It is safe to say that consumer expectations today are higher than they’ve ever been before. While many think this is due to the things that shoppers visibly see everyday, such as great marketing campaigns, innovative products or competitive pricing, sellers know where the magic needed to create happy, loyal customers lies – fast, free shipping and order fulfillment. 

The elevated customer expectations that online retailers face due to fast shipping times has been created by the “Amazon Prime Effect”. What is this effect, and what implications does it have for merchants selling online? 

Let’s go back to 2005, when Amazon introduced free two day shipping on orders over $35 – a move that everyone thought was crazy. Later in the same year, they introduced Prime – with its annual fee that allowed customers to get as many items as they wanted, with no shipping fees. By the time of the Covid-19 pandemic, same-day shipping arrived on Prime – run out of something urgent? Order it, and get it delivered that very day – amazing! While this has been great for Amazon and their customers, competitors large and small have been scrambling to catch up. 

For example, it took Walmart 12 years to catch up and offer 2-day shipping! As Amazon has gotten faster and faster at shipping, even their biggest competitors have taken a long time to reach the elevated shipping standards that Amazon makes table stakes.

On every channel today, the sellers winning are those offering fast shipping. For example, on Walmart (inspired by Amazon’s approach) – listings offering 2 day delivery rank higher in search results, win the buy box more often and see conversion lifts as high as 50% 

But in 2023, Amazon made fast, free shipping a standard for every e-commerce brand and retailer, through their Buy with Prime (BWP) program – allowing any online merchant to offer order fulfillment through Prime. 

While meeting the gold standard of Prime now applies to every online merchant, these times are harder than ever to win in for sellers. Costs at each step of the fulfillment chain (shipping, warehousing and labor) are on the rise:

• Shipping – General Rate Increases have surged upward, much higher than the prevailing inflation rate, making it harder and harder for merchants to absorb the last-mile costs involved in meeting the expectations of free same-day shipping. 

• Warehousing – To get orders fulfilled faster, you need to distribute your inventory in warehouses closer to the customer. But online merchants face the challenge of dealing with both elevated rent costs, and limited vacant space in warehouses: 

• Labor – With as much as 48% of the warehouse workforce quitting in 2021, Amazon has had to increase the wage they pay their workers – at $19 an hour, this is no longer a minimum wage job. 

With shipping companies raising prices, warehouses becoming tougher to rent and people becoming more expensive to hire, merchants face the daunting task of overcoming these challenges and meeting the customer expectations that Buy With Prime will bring. 

So it’s worth asking – What does Buy with Prime do well, and where are its limitations?

Benefits of Buy With Prime:

• Amazon claims it boosts conversion rates by as much as 25%, which is quite possible given the high consumer trust Prime enjoys. 
•  Merchants get to feature reviews from Amazon on their website and place ads on the Amazon Marketplace which link to their own website and drive traffic. 
• Merchants can feed off the high trust customers have in Amazon, and checkout experiences are simpler – they just have to login to their Amazon account. 

Limitations and Problems of Buy With Prime:

• Many products do not show the actual date by which they’ll be delivered, as in the case of this product listing: 

• You can only qualify for Buy with Prime if you use Fulfillment By Amazon (Amazon FBA) for your shipping – while FBA works well, the Buy with Prime button disappears from the product listing on your website if there is no more inventory available with Amazon, as in possibly this case! 

• FBA may not be suitable in the first place itself for long-tail SKUs – the costs associated with stocking inventory that does not turn over frequently with Amazon can become very large. This might necessitate the need to create a filter on your website for customers to view SKUs that they can buy with Prime, creating a cumbersome user experience:

• Discounts and promotions that you offer customers when they checkout through the native gateway on your website do not roll over to Buy With Prime:

• The payment processing fees are significant – 5.4% of the cart value + $0.30 – as Buy With Prime is a competitor to the Shopify ecosystem, any BWP purchase on a Shopify storefront incurs another 1% in payment processing fees. And aside from all this, there’s the fees involved with FBA!

• While BWP is as much as 43% cheaper than Multi-Channel Fulfillment (Amazon’s precursor to BWP, where you could take in an order from any channel and have FBA take care of it), it is nearly twice as expensive as selling on Amazon’s marketplace directly with FBA.
• Amazon had a very complex system to deal with how sellers get access to warehouse space, as part of FBA. Now, that’s been simplified to a “Capacity Limit” system where you bid for a given amount of space (in cubic feet) that you’ll hold in a month – Amazon gives visibility for the subsequent 2 months to enable you to perform planning. But things can go well, or really bad in this scenario.
• Let’s look at a good case first – let’s say you’re paying Amazon $3000 a month and bid $1 for a cubic foot of extra space, for a total of 1000 cubic feet ($1000). Amazon gives you credit on a pro-rata basis, for the incremental revenue that you drive through this: 

• Let’s say you drive $40,000 of revenue in March – you’re eligible for 15% credit on 25% of the revenue – in this case, things work out very well for the merchant – you end up with a credit of $500 after paying off the $1000 to FBA. 
• But if your sales don’t go so well….

• In this case, you end up owing money to Amazon. 
• The bottom line is that Amazon is constrained for space to house inventory in their warehouses. If you make a lot of revenue or move a lot of product through Amazon, it may still be worth it to bid aggressively for warehouse space with them. But if your products are long-tail, or do not move quickly enough, you should think very carefully before placing your bids. 

So if Buy with Prime has so many limitations, is there any way at all left for you to meet the customer’s expectation of free same-day or two-day delivery? It is a tall order – if you want to provide shipping within 2 days, you need 4 strategic order fulfillment locations. If you’re seeking to do it on the same day, that number goes up to 9. 

