I provide 3PL service to an ecommerce site but also manufacture a small number of the products they sell. As a gesture of goodwill, I started with a discount on those products which we are now saying need to be removed because they hobble our margins on those products and we'll, why make them for such a slim margin.
Here's the thing though… In response to this they are saying 'please don't increase the price because one of our previous 3PL providers charged us half of what you do'. This is problematic for a couple of reasons. First off, we are not proposing an increase in our 3PL fees… Second, they know fully well that said 3PL provider went out of business… When they asked us to match those alleged prices, we said absolutely not because we would go out of business at those rates too lol. What we offered was to de-couple our fees from shipping fees so that they had a real world account of both. Perfectly reasonable to and helpful to know what you are spending on shipping vs. fulfillment.
My big question though, is what percentage of revenue is reasonable to be spending on fulfillment alone (not including shipping)? Their customers pay for shipping anyway. At present, our fulfillment costs account for 8% of their total revenue which seems QUITE reasonable to me. Perhaps I am wrong about this? Anyone have any insight?