What is a 3PL and when to use one for your eCommerce business

As an eCommerce retailer, you have more than likely managed to fulfil all your online orders yourself in-house. However, if you're losing sight of your garage floor (or ceiling) due to an increase in orders, it may be time to consider a third-party logistics supplier (3PL) who can manage the fulfilment process for you.

Third-party logistics have traditionally been used by much bigger businesses and multinationals, but since eCommerce is now part of everyday life, there has been an increase in retailers using 3PLs to deliver a frictionless customer experience.

We also understand it may be daunting to outsource a significant part of your business to a third-party supplier, so to help shed some light on the subject, we've put together a guide to help you navigate the world of 3PLs as an eCommerce retailer.

Let’s get started!

What is a 3PL?

Third-party logistics providers provide general to highly specialised services that cater to the specific requirements of each retailer.

According to Gartner, a third-party logistics provider or 3PL is, "A commercial firm that provides one or more logistics functions on behalf of its customers on an outsourced basis for a fee. To be a 3PL, the logistics service provider (LSP) must predominantly operate a business that moves, stores or manages products or materials on behalf of its customer."

These logistics include all functions necessary to package and deliver an order to the end customer. These functions generally fall under warehousing and transportation services, which can involve subcontracted services. A 3PL service can be tailored according to your specific product requirements for your B2C, DTC or B2B needs.

Now that we have established what a 3PL is, let’s look at the pros and cons of using one as an eCommerce retailer.

Flexibility and scalability

One of the biggest benefits of using a 3PL is the ability to scale without some of the growing pains. Whether you’re dealing with seasonal spikes, flash sales, or rapid year-on-year growth, 3PLs give you the infrastructure to fulfil more orders without hiring, training, or expanding your warehouse footprint. When volumes drop again, you won’t be stuck with fixed overheads as your costs scale with your business.

This kind of operational agility is especially valuable when you're testing new products or entering new markets. You can launch quickly, adapt as you go, and avoid tying up capital in warehousing or logistics before you're confident in demand.

Without a 3PL, growth often means taking on significant risk – signing long-term leases, hiring before you're ready, and getting locked into systems that don’t scale. A 3PL removes some of those barriers. It gives you the freedom to focus on growing your business, knowing that your fulfilment operation can flex to support whatever comes next.

Cost-efficiency for higher volumes

While 3PLs charge for their services, they can help you save significantly, especially as your order volumes grow. That’s because many 3PLs already have high-volume relationships with major carriers, allowing them to access bulk shipping rates or tiered discounts that individual retailers might not qualify for. These savings are often passed on to you.

There are also efficiency gains: 3PLs streamline everything from pick-and-pack to labelling and dispatch, reducing the manual labour, errors and delays that can chip away at your margins. Some even offer bundled pricing for storage, fulfilment and returns, making it easier to forecast your logistics spend.

As you scale, fulfilment costs can quickly become one of your biggest expenses. Doing everything in-house might seem cheaper at first, but once you factor in labour, technology, lease agreements and carrier surcharges, those costs add up fast. A 3PL spreads those costs across multiple clients, giving you a more predictable, per-order cost structure that supports sustainable growth.

This also opens the door to regional fulfilment strategies. For example, a growing number of Australian retailers expanding to the US are partnering with American 3PLs to bypass cross-border shipping, avoid import duties, and speed up delivery. In many cases, it’s faster (and cheaper) to ship domestically from a US-based 3PL than to fulfil from Australia.

You also benefit from their existing infrastructure – that means established carrier relationships, local returns handling, and in some cases, regional compliance support.

Speed and reliability are two of the biggest drivers of customer satisfaction. By fulfilling orders closer to your customers, you can offer faster delivery at lower cost, without overhauling your entire operation. For international expansion, this can mean the difference between a market that breaks even and one that becomes a major revenue stream.

You lose some control over the process

When you hand fulfilment over to a 3PL, you’re also handing over part of your customer experience. You can’t walk into the warehouse to check how orders are being packed, ensure the right inserts are going in, or jump in to fix issues on the fly. If something goes wrong (a delay, a missing item, damaged packaging) it’s your brand the customer will hold accountable, not the 3PL.

Your fulfilment operation is often the final step in your customer journey, and the one they remember most. A great delivery experience builds loyalty; a bad one erodes trust. If you can’t clearly see what’s happening inside your fulfilment process, it becomes harder to proactively fix problems and maintain consistent service quality.

You’re depending on an outside partner

A 3PL becomes an extension of your operations, which means you’re dependent on them to get things right. If they run into staffing shortages, warehouse issues, tech outages, or miss SLAs during peak periods, it can directly impact your customers – and your reputation. Even strong relationships can be tested when volumes spike or things go wrong.

You’re also trusting them to maintain accurate inventory, handle returns correctly and manage communication with customers. If there are communication gaps or process mismatches, problems can escalate quickly.

