The fulfillment landscape is changing dramatically among the most prominent eCommerce businesses, which will have far-reaching consequences for merchants and the future of e-commerce fulfillment.
Wall Street Journal reported that Amazon is trying to sublease up to 30M square feet of their total warehouse space and renegotiate leases.
But how did Amazon move from having a significant shortage of warehouse space to being overstaffed? And why are they attempting to lease their warehouses in less than four months?
In this blog, we’ll dive into e-commerce fulfillment – where it’s at and where its headed, with some facts and difficulties you need to be aware of that can change your business plans.
What is The Future of E-commerce Fulfillment?
More consumers will buy perishable items online. there’ll be a greater need for quick fulfillment, more warehouse space, and more direct-to-consumer brands will create memorable unboxing experiences. Because of this, fulfillment centers will need to send orders quickly and package more products.
Top marketplaces like Amazon, Shopify, and Walmart are already taking steps toward the future with fulfillment options that accommodate shoppers and help sellers meet new demands.
How Do Amazon, Shopify, and Walmart Fulfillment Work?
In order to understand where things are headed, we’ll need to analyze the fulfillment processes used by the front runner eCommerce marketplaces. This includes Amazon, Shopify, and Walmart, and their respective storage facilities.
Amazon sellers can pick between FBM and FBA. FBM signifies that you are responsible for managing products and supplies on your own. FBA requires you to make product listings, prepare, and store them in an Amazon fulfillment center, for Amazon to handle.
The Amazon storage charge per cubic foot is $0.69 per month for eight months and $2.40 per month (required for October, November, and December month). Amazon’s FBA and Walmart Fulfillment Services (WFS) are comparable.
Monthly storage and per-item fulfillment fees are charged, and this service is restricted to established vendors only.
Shopify Shipment gives merchants complete control over shipping, and the tool enables merchants to choose certain shipping companies for their products.
In addition, it offers overnight delivery, parcel pick-ups, shipment insurance, tracking information, worldwide shipping, and a variety of other advantages.
Walmart members pay $98 annually for unlimited, accessible, and same-day delivery on all grocery items. Additionally, it offers a scan-and-go service for in-store customers.
In addition to free two-day shipping, subscribers receive discounted fuel pricing at Walmart and Murphy gas stations. The 2-Day Delivery Program is accessible to Walmart vendors.
Their ads can be tagged with two-day delivery labels that improve their search engine rankings and increase their buy box win percentage.
While these are all great options for sellers to get their products out from the top eCommerce marketplaces, they do come at a price.
Who is Profiting Most from Payments on Direct-to-Consumer Websites?
Revenue from Shopify’s Merchant Solutions, notably Shop Pay, is increasing significantly quickly. Shopify highlighted that Merchant Solutions increased to account for:
- 71% of overall revenue (in their Q1 ’22 financial outlook)
- 29% of well-outpacing subscription solutions
Payments are Shopify’s lifeblood, as the statistics demonstrate. E-commerce “landlords” like Amazon, Walmart, and Shopify want to collect leases from “tenants,” or E-commerce merchants, every chance they get.
They’re competing to offer merchants or Amazon sellers ever-more alluring platforms to take more of their GMV and, specifically, for all the additional services they can add. The lifeblood of contemporary digital advertising, first-party data, is made available to the payment processor.
Shopify is under increased pressure from Amazon’s ‘Buy with Prime’ to assist its sellers in providing quick delivery. If Shopify doesn’t do anything, they risk losing a significant portion of their vast payments business to ‘Buy with Prime’.
With the acquisition, Shopify made a daring change to its platform since it had no other option. If interpreted correctly, Amazon, Shopify, and Walmart’s fulfillment announcements are more about retaining sellers on their platforms so that their other services may continue to generate revenue.
As a byproduct of trying to one-up each other, marketplaces will continue to accelerate fulfillment strategies, and we’ve already seen some indicators of this.
How Do Marketplaces Accelerate Fulfillment Strategies?
Many were surprised by Amazon CFO Brian Olsavsky’s revelation regarding the capacity of Amazon warehouses during the April 22 earnings call:
“We swiftly moved from being understaffed to being overstaffed.”
Direct-to-consumer (DTC) retailers can now provide Prime checkout & delivery on their company websites, thanks to a new service Amazon released called Buy with Prime.