Usually, merchants have tended to look to 3rd Party Logistics Providers (3PLs) for solutions – however, 3PLs often come with significant costs as fulfillment is their primary revenue stream. 

That’s where a solution like Cahoot comes in – we’re unlocking the potential of over 2 million e-commerce retailers in the US that have their own warehouse space, who perform complete order fulfillment. 

For the first time ever, merchants, brands and e-commerce retailers will be able to monetize excess capacity available in their warehouses through Cahoot’s peer-to-peer order fulfillment network, which delivers fast, free 1-2 day shipping while also lowering costs. We offer the industry’s leading Service Level Agreement (SLA) and we help our Amazon sellers by offering Seller Fulfilled Prime (SFP). If you’d like us to take over all aspects of order fulfillment, we can do that too! We offer B2B and B2C wholesale, retail and Amazon FBA replenishments. 

Excited about how the peer-to-peer model works, but unsure about how to migrate from your existing fulfillment partner? You’re not alone. Migrating fulfillment partners can be an uncertain and stressful experience, which prevents merchants from exploring superior alternatives. To make this process simpler, we’ve created a step-by-step migration guide that you can read to make your switch easier! 

If you have excess capacity in your warehouse, or are looking to offer your customers an Amazon Prime like delivery experience, consider joining our fulfillment network – it’s a great way to generate additional revenue and take advantage of the shared economy through our collaborative platform.

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Podcast: The Future of 3PL Fulfillment in the Face of Amazon Warehouse Distribution (AWD)

In a conversation between Manish Chowdhary, founder and CEO of Cahoot and Neil Twa, host of the High Voltage Business Builders podcast, the two discuss Amazon’s inventory limitations and the impact it has on ecommerce sellers. Amazon has different teams with different priorities, causing confusion among sellers who cannot rely on any one order fulfillment solution. The company has cut down on inventory shelving space for some ecommerce sellers while launching new services, such as Buy with Prime, which could pose a threat to marketplace delivery services like Shopify. Shopify recently banned Buy with Prime, which Manish argues cuts into the heart of revenue. To avoid being beholden to any order fulfillment service, sellers must have a backup that is not Amazon. The experts caution against putting all your eggs in one basket and encourage ecommerce sellers to move beyond Amazon if they want to grow their ecommerce brand.

Below is the transcript of their conversation, edited for clarity:

Neil Twa:

Welcome to the High Voltage Business Builders, a show where we interview entrepreneurs growing and scaling their income through e-Commerce and showing you the path to make your first or next million.

All right, Manish, thanks for joining the call, my friend, from Connecticut today. How is things out there on the East Coast for you?

Manish Chowdhary:

Things are a bit cloudy here, but it’s still a great day, and thank you for having me, Neil.

Neil Twa:

Yeah, it’s great to have you here, man. So, we’re talking a little bit about things that are obviously relevant to E-comm, but in different channels, not just Amazon. I know you handle multi-channel fulfillment.

Let’s talk a little bit about that, because I know it’s a big piece of what you do in your business model. Tell us what are you seeing, what’s most relevant right now. If someone’s listening to this and they’ve got a Dropshipping or an Amazon store or some other thing else, what’s something they should know right now that you feel is important for them to hear?

Manish Chowdhary:

Well, one of the things that… I just got back from Search Summit last week, you hear conflicting sets of information, right? I mean, Amazon is rolling out new services. You brought up a little while earlier, Amazon warehouse and distribution. So they’re ready to take on everything. Then I hear from a very large seller, very successful seller, just two days ago that their inventory limit has been cut to 1/3rd (of what it is presently).

Yeah, one side, Amazon is ready to take on everything you’ve got, and the second side is the people that are in need of that inventory today don’t have that. So Amazon has different teams working. You really can’t believe one thing or the other, because they’re all just simply trying to get in the limelight. So, it’s a lot of confusion out there for sellers.

Neil Twa:

Yeah, there is definitely, because they said, “We’re going to do 5% of you only (whom they said they would reduce inventory for). We’re going to have to make some holiday changes, we got inventory issue.” Now if I just look at our group, our businesses and we come back, there was more than 5% of the people in our group who got that notification just within our group. So I’m like, “Well, I don’t think that was quite 5%.” I think they kind of just placated those numbers just a little bit.

So they killed it on one end by halving down the shelving space we had on one side of the house, and then they’d say, “Hey, well, we got this new Amazon warehouse distribution (AWD) thing, and you could have unlimited storage over here all of a sudden.” It’s kind of like, “Well, I mean, were you playing the shifting shelves game here?” What do you think is going on?

Manish Chowdhary:

Well, I mean, again, Amazon is a very large company. There are different product owners, each one has their own agenda, so they may have gotten certain amount of space allocated. There’s also Amazon launched Buy with Prime service that is probably also run by a separate group, that they’re ready to take on order fulfillment for Shopify merchants or just about anyone.

So, it is very unnerving if you are a seller like yourself or people in your group, that if you see your inventory limits cut down, what confidence, what trust would you have in other services? So one thing that we at Cahoot like to educate our sellers or give them advice on is that you’ve got to have a backup, and it cannot be Amazon.

Amazon cannot be Amazon’s backup. You’ve got to have an independent third party that has your interest in mind, that is going to help you navigate the turbulent Amazon waters, and that’s not going to end anytime soon. It’s not a Q4 issue, it’s not a Q1 issue.

As long as you play in the Amazon ecosystem, that will continue to remain a challenge no matter how large, how many services they roll out.

