By Retail Brew Staff
less than 3 min read
Definition:
Third-party logistics (3PL) essentially means outsourcing shipping and fulfillment to someone else. For retailers, especially e-commerce brands scaling fast, 3PL providers are the behind-the-scenes heroes that handle everything from warehousing to packing orders to getting packages on customers’ doorsteps. First, retailers send their products to the 3PL’s warehouse. Then, when someone places an order, the 3PL picks, packs, and ships it—often with tracking, returns, and customer service baked in. 3PLs can reduce overhead, streamline operations, and help retail businesses scale. Major players include ShipBob, Deliverr, and Rakuten.
Origins of 3PL
Before 3PL providers, brands did it all themselves—storing inventory, managing fleets, and handling fulfillment with in-house teams and big warehouses. The term “third-party logistics” came along in the 1970s as companies started outsourcing parts of their supply chain to external providers due to rising transportation costs and global trade complexity. Barcodes, early warehouse management systems, and the rise of just-in-time inventory models made 3PLs more sophisticated in the ’90s. And the e-commerce boom of the 2000s changed everything. Amazon raised consumer expectations with two-day shipping, and 3PLs had to keep up. Today, 3PLs power Shopify stores, TikTok-famous brands, and retail giants alike.
3PL in context
“3PLs handle fulfillment operations for the bulk of the brands that sell online across marketplaces like Amazon. Fulfillment operations in the world of e-commerce brands that earn average revenue anywhere between $10 million to $1 billion are dominated by 3PLs. Smaller brands selling online tend to do fulfillment in-house initially, but once they cross $100,000 in sales, they tend to opt for 3PLs, anecdotally.”
