Posted by Alex Jackson on February 10, 2017
Fulfillment by Amazon the greatest thing since sliced bread for small and medium sized internet retailers, but recently some of the magic has faded with the increasing costs for storage and handling fees. Apparently others have been taking note of the growing frustration experienced by these sellers and that someone is FedEx. Wait why would FedEx want to get into the storage business? One word and that is profits. FBA has been a hugely successful venture for Amazon representing more than 50% of their total third party sales. That means amazon is not only making money on that sale but also on storing and packing that item when it sells, why make one small profit when you can make three? Good business model right? What’s more FedEx is seeing the writing on the wall with Amazon what with their fleet of jets, delivery trucks and delivery drones hovering just over the horizon it’s apparent that Amazon is looking to reduce their reliance on third party carriers like FedEx. So if Amazon wants you out what do you do? For starters why not try and get in on that fulfillment business model? FedEx clearly has the expertise and storage space plus they have one very attractive competitive advantage over Amazon and that is they are not Amazon. Why is this an advantage? If you are selling your merchandise on Amazon its goes in an Amazon box but what happens when your selling your wares on other sites like ebay, Bonanza or your own website and having it filled by Amazon? It still goes in an Amazon box start to see the problem? Wouldn’t you as a merchant prefer your goods to be handled by a neutral third party? Another reason and perhaps a far more motivating factor is that your sales are not as transparent to Amazon, this is particularly appealing to the niche market manufacturer or that entrepreneur that has cornered a particular market. Amazon is a business and they are not above undercutting one of their third party merchants by going directly to the manufacturer. It remains to be seen how successful or effective this program will be and it will certainly be an uphill battle for FedEx to get the program firmly established but I think that a lot of disgruntled FBA sellers may be happy to know that there is now an alternative in fulfillment by FedEx.