Neil Twa:

Yeah, it’s a very valid point, and I love the way you speak Manish, because you’re a very pragmatic guy. I can tell in the way you look at these things. Because obviously with adding the Buy with Prime button, it’s added on a whole additional line of sellers from Shopify and other stuff, which I don’t know if they were aware maybe of what that would do. I know a lot of people have suddenly implemented that. I know for sure they’re going to take over a lot of Shopify’s opportunity for marketplace delivery they were trying to bring up.

Manish Chowdhary:

Well, but Shopify just came out last week I think, and banned it. So Shopify has publicly gone on record to say that installing the Buy with Prime button is against Shopify’s terms of service. So there you have it. Shopify wants to ban Buy with Prime, Buy with Prime wants to get on Shopify. Nobody wants to take FBA forwarding. It’s a big challenge if you’re a seller, you just cannot be beholden to any platform centric order fulfillment option.

Neil Twa:

And there it is. So we talk about pros and cons, and we’re very open about both of those things with Amazon, we don’t want people to be Amazon channel locked. So you need to move a brand beyond Amazon if you start there and incubate it or if you’re off Amazon, obviously you need the combination of the multi-channel aspect really for E-comm today. But like you said, you can’t put all your eggs in one basket, and as soon as you have the opportunity to split out profits, you should move another channel, another opportunity. I didn’t actually hear that update on Shopify, so that’s interesting news. I can see why they would do it. The marketplace is getting extremely competitive, and that opportunity was going to cut into their delivery systems, they were trying to ramp up.

Manish Chowdhary:

Well, it’s not even delivery system. It cuts into the heart of their revenue.

Neil Twa:

Well, for sure, for sure.  I mean, you can see why we do these kinds of things and have these kind of conversations. If you’re out here just trying to flounder around on your own. For us, having the experience levels we do, and you too it’s even confusing at times to try to rationalize this stuff in the middle of all the experience we have versus people who are just trying to get going. So if you’re new and you’re just like, “Okay, I got an Amazon channel, I don’t necessarily have a 3PL yet, or I’m looking to get one.” What are the top three things you want people to know when they’re looking for a 3PL company that they should consider? What are the things they should know about it?

Manish Chowdhary:

First and foremost, I think it’s very important to make data-driven decisions. A lot of sellers just simply reach out to 3PLs and we get many of those inquiries. “Give me a price rate card.” Most 3PLs specialize in something. Not everyone specializes in everything. There’s micro – What we call mom-and-pop 3PLs. These are one location, two location, 3PLs, and then there are chains, and then you have networks like Cahoot. So it’s very important for the 3PLs to understand what kind of products are they going to deal with, what’s the inbound and outbound frequency, what kind of services you’re expecting, what is most important to you if you’re simply looking for an FBA forwarding service, or are you looking for DTC fulfillment? What kind of products, because there’s the shipping cost.

I’ll give you a very simple example. You can get dirt cheap order fulfillment, let’s just say even in the hottest market, Southern California, let’s say dirt cheap storage. But if most of your orders are going to New York or the East Coast, you are going to pay Zone 8 shipping prices for moving that item from California to New York on an individual basis. So net net, you actually will lose money even though you thought you got a great deal. Those things are very important. If this 3PL is going to take one or two days extra to ship from a lead time or if they’re going to use downgraded services, that will take longer for the consumer to receive. All of those things are very important to understand upfront as to what are you trying to solve for. And that is one thing that is very important. At least at Cahoot, we don’t blindly hand our pricing because we don’t know if we are going to be the best fit and only information and data tells us whether we are going to be the right fit.

So I would encourage sellers to really think about – how many SKUs? What kind of orders are you fulfilling? The count of orders? Let’s do averages over the last six to 12 months to make sure what’s the typical inventory storage requirement? How long do you store that inventory for? And having all that information and what the shipping cost is going to be, because many 3PLs do not do that. They charge the shipping cost, so you could lose a lot of money on that front. And how does it compare to FBA trying to make any comparison with FBA? So you know exactly for what products you’re going to come out ahead, what products are going to cost more. Because we going to admit FBA is very competitive for Small and Light, very attractive. So anybody who tells you they’re going to beat FBA prices across the board, they’re most likely lying.

Neil Twa:

Yeah. Because of this infrastructure, their multi-channel services usually can win to some degree. You just have to look at it from a strategic perspective and not the lowest race to the bottom pricing. Because I know that’s what happens to a lot of those people with rate cards is they’re selling $10, $12 products and they’ve got razor thin margins and it’s hard to beat Amazon’s FBA pricing at that level because they’re already at razor thin and Amazon’s trying to beat all the competition for pricing. So you got to be smart about your numbers. And usually people who are just asking for rate cards don’t really know what their numbers are. And they may not even know what Zone 8 means if they’re listening to this. But guys by the way, that’s the farthest distance from one location to another at shipping costs.

If you’ve ever tried to ship something and like US Postal Service go down and look, they have a Zone card and you’ll notice some of the locations are some of the farthest away, and you got to be smart about where your sales are coming from. If you’re on DTC, it’s a little easier. You can do a quick analysis and see where’s the majority of my orders going to from people who are buying. On Amazon, you got to wait a little bit and figure out where Amazon’s distribution is sending all your products into which areas you’re getting the most sales from, which may take a little bit of time from the system. But obviously, Manish, you know your stuff. I mean, just listening to you for the last five minutes. You clearly understand this. What is your background in this business model?

