Blog

When Do You Know You’ve Outgrown Amazon?

Posted by Maeghan Hurley on Tue, Jul 15, 2014 @ 09:31 AM

When Do You Know You Have Outgrown Amazon

Amazon already towers over all other providers when it comes to the B2C side of distribution, but now it’s making further strides to monopolize and become the world’s largest 3PL for B2B. Should you, as a business owner, be leery of that kind of relationship and involvement? How do you know if working with Amazon for order fulfillment is the right choice for you, or if their growth limits your specific needs?

The Pros of B2B with Amazon

The benefits of working with Amazon are numerous: larger distribution capabilities, large-scale logistics and distribution centers that have the capability to process orders quickly, across the globe. A business that’s grown this big obviously has a model that works for many companies and can provide a history for the business looking for a 3PL with experience. And, yes, global can mean further distribution capabilities that outmatch any other partner you’re considering.

Amazon also gives the retailer an immediate audience that is generally seller and brand agnostic. This can help a business owner get started or give them a sales boost if not already selling on Amazon.com.

But there’s also the idea that you’re working with the Walmart of distribution—a company grown so huge that you worry they might not fit your needs. And the reality is, they likely can’t. Weigh the pros of a partner like Amazon with the reality of what needs might go unmet in the process.

The Cons

In order for a 3PL to have the capability to provide to hundreds and thousands of clients across the nation and globe, they require a wide net of certain restrictions, requirements, labeling—everything they need extra to move your product. That means, the further Amazon continues to grow, the more risk they run at failing to meet a specific distribution need you have. Maybe that’s kitting and packaging. Or complicated, expensive, or ignored returns?

Fulfillment by Amazon can be expensive for items not sold on Amazon.com. For example, many retailers sell on Amazon and also have direct sales through their own website. However, Amazon has a different fee schedule for fulfillment of  items that are not sold on Amazon.com.

Another Con is for the business that has an item which is proprietary or serves a niche market. For example, Amazon has access to analytics for all items that are sold on its site. Amazon could use “hot selling” item info to source their own design of a product that the business owner has listed on Amazon.com, and Amazon would then sell it at a lower price.

And what do you lose control of when you work with a company like Amazon? You don’t get to have a say in transportation costs or other specifics that might save you money in the long term. And there’s no promising how, when a company reaches this level, they won’t upend and change policies or pricing once you’ve given them all your distribution. There’s a lot of talk looming around Amazon’s policies—from increasing their Prime costs, to questionable work environments for their employees—and you need to identify exactly what you risk when you as a business decide to engage Amazon as a 3PL.

Utilizing A 3PL In Addition To Amazon

 For many mid-size retailers, Amazon is an important sales channel, and having Amazon fulfill orders sold on Amazon qualifies their products for Amazon Prime—which ensures sales through Amazon.com. For this reason, you might not want to move completely away from Amazon. Rather you could use a logistics provider for your distribution activities and your direct sales fulfillment. This 3PL can help comply with the requirements of shipping product to Amazon, can fulfill direct sales orders cheaper, and can handle returns—even the items sold through Amazon.  You might also consider only selling your close-out items on Amazon.com, and use other sales channels—such as your own website or department stores—for higher margin sales.

 

3PL Savings Calculator

Topics: 3PL, Logistics, Fulfillment, Distribution, E-commerce