Modern Retail

Diversifying your Amazon fulfilment strategy

For supply chain officers, now is not only about surviving the lockdowns and restrictions, it’s about taking the necessary steps now to be prepared for the biggest retail opportunities of the year – like Prime Day. 73% of Amazon sellers make up to half of their total sales for the year at events such as Prime Day, Black Friday, Cyber ​​Monday. According to Forbes and Coresight Research, brands and third-party sellers that participated in Prime Day 2019, generated about a third of the estimated $6 billion in sales.

Although Amazon is not releasing details on the new Prime Day date, the fact that they are now allowing more sellers to resume shipping non-essential items to Amazon warehouses, means they are now coping better with demand. Given that markets will soon start to lift some of the restrictions in place with regards to self-isolation etc., we can assume that things will only improve as the weeks go on and that the sales event will go ahead in Q3 as now planned. Still retailers should be prepared. Pundits believe that if the event is to go ahead, it will happen in August at the latest as the company will not want to risk any disruption to seasonal sales.

Sellers will now have more time to coordinate than in years previous with their supply chains to build additional inventory – but what does this process look like?

Firstly, the need for retailers to switch to Fulfillment by Merchant as a result of Covid-19, has highlighted the importance of fulfillment strategy for retailers. Many sellers (60% in the USA, 45% in the UK) rely on Amazon as both a marketplace and as their exclusive fulfillment solution (Fulfillment By Amazon). Switching to FBM (fulfillment by merchant) can seem like a daunting task in terms of having to partner with a third-party logistics company to store inventory as well as the task of carrier selection, but being more independent, has its own set of benefits and there are many solutions that automate this challenge for you.

First let’s look at what’s involved in the process:

Inventory: If you were shipping inventory directly from your manufacturer to Amazon, you will now need to store your inventory somewhere other than the manufacturer. When selecting a fulfillment center, it’s important to consider those outside urban areas which are typically cheaper.

Carrier selection: Choosing carriers is slightly more complicated and requires a lot of homework with regards to shipping costs. Which carrier to choose obviously depends on the region to where you are shipping, but also on the specific product you will be shipping and obviously the more varied your product range and geographies, the more complicated this can become. When choosing a logistics partner, a major consideration should be selecting one that is integrated with as many carriers as possible (global, regional and local). This allows retailers to free up technical resources and eliminate the friction and ongoing expense of carrier integrations.

Scurri’s software connects and automates the entire ecommerce process, allowing retailers to select the most effective delivery option for each package and provides labelling and tracking from dispatch to delivery.

What are the benefits of making the switch to managing your own logistics process?

Once retailers have successfully navigated their first Prime Day many may consider making the switch permanently in view of these many benefits it can have and an uncertain future as a result of the pandemic. These include a greater sense of control over the business, potentially higher margins (FBA is expensive), as well as the opportunity to build an independent brand is more feasible. Of course, ultimately, which option you chose depends on several factors (size of your business, any growth potential and the product categories that you sell). Amazon offers a handy calculator which allows you to better understand the option that suits your organization.

Another major consideration for retailers at present is not just how to fulfill orders but what to list in the first place. To understand the products that will sell best, it’s important for retailers to first look at all the available data since the onset of the crisis and consumer behavior once the restrictions are lifted. Several European countries, including France, Spain and Italy are on the brink of lessening restrictions. Sweden, the only European market not to impose self-isolation is another important one to analyse. Looking at this data over the coming days and weeks as people emerge from lockdown, should go some way to informing retailers about the kinds of products that they should be shipping for Prime Day.

If there is one lesson we have all learned from Covid-19 it’s the volatility and unpredictability it creates. Retailers should always have a contingency plan. Relying solely on Amazon could see retailers expose themselves to potential risk. Retailers should work to ensure as diverse a strategy as possible – in every regard. Retailers should be thinking about expanding beyond the Amazon marketplace to try selling on smaller, regional marketplaces and sites. Deliver time is key right now and will be as long as delays endure – which could be some time. More than ever, consumers are eyeing up the sites that will get their products to them the fastest. Therefore, retailers should also consider sites that have local fulfillment capabilities if possible.

Rory O'Connor

Rory O'Connor

Rory O' Connor, is the founder and CEO of Scurri. Since launch Rory has focused on building and leading an impressive team of highly experienced technologists and advisors. Rory has won significant investment for the software business, raising over €7 million investment from private individuals, business angel investors and Enterprise Ireland.

Prior to founding Scurri in 2010, he worked in various roles in Waterford Wedgwood, in sales, marketing and strategic project roles including being part of the team that delivered a €10m SAP implementation.

Rory subsequently worked as a change management consultant with clients such as Heineken, Intel, Ogilvy and Siemens and as a project manager with AOL broadband. Rory has a number of business qualification including holding an MBA from Henley Management College.