Amazon started as online book store and has grown to be the worlds largest online retailer.
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.
I’d like to hope that people who still want the benefit of using FBA get a higher preferred position with FBA Prime like they do at the moment. If not, they may see their FBA centres become less full as people will simply do it themselves.
The price is key.
But also is collection or the ablity to drop of parcels locally.
My area has some poor collection sucess rates and missed collections are often due to being very busy.
How much volume would you have to be doing to be invited onto this?
I don’t know if there is a volume requirement, or if it’s Amazon’s way of attracting brands who would refuse point blank to use FBA. I would imagine Amazon would want to be satisfied that the retailer had evening despatch cut offs and could deliver next day.
Either way, what starts with large businesses has an uncanny way of filtering down to medium sized and then small businesses over time…
Howdy Chris, All,
The next time you have a delivery from Amazon turn up, ask the driver the following question “Busy day fella? How many is it today?”
Then work out that they get paid around £100 a day (which covers expenses such as fuel & the van as far as I’m aware) and you’ll quickly learn that on some days, the final delivery cost per package can be £1 or a lot less.
As for Amazon offering a pick up service, what a neat idea. I had my first next day delivery from eBay turn up today via Royal Mail, that has to be the first one to arrive next day this year!
PS. Some of the chaps that have delivered to me have quoted 110, 140 and the on Tuesday after black Friday 182 deliveries in a day.
You’re such a crafty so and so Matt! But those figures are a package delivered every 5 minutes which just seems insane but not impossible.
Large Volumes of deliveries in a day could be achieved if there are more than 1 delivery to an address. So somebody who has ordered several items from different suppliers could receive several deliveries all together on the same day. Also on Estates there could be several within close walking distance where it might be possible to leave the van and deliver 2, 3 or 4 all together. But while this might be possible in Urban areas I doubt if it is possible in Rural areas.
I’m sure they’re not just in it for the good of their hearts or as a loss-leader, Amazon. But this isn’t an exact science. £100.00 labour cost on 140, 182, 200+ parcels which have been rated to the consumer at £2.50 a parcel leaves what… maybe £250.00, £355.00 for National Insurance, Fuel, Software, Scan-hardware (and support), HR, Bricks and Mortar buildings, Vans, Insurance, Van Tax, etc etc.
Basically, there’s not a lot of the pie left for Amazon, ‘cept they will be quite literally cornering the market end-to-end, which is very powerful in later years.
I spoke with one Amazon delivery guy who said the reason the vans aren’t branded is because they get targeted by thieves. Apparently it was trialled in London and they were getting 3/4 Vans per day getting raided!
It’ll be interesting to see how this change from Amazon, if bona fide, affects the wider eCommerce market, and current FBA’ers.
We were told this might happen earlier this year. We were invited onto the prime programme which worked very well until our carrier let us down for a brief period a few months in. Amazon were extremely understanding and said that none of their ‘approved’ prime carriers (it was a very limited list) were doing a good enough job for the sellers, and that they needed to do something themselves for 2016. This would be their solution I imagine.
We were also invited onto the program. Amazon logistics don’t seem to have a great reputation for reliable delivery, and certainly I don’t know how they expect us to handle integration of Amazon Logistics in a short time-scale if early next year is the plan.
I’d rather sell my soul to the devil than use Amazon Logistics. The pain of eternal fire and hell would be far less than using Amazon Logistics to carry my business’ reputation.
It’s why we cancelled Prime. Next Day delivery my big fat arse. If we’d stayed we’d have had free a prime till 2058 – every time they didn’t deliver next day we got a month added to our Prime membership – but what’s the point of free Prime membership till the end of time when nothing ever gets delivered next day? They are worse than Yodel. And to achieve that you have to go some.
Can’t argue with that – I hit 14 free months of prime for late and even missing deliveries. Really upset that I might have to pay for prime next year, although I just got another free month for a late delivery last week.
Percentage wise for me they’re no better or worse than the others though. We order a huge from amazon and 98% turns up next day fine.
Amazon logistics – quite possible the shittiest courier company I’ve ever experienced (as a buyer on Amazon ). They consistently leave my parcels in the rain, dumped outside my property at all times of the day (even when I’m in). The tracking is woeful – just says its on its way. No signature, no card even if given to neighbours doors away. Amazon just say it’s delivered on its site, not further description.
I’d rather pull all my toenails out with a mole grip than use then voluntarily.
I’ve got a pair of 14″ Mole grips if you’re interested…!!
I ordered an Xbox One a few weeks ago…took 5 days to deliver and they left it outside my property in the rain in full view of the street when both my neighbours were in and I left a note on the door where I had specified a safe place round the back of the house where it wouldn’t have been seen. Even Yodel manage to leave round the back of my house when I’m not in :/
A word to the wise tights arse*. you get what you pay for???
How interesting. Nice article Chris.
I was wondering how long it would take them to have a fully integrated logistics service in the UK. Obviously, not that long indeed!
I suspect the proposed low charge will be very attractive to get retailers on board – I wonder how long that will last? I suspect some of the old/ex carriers would have some interesting comments to make regarding their trade relationships with Amazon, and how they developed over time.
Interesting times in distribution at the moment.
Is there no one that can compete with Amazon’s brawn? Are we all destined for indentured servitude? As a platinum selling company, I’ve about had enough of the robber barons. It’s an all-out assault for freedom and the blood has all been drained.