Amazon got us hooked on one day delivery, now small businesses are paying for it

Things were looking good for Charleston gourmet burger, a small family business based in South Carolina. Founded by husband and wife team Chevalo and Monique Wilsondebriano in 2012, it sold its burger sauces and marinades in thousands of stores across the US, on the QVC shopping channel and directly to customers through its website. . Just before the pandemic led to the closings in March, the couple made the fateful decision to stop selling in stores and focus on online sales.

It turned out to be a near fatal mistake for their small business, which is the family’s sole source of income and employs the couple’s four teenage and adult children, as well as Ms Wilsondebriano’s sister and mother.

In the Amazon AMZN -0.08%

Back in the day, selling online is one thing, but actually getting your products to customers fast enough to make them happy is another. It’s especially difficult if, like the Wilsondebrians, a merchant doesn’t sell through Amazon, but still feels compelled to deliver on the e-commerce giant’s promises of fast, free delivery.

Their sales plummeted, from more than $ 20,000 a month to just $ 3,000 a month, says Ms. Wilsondebriano. The family had no choice but to pack and ship the orders themselves, as they could no longer afford the external charger they had been using.

Small businesses like the Wilsondebrians have a hard time matching Amazon’s fast and free shipping.

Still, many potential buyers complained about shipping costs (about $ 8 on a $ 40 order) and that the sauces and marinades were taking too long to arrive, says Ms. Wilsondebriano.

“It’s a daily battle trying to keep up with Amazon, and it’s no fun,” he says.

In fact, while Charleston Gourmet Burger left Amazon two years ago because the fees were so high, the family business is considering a return.

America’s small and midsize online merchants are separating themselves into winners and losers based on their ability to adapt to changes in logistics driven primarily by Amazon and other large retailers. Amazon’s ongoing recruitment binges and warehouse-building spree make it easy to get Prime shipping ever faster and free.

As a result, even merchants who don’t sell on Amazon are rushing to ship products as quickly as they can, either bearing the added cost or raising prices and seeing their sales decline, while simultaneously dealing with chain bottlenecks. of supply.

For Wilsondebrians, this means a daily ritual that involves the whole family.

Family Affair: Chevalo and Monique Wilsondebriano, sitting in black T-shirts, in the garage where they pack orders for the Charleston Gourmet Burger.

Every two weeks, the pallets of products, ranging from 1,500 to 3,000 bottles, are left at the factory in a workshop attached to its garage, which serves as a makeshift warehouse. In addition to running the online ad campaigns they use to increase sales, Ms. Wilsondebriano and her husband must process every incoming order from the website.

In moments of downtime between remote classes at Zoom, her 15- and 16-year-old daughters help pack boxes and write personalized notes to thank customers. Her 25-year-old son, eldest daughter, and Mrs. Wilsondebriano’s mother collaborate when available.

Once the boxes are labeled, the husband and wife team loads them into a van and takes them to the local post office.

“It’s like an assembly line,” says Ms. Wilsondebriano.

But it is not an assembly line, much less a warehouse full of humans and robots, moving in a software-optimized workflow aimed at reducing the cost of each online purchase.

Amazon was one of the first e-commerce companies to turn its supply chain into a competitive advantage, says Matt Crawford, general manager of shipping at BigCommerce.,

which helps merchants build and manage online stores. Once Amazon created its Marketplace, where anyone could sell products, and managed by Amazon, its logistics service to store and ship the products that those companies sold on Amazon, that advantage was extended to all sellers willing to pay for these services. .

Amazon has continually increased the speed with which most products sold on its site reach shoppers’ doorsteps, offering first two days, then one day, and now often same-day delivery, as it rolls out its Prime service. Now on your main site and its application.

Once the orders are packed, including personalized thank-you notes, the Wilsondebrians transport them by SUV to the post office.

This has left sellers wanting Amazon’s coveted Prime badge, which indicates fast shipping and produces significantly higher sales, with a difficult choice, says Steve Denton, CEO of Ware2Go, a United Parcel Service subsidiary that combines with small and medium online merchants. with warehouses from which to distribute your merchandise.

Sellers can pay increasingly expensive fees to Amazon to store and ship their products from the company’s own facilities, he says. Or they can ship from non-Amazon warehouses that meet the strict demands of the Amazon Seller-Managed Prime program, including nationwide availability and expedited shipping. Some sellers, especially those who trade large items or items that typically don’t sell quickly, find this to be a more affordable option.