When Shopify observed the shot, they didn’t wait long to make a significant response. They quickly made their move in May.
As part of their acquisition of the 3PL network Deliverr, they’re planning to introduce Shop Promise, a new program that will provide Shopify merchants with 1-2 day delivery choices.
To ensure that it’s not surpassed, Walmart is exerting significant effort to expand the reach of its eCommerce delivery services, known as Walmart Fulfillment Services.
In June, Walmart declared they would update their eCommerce supply chain by constructing four “next generation fulfillment facilities.”
“Today, we leverage our 31 specialized e-commerce fulfillment centers and 4,700 stores located within a 10-mile radius of 90% of the United States population to fulfill online purchases at extraordinary speed; however, we won’t stop there,”
And this is only the beginning of marketplaces ramping up and improving their fulfillment strategies to win merchants, but it’s not beneficial for everyone.
Challenges in Ecommerce Fulfillment
Order-processing warehouses play a significant role in eCommerce fulfillment. As a result of the unanticipated increase in demand, several warehouse managers are reevaluating their processes and systems to produce quicker, more precise, and even more productive outcomes to meet the volume.
Unfortunately, this rapidly changing business landscape has already caused some major difficulties related to order fulfillment.
Optimizing Inventory Picking
Picking operations are a crucial component of warehouse operations that takes a substantial percentage of the money and is labor-intensive.
Picking operations involves getting the correct products after receiving an online shopper’s order. Having the appropriate tools and systems to enable this activity affects customer happiness, optimizes operating costs, and reduces the amount of effort and expenses associated with returned items.
Packing Products Carefully and Cost-Effectively
After selecting the correct items, warehouse employees must pack them neatly and cost-effectively before shipping. This stage represents the final opportunity to remedy any sorting errors.
It’s challenging because each box must be properly packed to contain enough items without harming the products or exceeding the weight restriction. Commodities must also have appropriate packaging materials and shipment and delivery instructions.
Warehouses pressured by e-commerce expansion may adopt packing tactics contributing to e-commerce delivery problems, including mailing the wrong item, extra shipping charges, and damaged items. These types of order delivery issues eventually diminish customer happiness and confidence and can incur costly reverse logistics expenses.
Few things are more unpleasant for eCommerce shoppers than a back-ordered item. Such encounters reduce customer satisfaction, prompt purchasers to shop elsewhere, and harm a brand’s reputation.
High demand increases inventory turnover. Warehouses struggle when inventory reports are wrong, slow-moving products are stocked, goods are short, items are hard to find, and restocking is carried out manually.
Efficient Order Management
Order management comprises receiving and fulfilling warehouse orders. There are several behind-the-scenes procedures where order management might go awry, especially with increasing numbers.
Warehouses must keep track of inventory, orders, customer confirmations, picking, packing, and shipping. Multiple systems and reporting, an unintegrated order management system, unstructured order batching, and a lack of performance analytics can worsen the problem.
Using the Correct Device Management System
Device management systems are more critical than ever for ensuring effective and efficient warehouse operations. It allows managers to monitor the performance of the various equipment that provides the system information.
Device management systems are essential for businesses with stocks scattered across many locations. These systems assist warehouse managers in keeping track of all gear in the warehouse such as scanners, CC cameras, materials handling equipment, and more.
How Can You Prepare for the Future of Fulfillment?
We’ve explained current fulfillment trends and processes, where its headed, and identified five issues many fulfillment facilities confront due to the growing demand and transaction volume. But where does that leave your business in terms of change and preparation?
Inevitably, fulfillment practices will change. Marketplaces will offer more options to meet the demand of consumers, and you will need to ensure your brand can manage the quick turnaround by preparing your inventory and business practices in advance.
On the other hand, changes in shopping behavior are sometimes unpredictable and, as we’ve seen in recent years, trends can drastically ramp up in response to any given event.
While you may not be able to directly contribute to solving fullfillment and supply chain issues, you can prepare your products and your business for the future by anticipating and proactively responding to customers’ shopping behaviors.
Lab 916 Solutions
Lab916 is a team of certified experts who provide effective forward-thinking strategies and solutions for eCommerce. We equip your business to navigate the ever-changing nature of the landscape and ultimately to be a fierce competitor on any marketplace.
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