In its second annual “Small Business Impact Report,” Amazon noted that it has helped more than 1.9 million US-based small and medium-sized businesses generate more than $160 billion in 2018. This includes selling in and on Amazon’s stores and platforms, publishing via the company’s e-book’s unit, and utilizing the online retailers’ various web services.
It is estimated that Amazon has over three million sellers worldwide and accounts for more than 50% of Amazon’s net sales with US small business owners selling 4,000 items a minute, on average, in and on Amazon’s stores and platforms. In addition, the e-commerce website lent more than $1 billion to help owners build inventory.
Amazon’s unique requirements have created an ecosystem that has not been seen in the logistics market before, one that includes special labeling and fulfillment requirements, packaging, shipping, and more. The unique requirements are necessary to ensure speedy delivery to end-customers, which is a competitive advantage for such platforms. Failure to comply with various requirements could result in lost sales or even a ban from the platform for third-party sellers.
However, many Amazon sellers represent small businesses, usually one to five employees, with little, if any, logistics knowledge. The necessity for such knowledge is paramount as more of these small businesses need to form strategic relationships with overseas suppliers of various goods as well as to ensure compliance with all the additional various requirements that Amazon imposes on its sellers.
Amazon’s online marketplace can certainly serve many of the small businesses’ logistics needs, but the costs can add up quickly, and it’s complicated. In fact, serving third-party sellers’ logistics needs is a growing business in and of itself. For fourth quarter 2019 alone, Amazon reported that net sales of its third-party seller services increased 30.4% from same period in 2018 to over $17 billion.
Recent articles suggest that Roundup, Montana is a center point for prep-work for third-party sellers on Amazon. But it is just part of this logistics story. The ecosystem is much wider, encompassing forwarders, 3PLs, and more.
Traditional logistics providers were slow to pick up on this growing trend. Thanks to the wider adoption of cloud computing, a proliferation of online startups has entered the supply chain environment in recent years. Many of these businesses offer such services as rate comparisons and booking and tracking of shipments. Because of the promoted ease of use and the lower per transaction charge versus annual license and contract fees, these startups captured the attention of SMBs.
One such example is Freightos, an online marketplace that provides users with freight comparisons, booking, and management, and also offers a number of resources to assist small businesses and third-party sellers with such topics as how to import, how to do business in Europe, and an Amazon Fulfillment by Amazon (FBA) shipment strategy all available for free on their website.
Other logistics providers that have entered this ecosystem include Shapiro, which has been in existence for over 100 years but has recently added a specific e-commerce shipping service offering, which is a part of the company’s consulting service and includes assessment and implementation of shipping needs of specific sellers.
These are just two examples in the growing ecosystem that continues to expand as online marketplaces gain market share from retailers and other businesses. The result of this growth is redefining supply chain requirements and presenting new opportunities for logistics and transportation providers.
John Haber is founder & CEO, Spend Management Experts.
This article originally appeared in the March/April, 2020 issue of PARCEL.