Manish Chowdhary:

So I was involved with building the e-commerce platform before the word e-commerce platform was invented. This is going back to early 2000. I was involved with building one of the first Turnkey Shopping Cart Software long before Shopify existed. Magento wasn’t on the market at that time. So built a very successful Shopping Cart Software, Turnkey e-commerce platform as we see now. So I’ve seen e-commerce evolve from its infancy. And then went on to build another similar product, but it’s a full service mid market e-commerce order management system, inventory management system. So I’ve been dealing with online retailers, technologies God, for 22 plus years. So I’ve seen everything and just about anything. I’ve got deep experience with now logistics. I’ve got 10 US patents on business process, orchestration and collaboration. So a lot of experience in anything and everything to do with e-commerce and operations.

Neil Twa:

Yeah, no, that’s a very historic background. I mean, back to 2000, is post dot-com bubble. Did you get out of the bubble somehow into this or did you ride that out okay or what happened there?

Manish Chowdhary:

Yeah, I mean, I think we did phenomenally well because that was the time when e-commerce was just taking off. And I think some of the large, the eToys of the world, they pretty much laid the foundation for the SMBs. SMBs were getting on for the very first time, just like the pandemic did, brought in a ton of people who started to sell online. But in this case, there were businesses that were offline, the brick-and-mortar that suddenly saw themselves as an opportunity to sell online. And this is actually, I think this was before Amazon opened itself up as a marketplace. Amazon marketplace did not exist. Yahoo Shopping used to be the marketplace. May or may not remember that.

Neil Twa:

No, I do. But the eToys thing is taking me back in my brain for a second. I haven’t heard eToys in a long time.

Manish Chowdhary:

Yeah, so those were the early days. So I’ve seen the evolution of that. So I mean every time there’s a crisis as they say, or there’s a challenge, there’s an opportunity. I mean, right now we are going through some historic black swan event with the pandemic and so on, but I think there’s some great businesses that are going to emerge out of this. I mean, yes, for my own business, which is Cahoot, it’s an innovative peer-to-peer order fulfillment services network. For the very first time, if you are a merchant who has a warehouse, you have an opportunity to make money if you have excess space in your warehouse. This is something that did not exist. Similar to what Uber and Airbnb did in 2008 when the financial crisis hit. All of a sudden people were without jobs. So they were going and signing up to become drivers for Uber, which allowed Uber to offer low prices for short-term transportation, which really helped them take off.

Similarly, Airbnb also emerged during that time when people were trying to save on short-term stays. They don’t want to pay large, heavy amounts to the Hiltons and the Marriott’s of the world, and there was a great opportunity for them to monetize their spare bedroom. And so Cahoot is doing something very similar in the order fulfillment and logistics space. So if you have a warehouse and you have your act together and you’ve got spare capacity, for the very first time you can come to Cahoot, join our network and apply to become an order fulfillment partner and make some money.

Neil Twa:

So peer-to-peer order fulfillment services network, that’s new, that’s very innovative.

Manish Chowdhary:

Thank you. Thank you.

Neil Twa:

Yeah. Obviously your innovations and patents and other things have led you to some really new concepts. Where do you see that moving in the next year with some of the challenges around order fulfillment, longer shipping times? Where do you see that going?

Manish Chowdhary:

Yeah, I mean, I think that the order fulfillment companies should be embracing what I call merchant inclusive fulfillment. If you think about a merchant’s needs, a merchant wants to bring in inventory, whether it’s domestically or international. The inventory is going to come into one of the bigger ports. There are some of the less popular ports that I recommend right now. If you’re having trouble getting inventory to Long Beach or Oakland at New York, New Jersey, you can look into Charleston, you can look into Miami, you can look into some of the other ports that are less congested. I mean, I think merchants want a single provider that can handle their B2B, that they can stage their inventory and then drip it to FBA as needed for the items that make sense. They can do the order fulfillment for other channels, Shopify, Walmart, others, I know Walmart launched its Walmart fulfillment services.

Lot of sellers are not super excited about that. They still find that to be in early stages and infancy in its technology evolution. People are going and rushing to build new warehouses. But we believe that there are 2 million merchants in the US. Many of them do order fulfillment on their own, that there’s plenty of capacity available, just like how Airbnb helped unlock millions of rooms as opposed to going out and building new hotels in an already crowded space. When somebody builds a very expensive warehouse, they’re going to charge you something very expensive for their services because they got to recover their expenses. So Cahoot is very unique in that way to leverage existing assets so that we can get higher utilization for what already exists.

Neil Twa:

Fantastic man. And if I’m not wrong, it’s cahoot.ai, is that correct?

Manish Chowdhary:

Cahoot.ai, yes.

Neil Twa:

Okay. And when they show up, what should they expect to give you to get the right information necessary? And we’re talking about sellers who are already in the marketplace in one capacity channel or another, but we’re also talking about those who have additional warehouse space, maybe even other 3PLs who might want to utilize that space, if I’m hearing you correctly, can connect with you as well. Is that right?

Manish Chowdhary:

That’s right. We have two parts of our network. The sellers that are looking to outsource order fulfillment, they can come to Cahoot. If you have a great deal, come out to Cahoot, let us reconfirm that you still have a great deal, no harm done. It’s something to be aware of. Or if you have one location, you want to add a second location because you’re getting orders from nationwide. We have the technology, the software that can make that happen seamlessly. And if you’re super happy with your existing provider, we are not looking to replace them or displace them. That’s just not the way how Cahoot operates. We would invite them to come join the Cahoot network so they can participate and they can stay part of it. Because if you have got a good thing going, we know we have the technology to glue it all together.

And on the supply side, if you are a warehouse that has excess capacity that you want to monetize, then you come join and apply to become an order fulfillment partner. And we invite 3PLs as well to come join as a fulfillment partner. Because let’s face it, let’s say you are an East Coast based 3PL, your customers, your merchants are demanding a location on the West coast. So rather than losing that client entirely, you can come and partner with somebody so you can keep that client and meet that client’s needs. Because if you choose to ignore that client’s needs, because to your point, Neil, Zone 8 shipping from New York to California Zone 8, that’s very expensive however you slice it. And even if your fulfillment providers rates are the cheapest, you are still going to come out in the red because shipping orders cross-country has two problems, higher shipping cost, and longer transit time.

