retail news in context, analysis with attitude

The Wall Street Journal has a story this morning about how some third-party sellers are looking for - and finding - alternatives to Amazon as they seek to fulfill consumer orders.

The story uses Supply, a four-year-old specialty shaving company owned by Patrick Coddou, as an example: it started selling on Amazon's marketplace in 2016 and used Amazon's fulfillment service to pack and ship orders.

Now, things have changed.

"Three years later Mr. Coddou has pulled his products from Amazon," the story says, "citing fulfillment costs and seller fees that shaved his margins, among other issues. He moved the company’s online order fulfillment over to e-commerce technology company Shopify Inc., which this year began rolling out its own physical distribution service … Companies like Supply that are looking to reach customers and fulfill orders have many more options these days. Amazon’s dominance of digital retail sales has spawned a fast-growing ecosystem of startups and services aimed at matching different parts of Amazon’s sprawling network and at helping retailers and brands of all sizes meet consumer expectations set by the e-commerce heavyweight.

"Taken together, the businesses are creating what amounts to a virtual logistics system in Amazon’s shadow for retailers racing to keep up with the sector’s leader. This is creating new competition for the online giant even as Amazon itself continues to upend traditional retail and distribution strategies."

Coddou tells the Journal that “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.”
KC's View:
It is interesting - though not entirely surprising - to see how Amazon is working to compete with its third-party sellers in some cases, conceding some sales to third-party sellers in other cases (which is why Marketplace sales are higher than Amazon's own retail sales at this point), while at the same time exercising more control over third-party sales when it can.

The Wall Street Journal this morning reports that Amazon "is blocking its third-party sellers from using FedEx Corp.’s ground delivery network for Prime shipments, citing a decline in performance heading into the final stretch of the holiday shopping season … Amazon has stopped using FedEx for its own deliveries in the U.S., but third-party merchants had still been able to use FedEx."

But Amazon realizes - correctly, in my view - that if you are shopping on Amazon, you're going to blame Amazon if fulfillment does not live up to expectations, even if you're buying on the Marketplace. It also realizes that it is the gorilla in the room, and so it can pretty much dictate terms, and can defend its positions by being customer-centric.

I think it is a pretty good bet that Amazon isn't surprised by the cottage industry of companies that can compete with it in the logistics arena. If Amazon got big enough, that was inevitable. In some ways, all this competition probably will be a good thing, especially if there is more conversation in the regulatory world about potential antitrust challenges.