Use of Amazon Logistics to become Mandatory for Amazon Retailers
Amazon are, we believe, poised to expand their Amazon Logistics operations to include pick-up from retailers as their desire to control the buying experience from end to end continues.
We hear that sellers previously invited to participate in Amazon Prime program without using Fulfilment by Amazon (FBA) are to be forced to use Amazon Logistics from early next year. From what we understand use of Amazon Logistics is to be mandatory to remain a sell fulfilling Prime seller but on the plus side the rates on offer are expected to be very attractive.
This new move is likely to send shockwaves through the carrier network. We hear that the rates could be as low as sub £2.50 for next day delivery which really is ultra competitive but, by starting with Amazon’s largest retailers, huge volumes will disappear from the UK carrier networks. Once you’re invited to participate in non-FBA Prime, every product you sell can become Prime eligible so long as your shipping is with Amazon Logistics.
Amazon Logistics and non-FBA Amazon Prime
Carriers are already seeing volumes drop as Amazon Logistics grows. Amazon’s business is massive, they sold 7.4 million items on Black Friday alone, but still only about 10% of products are sold through FBA and so Prime eligible. Inviting sellers to offer Prime service with self fulfilment increases the product range available.
Up until now sellers have been free to use their courier of choice to fulfil the next day Prime delivery promise, but if Amazon Logistics takes over, this changes the game. Amazon are then in control of the delivery experience and they’re not even stitching retailers up on rates.
Integration and warehouse implications
For retailers this is going to involve some integration pain points – we’ve yet to hear of any multichannel management software or label solutions which have Amazon Logistics integrated. If you’re going to ship with Amazon Logistics there will be some technical integration required.
It’s likely you’ll also have to do some rearranging of your warehouse too. Whilst large retailers will simply have a trailer from their favoured carriers to load parcels onto, they’ll need to separate Amazon Logistics parcels for collection from their other outgoing traffic.
There’s little doubt that having your items included in Amazon’s Prime program increases sales dramatically. The downside has always been the cost of FBA and that large (and indeed many smaller) retailers will be reluctant to use FBA in preference to their own warehouse.
Being included in Amazon Prime but fulfilling from your own warehouse keeps the stock under your control and allows you to sell from the same pool across multiple marketplaces and websites.
Where will Amazon Logistics expansion end?
Amazon Logistics was created for one way traffic from Amazon’s warehouses to distribute goods out to consumers. Now it would appear that Amazon are adding in collection from multiple retailer locations.
Will Amazon expand Amazon Logistics to become the de facto carrier for all Amazon sales? If Amazon starts Prime collections from large retailers it seems inevitable that the program will expand to include smaller retailers at some point in the future so the only question is how long will it take until they get down to retailers of your size.
eBay is already aiming to disrupt the UK fulfilment landscape with their eBay Drop-Off at Argos service. They’re starting at the bottom of the courier landscape with a service largely targeted at consumer sellers. Amazon now appears to be targeting their Amazon Logistics fulfilment service at the very largest sellers.
At some point both will eBay and Amazon will add in new services and expand until they’re both targeting the same retailers, albeit only for products sold on their respective marketplaces. That’s bad news for the traditional carriers who will see their market shares eroded.