What’s more profitable for a supplier: own delivery or a platform’s fulfillment service?
August 18, 2025
Suppliers ask this the moment orders start scaling. Profitability isn’t only “fees vs shipping.” It’s conversion lift, fixed vs variable costs, returns, and policy risks.
Below is a practical, numbers-first guide you can apply to marketplaces and DTC.
TL;DR for busy operators
If you sell small/standard items, need 1–2-day delivery, and your marketplace shows a badge for platform-fulfilled items, platform fulfillment usually wins on net profit per week/month.
If you sell bulky SKUs, have dense local demand, or need custom packaging/service, well-run in-house/3PL delivery can beat platform fees.
Definitions you’ll actually use
Own delivery (in-house/3PL): you control storage, pick/pack, carriers, and returns. You pay rent, labor, packaging, software, and transport.
Platform fulfillment: the marketplace stores, picks, ships, and often handles returns. You pay per-unit fulfillment + storage + operational surcharges; in return you often get a speed badge that lifts conversion.
What to compare: the full cost stack
Don’t just compare “$ per shipment.” Compare every line that touches contribution margin.
Variable per order
- In-house: postage/courier, packaging, pick & pack minutes, label, payment gateway diffs.
- Platform: per-unit fulfillment fee, weight/size tiers, returns handling, label included/not.
Fixed & semi-fixed
- In-house: rent or 3PL minimums, WMS/labels, scanners, recruiting, shrinkage, training.
- Platform: storage by cubic-foot/liter, peak-season multipliers, aged inventory surcharges.
Revenue impact
- Speed badge & trust badge often increase conversion and Buy Box/share of shelf.
- SLA failures, stockouts, and slow delivery depress conversion and trigger penalties.
Quick comparison table (use this to sanity-check quotes)
| Cost/Impact Area | Own Delivery (in-house/3PL) | Platform Fulfillment |
|---|---|---|
| Per-order variable cost | Courier, packaging, pick/pack minutes | Tiered per-unit fee; label & box often included |
| Storage | Your rent or 3PL pallets | Per-cubic-foot/liter monthly; peak multipliers possible |
| Returns | Your labor + reverse freight | Per-unit returns processing; restocking/sorting rules |
| Speed badge / trust | Depends on your SLA and program eligibility | Often 1–2-day + badge; boosts conversion |
| Policy risk | You set most policies; carrier risks remain | Fees and rules can change; non-compliance charges |
| Capex/complexity | Racking, WMS, headcount | Lower capex; you manage inbound and inventory health |
| Cross-border reach | Your carriers & taxes | Use network; customs options differ by platform |
The part most sellers miss: sales uplift vs. fee drag
Badges like Prime, 2-Day, Fulfilled by X, or program-specific tags often lift conversion noticeably. That extra sell-through lowers your storage days and amortizes fees over more orders.
Your decision must weigh fee drag against conversion lift and the operational risk you offload.
A simple break-even model you can reuse
Goal: find the conversion lift (or cost savings) needed for platform fulfillment to beat your current setup.
Per-order contribution margin (before ads):
CM = Price – COGS – Referral/Marketplace Fee – Fulfillment/Shipping – Variable Ops (packaging, pick & pack, returns, etc.)
Break-even on conversion lift:
Let CM_platform and CM_own be contributions per order (same price).
Let Lift be the relative conversion increase from the platform badge.
Platform is more profitable if:
Orders * (1 + Lift) * CM_platform > Orders * CM_own
Rearranged for the minimum lift needed:
Lift > (CM_own / CM_platform) – 1
Example inputs (illustrative, adjust to your quotes):
- ASP: $35; COGS: $14; Referral fee: 15% ($5.25).
- Platform fulfillment fee: $5.00; returns avg $0.40/order; storage $0.10/order.
- Own delivery: shipping $6.00; pick/pack $1.50; packaging $0.50; ops overhead $0.80.
Per-order CM:
- Platform: $35 – 14 – 5.25 – 5.00 – 0.40 – 0.10 = $10.25
- Own: $35 – 14 – 5.25 – (6.00 + 1.50 + 0.50 + 0.80) = $6.95
Minimum lift needed:(6.95 / 10.25) – 1 = –32%.
Negative means platform already wins on per-order margin even without a lift in this example.
If your shipping is cheaper (e.g., $4 local), own delivery might win unless the badge adds enough conversion.
Scenario table: when each model tends to win
| Situation | Likely Winner | Why |
|---|---|---|
| Standard-size SKUs, national delivery expectations | Platform | Speed badge + dense network beats local rates |
| Bulky/oversize, low value-to-weight | Own/Hybrid | Carrier tiers explode on platforms; local runs can be cheaper |
| Fashion with high returns but badge-sensitive audience | Platform | Faster delivery & easy returns lift conversion; platform processes returns at scale |
| Dense metro demand, your own vans/routes | Own | Route density slashes last-mile cost; predictable SLAs |
| Seasonal surges with limited staff | Platform | Elastic capacity; you avoid temporary hires & overtime |
| Custom kitting/unboxing experience is critical | Own/3PL | You control packaging, inserts, and special handling |
| Cross-border expansion with limited tax/logistics know-how | Platform/3PL | Pre-built lanes, compliance, and duty-paid options |
Example P&L snapshots by monthly volume (same inputs as above)
| Monthly Orders | Platform: Revenue | Platform: Fulfillment+Ops | Platform CM | Own: Shipping+Ops | Own CM | Winner |
|---|---|---|---|---|---|---|
| 200 | $7,000 | $1,100 | $2,050 | $1,760 | $1,390 | Platform |
| 2,000 | $70,000 | $11,000 | $20,500 | $17,600 | $13,900 | Platform |
| 20,000 | $700,000 | $110,000 | $205,000 | $176,000 | $139,000 | Platform |
Notes: Revenue assumes $35 ASP. CM excludes advertising and fixed salaries for the in-house team. Replace with your real quotes to validate.
Hidden costs & risks to factor in (2025 reality)
- Inventory health rules: platforms can penalize low inventory depth or long-term storage. Keep weeks-of-cover healthy and turn stock fast.
- Peak season multipliers: some programs add peak storage or holiday fulfillment fees; read the calendar.
- Placement & inbound rules: mis-routed boxes, carton labeling errors, or inbound defects can incur charges.
- Policy shifts: fee structures change. Build a buffer in your model and revisit quarterly.
Hybrid often outperforms a single bet
Many suppliers split their catalog:
- Badge-sensitive fast movers: put them on platform fulfillment for speed and trust.
- Heavy/oversize or slow movers: ship yourself or via a 3PL to control costs.
- DTC site: test “badge-as-a-service” programs where available, while keeping your customer data.
Step-by-step: decide in two weeks (and avoid analysis paralysis)
- Export 90 days of orders with SKU, weight/dims, destination ZIP/postcode, and return rate.
- Get apples-to-apples quotes: platform tiers, your current carriers, and one 3PL.
- Map items to tiers and compute per-order CM for each SKU under both models.
- Layer in realistic conversion effects: use past A/B where you had speed badges; otherwise model +10%, +25%, +50% conversion scenarios.
- Stress-test Q4: apply peak fees and return rates to see if your winner flips.
- Pilot: move 5–10 SKUs to the alternative model for 30–45 days and measure margin per day, not just per order.
- Document playbooks: inbound, labeling, exceptions, and re-stocking so the gains persist.