“You will see a continual elimination of merchants who cannot solve the supply chain piece [of online sales]”Says Mr. Crawford. Shipping costs from merchants, via carriers such as UPS, the U.S. Postal Service, and

FedEx,

they are rising 5% to 7% this year as demand skyrockets. And since Covid disrupted supply chains around the world, merchants have to pay more to stock more products. Meanwhile, the demand for faster shipping means that retailers have to figure out exactly how many items to store in which warehouses are distributed in a network that spans the entire country, he adds. (Amazon’s fees discourage retailers from keeping items in their warehouses for long.)

To be on the seller-fulfilled Prime program, sellers must store merchandise in warehouses from which customers can be reached in delivery time of one or two days, for most views of a product on the Amazon site and app.

Amazon’s success with its market has spawned many imitators. Things you buy on Walmart websites,

Target, Wayfair, and dozens of other large merchants can be sold and shipped not by those companies, but by smaller companies that give these retail giants a cut of the sales and can pay other fees in exchange for the listing.

The proliferation of the market model and the way Amazon shapes customer expectations means that the growing demands the company places on Prime sellers are spreading throughout the e-commerce industry, Denton says. These other marketplaces continually change their own seller compliance requirements based largely on Amazon’s standards.

Amazon says it has “made changes to Seller Fulhered Prime so that customers have a consistent Prime delivery experience, regardless of the method of fulfillment. Amazon succeeds when sellers succeed, and these changes help ensure SFP sellers continue to delight Prime customers with the shopping experience they expect. “

Low Tech Logistics – Wilsondebrians take packages to their local post office for delivery to customers.

For small to midsize online marketers, keeping up with the latest Prime demands requires what until recently were considered extraordinary measures. It means operating warehouses at least six days a week and sometimes resorting to expensive shipments on the second day or the next day.

Some salespeople thrive in this new world. In the early 2000s, Lee Siegel founded ECR4Kids, a manufacturer of ready-to-assemble, flat-pack furniture and play equipment for kids. The company sold to traditional buyers, such as distributors to school districts, as well as directly to department stores and even Amazon, but only as a wholesaler and seller. In late 2018, to increase sales, Siegel listed some of its products directly on the Amazon marketplace.

When the pandemic struck, Siegel thought his sales would plummet, but instead surged, as parents of home-schoolers rushed to buy things like children’s desks, chairs, and cubicles.

Around the same time it started selling on the Amazon Marketplace, ECR4Kids went from having its own warehouses to outsourcing its fulfillment to third-party logistics providers, including Ware2Go.

Previously, Mr. Siegel says, fulfillment services could be provided by anyone with “a forklift, a loading dock, and a large empty warehouse with shelves. But to survive against Walmart, Costco,

Amazon and Wayfair require a completely different approach to customer satisfaction and shipping speed. “

Some turn to companies like Productive, which operates six distribution warehouses. While Amazon relies on its own bestiary of parcel sorting and shelf moving robots, companies like Productiv are testing systems with tracking robots that follow warehouse employees as they walk through the rows of shelves and then transport to conveyors. any item they need. humans choose from those shelves.

As in many other industries, this automation is in part a reaction to rising wages and labor shortages. The demand for warehousing and fulfillment is setting and breaking records by the month, creating more competition for these services and a greater variety of them to choose from.

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At Charleston Gourmet Burger, things have improved a lot. The weather has gotten warmer and millions of vaccinated Americans are once again gathering with friends and family and lighting the grill. Monthly sales rebounded to nearly $ 14,000 in May, and Ms. Wilsondebriano anticipates that June will be even better.

In addition, the family will begin to experiment with using Amazon both to sell and to fulfill orders. Amazon is launching a pilot program aimed at providing additional assistance to black business owners like the Wilsondebrians, including free advertising, free storage and returns processing, waiver of some fees, free advisory services, and more. At some point in the next two weeks, Amazon will fulfill approximately 90% of the family’s website orders and its products will appear in the Amazon marketplace.

“Waiving so many fees sounds like a win-win,” says Ms. Wilsondebriano. “But I don’t know how this is going to go.”

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Write to Christopher Mims at [email protected]

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