Building a successful 3PL relationship takes time and ongoing effort: clear documentation, aligned expectations, and regular performance reviews.

Outsourcing fulfilment doesn’t mean outsourcing responsibility. You’re still on the hook with customers if deliveries are late or items are lost. Relying on a third party introduces risk – so it’s crucial to choose the right partner, build in checks and safeguards, and ensure you’re not flying blind.

Some 3PLs also charge per shipping label or for customer returns, and you might not have much leverage to negotiate these fees once you’re locked in. If your fulfilment partner uses third-party software to generate labels, you could be paying per label without realising there’s a more cost-effective option.

Margins in retail are already tight, and fulfilment is often one of the biggest cost centres. Unexpected fees can erode profitability, especially at scale. The more control and visibility you have over your fulfilment stack, the easier it is to forecast accurately, plan for peak periods, and avoid surprises.

When should you switch to a 3PL?

Outsourcing fulfilment isn’t a decision you make overnight, but there are clear signs that your current setup is holding you back. If you’re spending more time packing boxes than growing your business, or struggling to keep up with increasing demand, it might be time to make the switch.

Here are some of the most common tipping points that suggest it’s time to bring in a 3PL.

1. Your team can't keep up with order volumes

One of the clearest signs that it’s time to consider a 3PL is when fulfilment becomes the bottleneck in your business. What started as a manageable in-house operation can quickly become a logistical headache as your order volume grows.

While the exact tipping point varies by business, many 3PL providers cite 500+ orders per month as a common threshold – at this stage, the labour, storage and coordination required to fulfil in-house often outweigh the costs of outsourcing. Even before reaching that volume, some retailers feel stretched at 50–100 orders per month, especially when they’re juggling fulfilment alongside customer service, marketing and product development.

When your time is spent printing shipping labels instead of growing your business, or you’re constantly playing catch-up, it’s time to ask whether a fulfilment partner could help you scale sustainably.

2. You have limited space or expensive storage

Maybe your business is bursting at the seams – products taking over every corner of your office, garage or retail space. Or maybe you’ve looked into leasing a larger warehouse, only to find that the cost in your area is much too high. Either way, if storing inventory yourself is becoming too expensive, it’s a clear sign it’s time to reassess.

This is one of the earliest and most common triggers for switching to a 3PL. Instead of signing a long-term lease and investing in racking, security systems, or warehouse staff, you can “rent” storage space in a 3PL’s facility on a flexible, as-needed basis. Many 3PLs offer pay-as-you-go models based on storage volume, so you’re only paying for what you use, and you can scale up or down depending on seasonal demand.

This setup is particularly valuable for urban-based brands, where warehouse space comes at a premium and square footage is too precious to waste on boxes.

Storage should support your growth, not constrain it. If expanding your inventory means compromising your workspace or taking on costly infrastructure, a 3PL can give you the space to grow, without locking you into fixed overheads or long-term commitments.

3. You need multi-location fulfilment

As your customer base grows beyond your local region, fulfilling from a single warehouse can start to work against you. Orders sent across the country take longer to arrive and cost more.

3PLs with a national or international network of fulfilment centres solve this by allowing you to distribute inventory across multiple locations, positioning stock closer to customers. For example, a retailer based in Sydney might use a 3PL’s warehouses in Brisbane and Perth to speed up delivery across Australia. Likewise, a US-based brand could store inventory in California, Texas and New York through a single 3PL relationship – offering 2-day or even same-day delivery without owning any of the infrastructure.

By reducing shipping zones, you also lower your average delivery cost, avoid long-haul surcharges, and reduce the risk of delays or damage from longer transit times.

Customers expect fast, affordable shipping – no matter where they live. Competing with national brands means matching their speed and reach. A 3PL’s distributed network gives you the fulfilment footprint it would take years (and potentially millions of dollars) to build yourself, helping you deliver on customer expectations without overextending your team.

For many retailers, this is where a 3PL becomes essential – not just for shipping, but as a partner who understands the local logistics landscape. Rather than committing to your own warehouse, local team, and carrier relationships straight away, you can tap into a 3PL’s existing infrastructure to test the waters.

When shipping internationally, speed, flexibility and low-risk infrastructure are critical. A 3PL lets you move fast and stay agile – giving you a proven way to fulfil locally and learn the market, without overinvesting too soon.

Wrap up

Switching to a 3PL is a big decision – but it’s also a sign your business is growing! If your current fulfilment setup is starting to slow you down, or you're facing challenges like space constraints, rising costs, or complex shipping needs, a 3PL could give you the breathing room (and operational muscle) you need to scale.

There’s no single formula that works for everyone but knowing your tipping points and understanding what to expect, makes the decision clearer.

You don’t have to figure this out alone. If you’re considering a 3PL or want to see how shipping automation can support your move, we’re happy to talk through your options! Book a chat with one of our shipping experts to learn more today.