Inflation may be off the front page, but the pressure on e-commerce operators hasn’t eased. It's shifted, embedding itself inside the fulfillment stack.
Labor, freight, and packaging costs remain volatile. CPI may look stable, but the cost to fulfill each order keeps rising. At the same time, pricing power has hit a ceiling. Customers are pushing back. Promotions are under scrutiny. The strategy of passing costs to consumers has run its course.
For operators, that shift isn’t theoretical. It shows up in every warehouse, shipment, and invoice. The next phase of margin protection isn’t about finance. It’s about execution. And the battleground is fulfillment.
Where cost pressure is building inside the fulfillment stack
Labor volatility is now a planning problem. Warehouse labor is more expensive than ever and shows no sign of cooling. In many markets, total hourly compensation for warehouse workers has risen significantly, up 8.3% in 2024, according to BLS data. Local labor shortages, higher minimum wages, and the need to retain skilled staff continue to push costs higher, even as national trends suggest stability.
Post-pandemic expectations have made staffing harder. Brands with seasonal spikes often need twice the headcount in Q4 compared to Q1. That forces 3PLs and brands to overstaff or pay premiums to avoid service-level breaches.
Labor now accounts for a much larger share of total fulfillment cost and is one of the main reasons margins are tightening. Operators should be actively modeling labor needs against seasonality, shift premiums, and retention costs. Planning early for Q4 spikes is no longer optional.
Freight isn’t a line item. It’s a strategic variable. Freight costs remain one of the most unpredictable parts of the fulfillment stack. Over 80% of shippers renegotiated ocean contracts in 2023. Surcharges, rate adjustments, and contract renegotiations continue to create volatility. Ocean versus air decisions now come with sharper tradeoffs, and even small shifts in freight mix can have an outsized impact on margin.
For many operators, margin depends on how well they manage that mix across regional, national, gig, and hybrid carriers, and across air, ground, and LTL modes. Using a TMS to optimize routes and service levels in near real time is no longer optional. It is foundational to protecting contribution margin.
The takeaway is simple. Operators must treat freight mix as a living system, adjusting strategy continuously based on cost swings and carrier capacity, not on annual contracts.
Small packaging decisions are creating big losses. Packaging materials like corrugate, inserts, and protective wraps are still 15-30% higher than pre-2020. But the bigger issue is how quickly packaging inefficiencies can eat away at margin.
Oversized boxes, poor SKU-to-box mapping, and redundant kitting inflate dimensional weight, which increases shipping costs. One brand reduced box size by 30% and immediately saw freight costs drop by 20-30%. That’s not a rare case, it's the new baseline.
Assigning boxes to top SKUs, removing overboxing, and standardizing protective materials are straightforward ways to lower per-order costs. These changes don’t require an overhaul. They produce fast, measurable results.
Why margin protection is now an ops conversation
For most brands, the room to raise prices has narrowed. Consumer elasticity has tightened. 75% of U.S. consumers are already trading down in discretionary categories like electronics and apparel. Aggressive increases now risk damaging volume or long-term value. Price hikes used to be a lever. Now they’re a liability.
At the same time, many operators are pulling back on seasonal promotions. Not because demand isn’t there, but because margin visibility isn’t. Brands are buying less often, cutting safety stock, and shifting to just-in-time models to preserve cash. Some are limiting both summer and holiday campaigns, choosing to prioritize margin protection over top-line growth.
Operators are waiting to make inventory decisions until they have a clearer picture of how margins will play out.
Execution is the new growth lever
Strong operators aren’t just absorbing cost, they’re turning fulfillment into a system for margin control.
Packaging optimization: Fastest path to margin recovery. Right-sizing boxes at the SKU level, eliminating overboxing, and improving kitting logic, can deliver 10-30% per-shipment savings. These adjustments generate fast returns on your highest-volume SKUs.
Freight mix discipline. Operators are actively blending regional, gig, and national carriers to improve costs, lead times, and service reliability. Some are renegotiating contracts mid-cycle to lock in better rates before peak seasons.
Freight strategy is no longer a backend detail, it is a profitability tool.
Inventory and marketing alignment. Inventory planning is increasingly tied to campaign calendars and paid media performance. Some brands are delaying campaigns entirely if cost-per-order spikes beyond a set threshold, choosing to preserve margin instead of chasing growth at any cost.
Others are holding off on POs until they have real-time clarity on fulfillment costs. In both cases, the strategy is simple: don’t move until you know the margin holds.
Visibility only works if everyone uses the same map
Margin can’t be managed in silos anymore. Fulfillment costs now factor into strategic planning as much as financial forecasts or growth campaigns.
Operators need real-time SKU-level cost-to-serve—broken down by customer, fulfillment method, and sales channel. That means marketing, operations, and finance must model margin together before making decisions. Fulfillment partners are no longer just executing, they are helping brands forecast, plan, and adjust in real time.
To get there, operators should align teams around:
● SKU-level fulfillment cost data
● Promotional margin thresholds
● Real-time fulfillment spend by channel
We see this shift happening daily. Fulfillment conversations aren’t just about execution anymore—they’re about identifying cost-saving opportunities. Brands are more open to adjusting packaging, simplifying SKUs, and cutting special packouts because both sides are aligned on a single goal: reduce cost without compromising performance.
The operators who measure cost-to-serve will win
The margin battleground is no longer financial. It’s operational. The brands that stay profitable are making precision adjustments across fulfillment, from packaging decisions to freight strategy to inventory timing.
This isn’t about cutting spend, it’s about leveraging critical control points. Knowing what every order costs to serve and building that number into how you forecast, how you campaign, and how you buy.
If you haven’t audited labor, freight, and packaging costs this quarter, start there. Then tighten the connection between execution, margin, and decision-making.
The strongest operators won’t be the ones chasing growth. They’ll be the ones protecting it by finding the leaks and fixing them before they hit the P&L.