It takes five days for the item to be delivered, sometimes could be up to six, seven days. So we invite both 3PLs and warehouses of capacity to come check us out, apply to become an order fulfillment partner, and for the sellers to look out and find a merchant inclusive fulfillment solution. You got to have a backup. And I’m talking about the seller, Neil, that I spoke with last week. Sellers in the Amazon space – they are plugged in, they’re super smart, you would know them, even they don’t have a backup. And it’s appalling to me that how can you put all the eggs in one basket?

Neil Twa:

Once you get to be a certain size – Risk management needs to be a big part of your operational component. I would be surprised that they didn’t have some of that in place, but I’m sure they could help you. You’re obviously got an innovative, unique idea for both seller and 3PL. And folks, if you’re listening to this, I would encourage you to check it out. The link will be in the show notes, go to cahoot.ai, check out what Manish is doing. Obviously, you can hear he’s a super smart guy who’s figured something out that’s really cool. It will benefit both you and the 3PL provider you might be using at this point. Guys, I would encourage you to go check it out and take a look at that if both, again, you’re a seller and a 3PL. Manish, any other final words of wisdom you want to leave on us today?

.

Manish Chowdhary:

Thank you, Neil. I mean, there’s one more thing in the words of Steve Jobs.

Cahoot has the industry-leading shipping software. So if you are not ready to outsource fulfillment and you have a warehouse, you do order fulfillment or shipping yourself, Cahoot can save you a lot of time in rate shopping. We did a side-by-side comparison between ShipStation and Cahoot, which is a leading product on the market. And of course, as they say, Cahoot came out 21 times faster, that’s just the technology that Cahoot has built that reduces human error. It reduces a human trying to compare UPS, FedEx, USPS rates, figuring out which one to pick. And rather than doing it one order at a time or applying any kind of crude rules, Cahoot’s technology automates all of it. So if you want many hours back in your day, and I kid you not, we have a client that was spending four hours on a Sunday away from their family printing labels so that they could ship those orders out on Monday and they could not fulfill Monday’s orders until Tuesday because they just did not have the capacity.

And so there’s some unique technology even on the shipping software front. If you can save three hours, four hours of labor a day that’s money back in your pocket to do some other things that are more revenue producing.

Neil Twa:

Very smart and interesting angle on that. Definitely. So a shipping station comparison is a very good analogy for what your software does and obviously it’s very powerful. We may have to check that out ourselves, for some of the projects we’re working on. Thanks for bringing that up, man. I appreciate your time today, sir.

Manish Chowdhary:

Thank you. Neil, anything else you’d like to cover?

Neil Twa:

Look, that’s good for me at this point, unless you have something else you would like us to know.

Manish Chowdhary:

No, I mean, I think just merchants should be aware that Amazon FBA has added peak fulfillment surcharge of 6 to 8% for the very first time. That’s I think getting rolled out on October 15th. That’s a fourth increase in FBA fees this year. I think in the first quarter they revamped the Small and Light pricing. April 28th they added 5% inflation surcharge. And then of course the storage triples in Q4, as you know. So I would encourage sellers to go check out their bills and to make sure that nothing in the Amazon FBA world remains as is. So be mindful of that as you’re calculating your profitability, how much you’re allocating to your advertising, return on advertising spend and all that good stuff. And some other big news, I mean, Pharmapacks the number one Amazon seller going out of business –

Neil Twa:

Yeah. Their margins were too thin. And I was just going to cover a little bit of that actually, because on the antithesis side of that, one of the third largest native acquisitions just occurred for a cosmetics company in a $630 million acquisition. So on the other side, you got to look at the differences between the two. Why did one go out of business, and why did one have such a tremendous exit? And then how to deal with the rising costs of obviously inflation or fees, obviously, as you mentioned are going up.

And that’s a good topic because I mean, you got to look at the value of the brand and the value of the products you’re putting into it. That’s one of the things we always drive out here. If you’re going to sell something for $30 or less on Amazon, you better have a very high margin on it or not sell anything less than $30, or you’re going to run into these kinds of really razor thinned margins where you might be making it great or it cost is good, and the product is growing, but all of a sudden that 5% surcharge or changes at this fourth quarter of the year slice your margins down to a dollar in profit, which is really no for a business model.

So we want to encourage everybody on the back of that to remember, keep your product profitability above $10, if not higher to $15 in that profit per unit for your products. If you can’t achieve that on your products currently, you need to get products in the market that will do that. That will raise with price, can raise retail price against inflation and market hedges or of course increasing costs and operations and logistics as we just spoke about, won’t impact you as greatly. Yes, they’ll impact you, but it won’t be devastating. And I know there’s a lot of sellers in the market right now that are going to face that coming into fourth quarter.

As you mentioned earlier, there’s opportunity in everything. For some of us, there’s going to be great opportunity priced correctly and in the profit margins we need, whose fourth quarter this year is going to be great. But I think there’re going to be a lot of sellers who are coming off of a COVID bump who still haven’t right sized their metrics or expectations and rising cost of inflations are going to hurt them in this coming quarter. And many of them may not be able to make it through the end of the fourth quarter, even though they should be doing really well.

