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The impact of cost of living/payroll on e-commerce fulfillment costs

Posted by Kristen Melendez on Fri, Jun 14, 2013 @ 09:10 AM

So you’ve decided to take on e-commerce fulfillment yourself. Sure, why not? You know the products. You have the space already; why not just ship them from your location? Sounds good on paper, but many factors come into play when you enter the world of e-commerce fulfillment, and the most often overlooked is how cost of living and payroll costs play into the whole scenario.

Fulfillment is a labor-intensive operation, particularly for start-ups and smaller organizations that can’t afford the luxuries of automation. And with labor, comes payroll. It also offers some other potential pitfalls to avoid as well. Most of your payroll will be devoted to hourly employees, and many of those part-time. Hourly employees can be nomadic, often moving on to another job when a better opportunity arises. Many part-time employees may have other jobs, creating scheduling conflicts.

But it can be done. Here’s what you need to consider. 

  • Wages. What are competitive wages for the type of work you are offering? Are the wages in your part of the country equal to, higher than or less than national averages? If you are in New York City or the west coast, wages may be several dollars per hour higher than major metro areas in the Midwest.
  • Job Market. What impacts wages the most is the availability of labor. Are jobs plentiful? If so you’ll pay more. If however, jobs are scarce, you’ll pay less. It’s simple supply and demand.
  • Staff management. Who will hire and manage your fulfillment staff? If this is an existing resource, then it may not impact your bottom line, but if you need to add HR or management personnel to manage your fulfillment staff, then costs go up.
  • Benefits. What benefits do you offer for employees? Are you competitive? Again, this is relative to the job market and wages.
  • Access to transportation. Can your employees get to work efficiently and predictably? While not a direct cost consideration, access to transportation can be a hidden cost as it relates to tardiness and absenteeism.
  • Taxes. What are the payroll taxes in your city, county and state? Are these higher than other areas?

All of these factors are unique to your location. And if you have multiple locations that you ship from, your costs may vary as well, which makes it very difficult to track costs.

If you’d like to discuss these or other factors related to the costs of fulfillment, just contact us.