Posted by Alex Jackson on September 20, 2019
Fulfillment by Amazon undoubtedly changed the online retail business in many ways and has also spawned a whole host of copycats eager to emulate the business model. Recently we looked at eBay, and it plans to expand into fulfillment services by 2020. eBay is taking a slightly different approach and has partnered with various third parties to handle the heavy lifting of storing and shipping (see our recent article here). There are more big names already in the field like FedEx and UPS and our latest entrant, Walmart certainly knows a thing or two about retail, shipping, and logistics. Walmart's physical footprint is virtually unrivaled, in 2017, the combined square footage of both their retail spaces and their warehouses was about 900 million square feet. In terms of square footage, that's the size of Manhattan with a bit to spare. Add to this mix a massive fleet of 6000 plus trucks, and you got yourself a business capable of efficiently handling the volume and challenge of shipping and storage for third-party sellers.
We have spent some time looking at the who's who list of companies now offering fulfillment services, but not asked the fundamental why question yet. Why are shipping companies and retailers virtually tripping over themselves to provide fulfillment services to third-party independent entrepreneurs? It all has to do with an essential fact about Amazon; nearly 50% of the marketplace's sales come from third party sellers. Not only are third-party sellers generating sales, but they are also making profits for each unit stored and processed whether it sells or not. Think about it from the perspective of a Walmart, UPS, or FedEx. You have the warehouses and the transportation covered, and it means either increased sales in Walmart's case or increased volume processed in the case of FedEx or UPS. Last but not least, all three can count on storage and processing fees, which is a new revenue stream for all three companies with very minimal risk. Why is everyone in fulfillment theses days? They all want that new revenue that Amazon has been so successfully generating since 2006.
Now, this brewing fulfillment war is going to get ugly for those doing the fulfilling but pretty darn good for our readers. You know just how easy Foxliquidation makes it to shop for liquidation merchandise to resell and line your pockets, now imagine a world where all of these big-name retailers and shippers will be fighting to store and process your orders? They want and need you, and a race to grab market share from Amazon is already on. Not happy with Amazon fees? Take your merchandise somewhere else you have plenty of options these days, and that list will only get longer.