Manish Chowdhary:

Right. And business metrics have changed. I mean, if you’re looking to get acquired, that brings massive challenges of its own. Profitability is going to be key. The other advice that we are giving sellers is don’t wait for the last minute. Holiday shopping is going to happen earlier. There’s of course, a lot of talk about a second Prime Day. I mean, just think about it, why is Amazon considering a second Prime Day? It is because they want to push holiday forward. They want to push spending forward because they’ve got tons of excess inventory. We’ve heard from Walmart, lots of inventory challenges, aggressive discounting happening at Target. Their profit plummeted 89.9% year on year. 

Neil Twa:

Yeah. Target is taking big hit, no doubt.

Yeah. And you mentioned Walmart – literally yesterday, I saw an article that said Walmart removed some of the major restrictions. It was making it very difficult for third party sellers to get approved on their platform. And in one day they had the largest spike in signups they’ve had to date since they opened the Walmart ecommerce platform. Because now you can actually get over there and open up your business, which is your name and your business in a few other details now. Whereas before it was highly restrictive. So there may be some additional opportunity for folks looking at Walmart because it has a market potential opportunity.

But you’re right, there are others that they’re suffering for a lot of different reasons. You bring up Target, but Target’s isn’t just operational or profitability. They’ve got other geo and political problems hitting them due to some policies and stuff that affected them, I believe. Just look at the market and the trends, and you can see what I’m talking about. But in terms of market share and stuff, the latest studies show that the even Walmart and Target combined still don’t make up Amazon’s 38% of market share. So if you’re going to play in the market, go with the juggernaut. Right?

Manish Chowdhary:

Certainly, certainly, but also diversify because if you’re successful at one marketplace, you want to dip your toe in the other.

Neil Twa:

Yeah, hints the Walmart point. You can get into Walmart a lot easier now due to those restrictions being lifted. Yep. So you should definitely consider it.

Manish Chowdhary:

That’s right. That’s right.

Neil Twa:

Yeah. Manish, thank you so much for your time, sir.

Manish Chowdhary:

Neil, thank you again for having me and pleasure speaking to your audience and if I can be of any help, please go check us out at www.cahoot.ai.

Neil Twa:

If you like this episode, please share it with people you think will enjoy it as well. Thank you for listening and be sure to tune in next week for a brand new episode of High Voltage Business Builders.

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This past Thursday, April 21st, Amazon launched a new service: Buy with Prime. For a fee, the service will let third-party ecommerce merchants use Amazon’s huge distribution network to fulfill orders on their own sites. It’s Amazon fulfillment for DTC sites.

On top of that, Buy with Prime web sites will be allowed to put the Prime badge on their websites next to items eligible for free 2-day and 3-day shipping (which will be most items), helping boost their conversion.

And finally, Amazon Prime members that purchase from third party sites that use Buy with Prime will have their payment and shipping information pre-loaded in the checkout window, further smoothing the conversion process and decreasing cart abandonment. 

In this article, we’ll share what we know so far about the service and dive into pros, cons, and fulfillment service alternatives for sellers.

Who Benefits from Buy with Prime?

Amazon is targeting Buy with Prime firmly at online sellers with DTC stores. While Amazon previously offered its multi-channel fulfillment service to DTC sellers, this new offer seems in many ways to be a direct replacement, and we anticipate that they’ll slowly phase out Amazon MCF in favor of Buy with Prime.

While Buy with Prime is currently invite-only, Amazon’s new website for the program clearly demonstrates who they think will benefit most from using it. As you can see in the below screenshot, they’re positioning it as a way that DTC sellers can grow their business.

Buy with Prime asserts: if you’re a DTC seller, you can stop worrying about fulfillment and delight customers with fast and free shipping by signing up with us.

_{Source: buywithprime.amazon.com, 4/26/22}

It stands to reason that this will become and remain Amazon’s fulfillment solution for direct-to-consumer online sellers, but that it likely won’t grow further. It would be remarkable if other marketplaces like Walmart or Target integrated with Buy with Prime (at least for the time being), and we’ll be very interested to see whether a critical mass of Shopify or BigCommerce sellers jump over to Amazon’s new service.

Shopify fulfillment network recently significantly drew back its ambitions, but in its place, Shopify has quickly pivoted to talks to buy a rival fulfillment service. If Shopify makes such a large investment in a fulfillment network of its own, it likely will want to shut Amazon out of its user base in favor of its own solution. As it stands, it’s an open question as to whether Shopify sellers will be able to use Buy with Prime.

We’ll keep a close eye as the situation develops, because multi-channel sellers know how painful it can be to have to manage multiple fulfillment solutions. Amazon is making a big play to extend FBA across more of the ecommerce landscape, but its competition isn’t standing still.

What Are the Drawbacks?

Buy with Prime promises to solve checkout and fulfillment for DTC merchants, but convenience will come at a price. Sellers trying to make it on their own or pursuing a multichannel ecommerce strategy enjoy significant benefits from their strategic distance from the big marketplaces, and implementing Buy with Prime will blur those lines and risk losing more than you gain.

Amazon Owns Your Customer

If Amazon gets their logo on your checkout process, and the customer converts because they feel more comfortable with Amazon, who really owns the customer? Or worse, will the customer even stay on your site?

Many DTC sellers have built brands and struck out on their own because they want to get away from Amazon and its questionable business practices. By owning their customer, they build long-term relationships that lead to repeat purchases and realize significant long-term customer value, the basis of sustainable profitability.

_{Source: buywithprime.amazon.com, 4/26/22}

By bringing Amazon back into the mix, DTC sellers risk all of their hard work in developing a unique relationship with their customers. Fast and free shipping does boost conversion, so you may see a boost from new customers – but with Amazon’s logo doing the heavy lifting, you’re also giving customers the idea to head over to Amazon to price check and look at competitive offers. 

