervisory roles or specialized positions, such as forklift operators, may command salaries upwards of $20 to $30 per hour.
Shipping and Logistics
Shipping costs are another major consideration. Negotiating rates with carriers like UPS, FedEx, or USPS can save money in the long run. For example, obtaining bulk shipping discounts could lower costs by 10%-20%. Additionally, investing in shipping software, which can cost anywhere from $50 to $300 per month, can optimize routes and reduce expenses.
Carefully evaluating and planning for these costs can help ensure the financial health and operational efficiency of your fulfillment business.
Potential Costs of Starting a Fulfillment Business
Starting a fulfillment business involves several potential costs, ranging from initial setup expenses to ongoing operational costs. Below is a detailed breakdown of these potential costs.
| Cost Item | Description/Details | Estimated Cost (USD) |
|---|---|---|
| Warehouse Lease | Monthly rent for a warehouse space | $2,000 - $10,000 per month |
| Warehouse Setup | Shelving, racks, and other infrastructure | $5,000 - $20,000 |
| Insurance | Insurance for warehouse and inventory | $500 - $3,000 per year |
| Inventory Management Software | Software for tracking inventory levels and orders | $100 - $500 per month |
| Order Management Software | Software for processing and managing orders | $50 - $300 per month |
| Labor Costs | Salaries for warehouse staff, packers, and admin | $2,000 - $15,000 per month |
| Packaging Supplies | Boxes, tape, labels, etc. | $200 - $1,000 per month |
| Forklift/Material Handling Equipment | Equipment for moving large pallets and heavy items | $5,000 - $30,000 |
| Hosting Fees | Cloud services for hosting the e-commerce platform | $50 - $500 per month |
| Marketing and Advertising | Promotional materials and online advertising | $500 - $5,000 per month |
| Shipping Costs | Costs to ship items to customers | Varies (depending on volume) |
| Utilities | Electricity, water, and internet for the warehouse | $500 - $2,000 per month |
| Security Systems | Cameras, alarms, and other security measures | $1,000 - $5,000 |
| Website Development | Cost to develop and maintain a company website | $1,000 - $10,000 |
| Licensing and Permits | Permits required for operation | $100 - $1,000 |
| Professional Services | Legal, accounting, and consulting services | $500 - $3,000 per year |
| Miscellaneous Costs | Unplanned expenses (maintenance, repairs, etc.) | $500 - $2,000 per month |
Starting a fulfillment business requires a thorough understanding of these potential costs to ensure that all necessary expenditures are accounted for and that the business can operate smoothly from day one.
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Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
