Posted by Alex Jackson on 2nd Aug 2019
Back in 2006, when Amazon first launched their Fulfillment by Amazon program, most industry analysts were not throwing around words like innovative or revolutionary to describe it. Quite the contrary, this was 2006, Amazon was big but not the dominant force that it is today. At the time, Fulfillment by Amazon was looked upon as quite a big gamble and likely to fail, after all what business would willingly entrust their goods to a scrappy internet company like Amazon to manage and fulfill their shipping needs? Up to this point, Amazon was a traditional retailer but in a virtual environment. They bought and sold products just like any other conventional retailer. Fulfillment by Amazon and its phenomenal success fundamentally changed the company and to describe Amazon today as a retailer, would be, to put it mildly, an oversimplification. Fulfillment by Amazon has been hugely profitable for the company, not only are they making a profit on each sale, they make money storing, processing, and shipping each sale while minimizing their own risk. Amazon no longer needs to risk buying a product these days, when they have the manufacturer to sell it via their platform and still take a healthy chunk of the profits.
There have been a few attempts to emulate the Fulfillment by Amazon model, most notably by FedEx but now it may be getting a real challenger in the form of the number two online marketplace in the U.S. eBay. EBay's fulfillment service is a bit different; it's not planning on building massive distribution centers like Amazon or hiring an army of eBay branded trucks. Instead it's farming this portion of the business out to third parties. These third parties will be doing the legwork of storing, processing, and shipping goods, and the ultimate goal is twofold. One it's to increase the speed of delivery of high-volume items and two it's to increase brand recognition as each shipment will be packed in an eBay branded boxes. EBay's managed delivery program is scheduled to roll out in 2020 and if successful could be a boon to eBay and more importantly to independent retailers like you. Amazon has a firm hold on the fulfillment business, and it needs a shakeup. Increased competition in the form of eBays managed delivery could loosen this grip and lead to lower costs for sellers using either Amazon's or eBays fulfillment programs. It's also guaranteed to lead to increased sales on eBay's platform, faster delivery, and greater brand awareness will bring in new shoppers that have previously relied exclusively on Amazon for their shopping needs. Independent retailers thrive in a competitive market, and this could be a move that reshapes the current state of online retail.
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