Well over half of online product searches already start on Amazon. Do you really want to give shoppers the idea to pop over to the ecommerce giant after you’ve done all the hard work advertising to get them onto your site?

Pay Hefty Amazon Fees

In Q4 2021, Amazon made $30.3 billion from third-party seller services, which includes commissions, fulfillment, and shipping fees. While we don’t yet know the full fee structure of Buy with Prime, all indicators point to the company trying to turn this into the next Amazon Web Services. After all, in recent years Amazon has continued to lose money on its core retail business, while it makes up for it with huge profits from AWS and its advertising business.

AWS famously started as an internal service to run Amazon’s business before they productized it and started selling it to the world at large. Amazon FBA is now following the same exact path: it started as a way for Amazon to fulfill their own orders, then they extended it to third-party sellers, and now they’re expanding to DTC merchants. We anticipate that they’re targeting significant margins with this new business – perhaps they could even rival AWS’ 60%+ operating margin. 

With this model, DTC merchants will feel the crunch in their own profitability. In exchange for increased conversion thanks to the Amazon Prime badge, they’ll realize lower margins. If the extra revenue doesn’t flow through to the bottom line, is the service worth it?

Competes with Your FBA Inventory Limits

Finally, if you’re a multichannel seller trying to win on Amazon and on a DTC site, you don’t get two separate inventory limits. All of your FBA and Buy with Prime inventory goes into one pool, and where an order is placed doesn’t make a difference. 

While this is helpful in its simplicity, it’s a big potential challenge because Amazon is notorious for imposing too-strict FBA inventory limits and for long receiving delays. With all of your eggs in the FBA basket, you make yourself extremely vulnerable to a self-serving change in inventory limits or one of FBA’s routine weeks or months-long receiving delays.

_{Source: Cahoot original analysis}

The best fulfillment practice for Amazon-only sellers is to have an FBA alternative for the many times when FBA falls flat, and that will be doubly true for Buy with Prime users. If you’re selling on Amazon and on a DTC site, and a receiving delay knocks your best seller out of stock, that now doesn’t just kill your Amazon sales rank – it also kills your DTC store’s SEO and paid advertising efforts!

Though Amazon is positioning Buy with Prime as a holistic solution for DTC sellers, we assert that relying wholly on Amazon FBA would be a fatal mistake for your business.

The Buy with Amazon Prime Alternative: Cahoot

Cahoot has created a robust 

How to Choose the Best 3PL for Your Shopify Store

ecommerce order fulfillment network that makes low cost, fast and free shipping a breeze for every eCommerce sales channel.

If Buy with Prime’s promise of a simple multi-channel answer to fulfillment appeals to you, contact us in addition to sending in your application to Amazon.

Cahoot is the next generation of tech-enabled fulfillment networks. Unlike other networks that are collections of 3PLs, Cahoot’s innovative approach empowers merchants across the country to fulfill orders for one another. Our peer-to-peer network is a collective of highly vetted eCommerce retailers who offer up excess warehouse space and resources to provide high-quality order fulfillment to other merchants. Since they fulfill their own DTC orders, they know how important top-notch fulfillment is, and they put the same care and energy into your orders as they do for their own.

As a result, costs are typically lower than what you get with a traditional 3PL fulfillment company, yet service levels are higher. With a P2P network, multi-channel fulfillment with nationwide 1-day and 2-day delivery at economy shipping rates is the norm. Merchants can use the network solely for outsourced fulfillment – similar to FBA, or they can choose to fulfill orders for other merchants and offset some of their own outsourced fulfillment costs.

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The Health & Beauty industry is currently the second-largest retail category in the US and one of the fastest-growing consumer markets on the planet. Lead by the Cosmetics and Skin Care categories, both have proved themselves to be items that consumers just can’t get enough of.

However, with roughly 30% of beauty stores closing indefinitely due to the pandemic, consumers, and especially younger generations, have turned to finding their cosmetics online. Unlike many other consumer packaged goods, Health & Beauty products come with unique challenges for ecommerce merchants, largely due to their special handling requirements.

Despite the challenges, the industry is thriving online. Statista estimated that US consumers spent $53.7 billion on Health & Beauty online in 2021, and it shot up to over 11% of total ecommerce spending. It’s growing more quickly than the overall ecommerce market, showing great promise as a place where sellers can earn big returns if they get things right.

Getting things right in beauty products fulfillment, though, is no easy task. From climate controls to hazardous goods to high damage rates, cosmetics and other beauty products present significant challenges.

In this article, we’ll provide you with an inside look into what you need to look for in a 3PL warehouse that will support your profitable growth as a Health & Beauty seller.

What You Need From Your Cosmetics 3PL

While there are many similarities between fulfilling online orders for the Health & Beauty industry and general consumer packaged goods, beauty products have special needs that many 3PL warehouses aren’t equipped to handle.

In this section, we’ll break down the added requirements that 3PLs need to excel in to provide excellent beauty product order fulfillment.

Climate controls for beauty product fulfillment

One of the most important considerations when choosing an order fulfillment company is the type of climate conditions that your products will require. Certain types of cosmetics become damaged when they are stored in conditions that are too hot, too cold, too wet, or too dry. Lipstick, some blushes, mascaras, cream based shadows, and more all can melt when exposed to warm temperatures. Once these products reach a certain temperature, their consistency begins to change, and may render the products unusable altogether.

Unfortunately, many 3PLs maintain warehouses at warmer temperatures in order to save money on air conditioning – which makes them too warm for cosmetics. And product loss in the warehouse isn’t even your biggest concern (though it’s enough to destroy a ecommerce business on its own). Even worse, your outsourced warehouse team likely won’t realize that products are damaged before they ship them out. That leads to a mass of customers all receiving damaged products at once, and when they take to social media to complain, it will create a lasting negative impression of your brand.

