We need to discuss the 460 billion dollar elephant that occupies the room of every retail store and mom & pop shop in the US: Amazon. The Seattle-based ecommerce company has been snowballing into an omnichannel retail monster, disrupting any industry from grocers to pharmaceuticals that it finds vaguely interesting. Their recent announcement of Seller Flex, a delivery service for third-party merchants, is Amazon’s latest attempt to own another piece of their—and their merchants—logistics process.
Amazon’s ability to offer services to third-party sellers, whether it be an ecommerce presence or delivery logistics, has allowed the company to use their position as a supplier to lever up their own business. We’ve seen retailers continue to develop a dependency on Amazon’s platform, only to wake up one day to find Amazon as their biggest competitor.
But with about 20 years and a few hundred billion dollars head start, how are retailers supposed to keep up with the shopping standard that Amazon continues to set? The key is to work like Amazon rather than with them. Despite the retail giant’s head start, it has never been easier for companies to adopt 3rd party services and platforms that allow them to offer a service comparable to Amazon’s.
Because Working With Amazon Has Its Risks
With consumers quickly shifting their shopping habits online, retailers have found distributing through Amazon’s marketplace increasingly tempting. It’s understandable: building out a branded digital footprint is a daunting task and the ease at which sellers can plug into Amazon’s marketplace can seem like a great idea.
Large retailers who choose to become Amazon sellers rather than own their branded digital experience have continued to expose themselves to the risks of becoming a target for Amazon. Leveraging their position as both a supplier and competitor, Amazon has constantly put pressure on some of their marketplace sellers. They continue to produce and release their own products priced to squeeze out the competitors on their own platform.
Whole Foods Acquisition
Amazon’s 13 billion dollar acquisition of Whole Foods is the perfect example of pulling the rug out from under their marketplace sellers. Amazon had slowly built out an online grocery service with its Prime Now service by partnering with grocers like Sprouts and Kroger. The grocery outlets that had based their online businesses on Amazon’s platform found their ecommerce partner to now be their biggest competitor.
We can see this same process—Amazon forcing dependency on its platform only to enter the industry as a competitor—in a number of settings. They pulled the same maneuver on Kohl’s and Macy’s a few years ago as they rolled out similar products at lower price points.
Luckily, third-party services and tech-enabled platforms have been created to help these grocers and retailers offer the shopping experience that consumers are becoming accustomed to—allowing them to work like Amazon rather than with.
Do Act Like Amazon
As we’ve said, it’s no coincidence that Amazon is on pace to be the first trillion dollar company: They leave consumers happy. Their extremely convenient delivery options have made Amazon the default retailer for a generation accustomed to getting what they want, when they want.
It’s become clear that the future of retail will look like Amazon; a variety of choices offered with convenient delivery options. If retailers are going to compete with that level of consumer experience, they need to figure out how to act like Amazon—and fast.
What Does Acting Like Amazon Entail?
It’s about offering convenience. Logistically, that means keeping inventory closer to customers and having the infrastructure to deliver those items quickly and affordably.
For Amazon, this means building hundreds of fulfillment centers across the United States. Their expansive network is now within 20 miles of 80% of the total population and within 95% of the 70+ million Amazon Prime members. The Whole Foods acquisition was yet another step closer to their customers, with the grocer’s metropolitan locations just a few miles from the majority of Amazon’s affluent, urban-placed Prime members.
As another example of their massive ecommerce growth, Amazon has eclipsed the bandwidth of national shipping networks like UPS and USPS and begun developing their own delivery infrastructure. Their in-house delivery network, recently offered to merchants as Seller Flex, allows them to operate their same day and one hour shipping options without having to fully rely on other partners.
As retailers are more than aware, Amazon has invested billions of dollars to be able to offer the services at massive scale. Between their fulfillment network and delivery infrastructure, they’ve created an incredibly high barrier to entry for becoming a business that resembles them.
Luckily, third-party services have emerged so that retailers can offer an equivalent experience without having to invest the time and capital of building their own infrastructure—so that retailers can act like Amazon without the Amazon-like costs.
Distributed warehouses like Darkstore and Flexe allow retailers to “rent” inventory space and plug into a full logistics operation. The “airbnb for warehouse”-type systems work by leveraging excess capacity in storage facilities and malls, allowing companies to distribute their products further and fulfill from centers closer to their customers. Originating in the UK, the idea of a dark store was created for companies without physical storefronts or to place inventory close to delivery routes.
With customers expecting delivery times to be dramatically reduced, pure-play and traditional retailers alike have begun to leverage the warehouse space offered by third-party dark store providers.
It’s never been more important for retailers to adopt the latest in logistics management. Using an on-demand, third-party logistics partner allows them to offer an Amazon-equivalent customer experience without having to build it themselves. With the warehouse networks, in turn, partnering with delivery services, retailers are given the ability to offer a suite of delivery options from on-demand to same-day and two-day delivery.
The future of retail will continue to be defined by choice and convenience. While Amazon has managed to set that standard recently, retailers of all sizes have been given the tools to compete with that same level of service.
Daphne Carmeli is CEO and Founder of Deliv