You don’t have to know much about real estate to know that location is everything. But unless you run a brick-and-mortar store, you may believe you’re off the hook when it comes to thinking about physical properties.
But wait! Even when you only sell online, geographic location does apply to you: Where you fulfill orders matters a great deal when it comes to the ability to meet customer expectations.
If you’re at the point where you can no longer fulfill orders on your own, and you don’t want to run warehousing operations yourself, you can outsource fulfillment to a third-party logistics (3PL) provider. With that decision comes many options all over the country.
In the past, having orders fulfilled in rural areas may have worked okay. But with today’s consumers wanting everything now, in addition to continued population growth in big cities, using urban fulfillment centers is on the rise.
Learn why fulfilling orders in metro areas enables an efficient ecommerce logistics strategy.
The importance of urban fulfillment centers
Greater population = more buying power
With a fulfillment center in a large city, you are closer to larger pockets of the general population, as compared to being in a more remote area. While rent is certainly more expensive in major cities, the tradeoff of not being in the middle of nowhere is that you are close to the majority of the buying power in the US. That’s where your potential ecommerce customers live.
If we look at the chart below, we see the population of the largest metropolitan areas in the US from 2016. A fulfillment center in any of the top cities listed below would be positioned to reach a good amount of people.
Image source: Statista.com
Similarly, you can identify major cities in the US on the map below by the darker marks. The redder the area, the greater the population per square mile, while the lighter areas are more barren.
As you can see, highly populated regions are present throughout the continental US. That’s why having fulfillment centers in different regions can help you reach various areas with a high population density (more on that later!).
Image source: bl.ocks.org
Closer to customers = faster deliveries
The whole point of using a fulfillment center that’s in a large city is to quickly reach people who live there, since there is less distance between where the order is fulfilled and the shipping destination.
Getting a package from Point A to Point B can be easily delivered the same day or within 1-2 days when your inventory is already only a few miles away, rather than hundreds or thousands of miles away.
As consumers are more impatient than ever before, offering fast deliveries can improve conversions on your website and reduce shopping cart abandonment. But even if you have to ship something much farther, big cities are also where you find large airports for efficient distribution.
More fulfillment centers = greater reach and less money spent on shipping
Shipping your items from a single fulfillment center in a major city can greatly benefit the customers who live near there; however, your customers who are on the other side of the country will still have to wait longer or pay for expedited shipping via air.
So, what’s better than a fulfillment center in a major city? Having inventory in several major cities! After all, that’s how Amazon provides guaranteed two-day shipping for their Prime service.
In addition to fast delivery, you can also reduce your shipping costs. This is based on how shipping zones work, or the geographical areas that carriers ship to, spanning from Zone 1 to Zone 8 in the United States.
The location from which an order is shipped is the point of origin and located in Zone 1 (as seen as yellow dots which mark fulfillment centers on the maps below).
The address it’s shipped to is the destination zone. The destination zone number will vary, depending on how far it is from the point of origin, with Zone 8 being the farthest away.
Shipping carriers use zones to calculate rates for certain services. For services that are zoned, the greater the zone, the greater the cost in most cases.
As we see on the maps above, using one fulfillment center leaves the rest of the country paying more for shipments (because they are shipping to higher zones).
Using three fulfillment centers in major cities around the country reduces the higher zones (and also reduces shipping costs).
If you’re looking to maximize efficiency, you need to factor in more than just one urban fulfillment center. Learn more by viewing the webinar recording of “How to Transform Your Logistics Using Distributed Inventory.”
Selling products online lets you reach customers all over the world at all times of the day. Though you can work from anywhere when you run an ecommerce store, your fulfillment centers should be located where you can most efficiently ship to the greatest number of customers. To maximize this, you will want to use multiple fulfillment centers in highly populated areas.
If you’re looking for a 3PL with fulfillment centers in big cities across the US, ShipBob owns and operates facilities in Chicago, Brooklyn, LA, San Francisco, and Dallas. You can utilize our strategic geographic footprint and split your inventory across the country to reduce your transit times and shipping costs. This includes seamless communication across fulfillment centers and the ability to automate alerts to let you know when it’s time to replenish inventory for each SKU at each facility.
Learn how to compete with giant retailers by meeting customer expectations around inexpensive 2-day shipping. Download “The Guide to Offering Affordable 2-Day Shipping.”