Amazon Drives Fulfillment Network Expansion -12/19/19

From the Simplr studios in San Francisco, this is your daily briefing.  

Introduction

This is Today in Five, for today, Thursday, December 19th. Here is today’s headlines in digital disruption.

While many blame Amazon for driving high consumer expectations, it also seems to have clear benefits for retailers trying to keep up by driving businesses to create new resources and fulfillment networks for smaller retailers.

First, here’s what’s making headlines.  

Third-Party Delivery Services Now $10 Billion Industry

The online shopping trend has affected more than just retailers. Consumers have also shifted to ordering their food online through delivery services like Uber Eats and DoorDash. According to Technomic, consumers looking for convenient food delivery spent $10.2 billion dollars through third-party delivery services in 2018. Restaurants have scrambled to be a part of the new $10 billion dollar industry, with McDonalds forming partnerships with Uber Eats, DoorDash, and GrubHub. The fast-food chain is now forecasting $4 billion dollars in global delivery sales in 2019. While there’s no doubt food-delivery apps are changing the industry, it remains to be seen if they can achieve profitability. GrubHub, the only profitable delivery provider, reported third-quarter net income of $1 million dollars, down from $23 million dollars a year earlier. DoorDash and Postmates are both looking to go public in 2020.  

Jared, James Allen Partner for Concept Store

Jared is partnering with digitally-native jeweler, James Allen, for a new concept store. Jared is known for its professional diamond consultants and personalized service. James Allen is one of the largest online diamond and bridal jewelry retailers, with a collection of over 250,000 thousand certified loose diamonds. The Jared and James Allen store is designed to provide a modern, elevated omnichannel shopping experience where customers feel comfortable shopping at their own pace. In a switch from traditional jewelry displays, the display cases open in the front, allowing shoppers to view jewelry from all angles. Bill Brace, the executive general manager of Jared said,  “Our collaboration with James Allen allows Jared the opportunity to create a new and richer experience for our customers and create a modern environment for jewelry shopping.” 

Amazon Banning FedEx Ground or Home for Third-Party Sellers

Amazon is banning third-party sellers from using FedEx Ground or Home on Prime orders beginning this week. Amazon cited a decline in performance as its reason behind preventing sellers from using the carrier. According to the company, the temporary ban will continue, quote, “until the delivery performance of these shipping methods improves,” end quote. FedEx Express will still be available to Amazon Prime sellers and standing non-Prime orders can still be shipped through FedEx Ground and Home.  

Amazon Drives Fulfillment Network Expansion

When the founder of Supply, a specialty shaving products company, wanted to boost sales almost four years ago, he turned to Amazon. He added the company’s razors and shaving bowls to the marketplace in 2016 and was able to use the e-commerce giant’s fulfillment service to ship orders, supplementing what they were handling themselves. Three years later, he pulled Supply products from Amazon, citing fulfillment costs and seller fees shaved margins, among other issues. He said, “If you’re trying to build something, a brand, a relationship with customers, Amazon’s not a good place...Before I took it off Amazon, they started advertising their Amazon razors on my page.”  He turned to Shopify, which this year started rolling out its own distribution service.  

For company’s like Supply, Amazon’s vast market reach and power could be a good thing. The e-commerce giant’s dominance of digital sales has sparked a fast-growing ecosystem of startups and services aimed at matching Amazon’s growing network and at helping retailers and brands meet rising consumer expectations. The new businesses are creating competition for Amazon, even as the giant itself continues to disrupt traditional retail and distribution strategies.

Some of the new companies cater to brands that might sell on Amazon but don’t want to pay fulfillment charges, or that view Amazon as a competitor. Some major brands have distanced themselves from the e-commerce giant, with Nike recently deciding not to sell on Amazon anymore. Instead, they chose to use tools they’ve either built themselves or brought in from other companies.

Businesses like Shopify, Wix.com, and Squarespace help sellers set up their digital stores and process payments. And a growing lineup of new software firms offer tailored technology to tell retailers where to keep their inventory. Players well known for helping customers with their online stores, like eBay and Shopify, plan to offer physical distribution services, using technology to create a network of third-party warehouse operators.  

Traditional logistics providers are even developing e-commerce services for direct-to-consumer brands and small businesses. FedEx Chief executive said in a September interview that, “The way the war is going to evolve, it’s essentially going to be Amazon with their 150 fulfillment centers...against the Walmarts with 4,700 stores or the Targets with 1,800 stores or the Best Buys with 1,000 stores.”  

While the Amazon Marketplace continues to dominate e-commerce, it appears to have also driven vast amounts of opportunities and resources for retailers trying to keep up.    

Closing

Want to stand out? Simplr can help deliver wow moments for your customers through unparalleled customer service support. Visit simplr.ai to learn more. That’s S-I-M-P-L-R.ai.  

Thanks for listening to this latest episode of Today In Five. I’m Vincent Phamvan, and we’ll see you tomorrow.