Therefore, it’s critical that your 3PL warehouse that you choose is equipped to handle, store, and ship cosmetics in optimal climate conditions so that your customers are able to receive the very best version of your product.

A good rule of thumb is to ask your 3PL company whether they guarantee their warehouses at or close to room temperature. Since most cosmetics are designed to be stored in cool, dry conditions in a user’s vanity, they’re usually safe at 72 degrees. That being said, know your product! If it requires more careful heat regulation, then you need to be even more careful up front with your 3PL.

Cahoot has a wide variety of temperature-controlled warehouses, perfect for storing sensitive goods such as cosmetics.

Hazardous goods storage & handling

Certain beauty products have special requirements when it comes to safety and proper handling. In particular, many fragrances can create unsafe conditions and require specific storage different from most other items. Many contain ethyl alcohol, which is flammable and puts them in hazard class 3.

Many 3PL warehouses avoid goods in hazard categories, as they either don’t want to take on extra risk, or they don’t have proper certifications for handling dangerous goods. Make sure that you’re up-front with the order fulfillment partners that you evaluate about hazard classes that your goods fall into, or you risk wasting precious time and money sending them inventory that they legally can’t take.

We know that it can be hard to find a warehouse that not only can accept hazard class goods, but is built for them. Cahoot ecommerce order fulfillment has intentionally curated warehouses with different specialties, including handling dangerous goods. We can go above and beyond in enabling sellers with goods that have special handling needs.

Careful packaging for safe shipping

One metric defines online seller profitability more than any other: customer lifetime value. With digital advertising becoming increasingly expensive, most sellers lose money on new customers. They’re only able to earn a positive bottom line through long-time repeat customers.

In Health & Beauty perhaps more so than any other industry, a fantastic post-purchase customer experience is critical to building repeat rates. Unfortunately, it’s more difficult to safely ship glass and fragile bottles than it is to ship other goods. So, the industry that needs to minimize damage rates the most often has the hardest time doing so.

Unfortunately, many 3PLs that claim they can handle cosmetics and other beauty products treat them like any other good when it comes time to package them for shipping. This is insufficient: fragile items need extra time and care during packing.

Cahoot uses a combination of intelligent packing software and responsive customer service to get packaging right for the toughest goods to ship. We optimize for two things: we keep the package as small as possible to minimize shipping cost, while also getting damage rates as close to 0% as possible. In this way, you save money on shipping while also ensuring that your customers are delighted when they open up their products every time.

Responsive customer service

Though responsive customer service is important for all online sellers, it’s especially important for a cosmetics 3PL given the above additional needs. Beauty & Health has more unique shipping and handling needs, so you need to be able to get in touch with your customer service team quickly to feel confident that they know how to excel with your products.

Look for a 3PL company that offers you a real person to work with your account, and multiple ways to get in touch with them. If it’s a small issue, live chat will do. Thornier challenges, on the other hand, should be governed by a detailed ticket system. And of course, you need a phone line for critical issues.

Cahoot clients love our easy-to-reach and proactive customer service team. Our team is based in the USA, and they take the time to get to know your ecommerce business, so you don’t have to start at square one with a new person every time you submit a ticket. The close relationship we forge with our sellers is foundational to our ability to go above and beyond as a cosmetics 3PL.

Cahoot: the Best Cosmetics 3PL

Cahoot’s order fulfillment service network is built for the rigors of modern ecommerce. We’ll help you level the playing field with marketplaces and delight your customers with a stellar, Amazon-like delivery experience – no matter where you sell. We have pre-built integrations with major marketplaces, shopping carts, and ecommerce platforms to fuel your multi-channel growth.

Our innovative peer-to-peer model sets us apart by enabling us to offer low-cost, fast fulfillment by design. We recruit top-tier ecommerce merchants with their own warehouses to join our network as order fulfillment partners, and then our intelligent shipping software and control team keeps the whole system connected and running efficiently. Since we’re unlocking excess fulfillment capacity that was lying idle, we’re able to offer lower costs.

Critically for Health & Beauty sellers with the special handling needs we outlined above, we have a wide variety of merchants fulfilling for others as part of our network. Unlike other 3PLs that are building cookie-cutter warehouses designed to store easy-to-fulfill goods, we have specialists in temperature-controlled fulfillment, hazmat, and more. Our flexibility is part of what distinguishes us and makes us the best choice for sellers seeking a reliable cosmetics 3PL.

If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We can’t wait to show you how beauty products order fulfillment was meant to be.

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The North Face closed it’s global headquarters and 113 stores in the U.S. and Canada on Earth Day, April 22. The action is part of a campaign to make Earth Day an officially recognized holiday.

The North Face closed it’s global headquarters and 113 stores in the U.S. and Canada on Earth Day, April 22. The action is part of a campaign to make Earth Day an officially recognized holiday.

As part of the campaign, the North Face also launched “Explore Mode” in major cities in the week leading up to Earth Day. Throughout the week, The North Face partnered with musicians, artists and culinary influencers to host a series of experiences that encourage people to disconnect digitally and engage with their surroundings.

Per Total Retail, The North Face joins a growing list of outdoor brands, including REI and Patagonia, that are becoming increasingly vocal about social causes such as environmental protection. For these companies, closing stores — costing short-term profits — has become a powerful tool to make a statement about serious global issues.

Read the full article here.

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What’s not to love about Amazon FBA? List your product on Amazon, send them your inventory, and reap the rewards of the Amazon Prime badge and low shipping costs (though FBA fees are rising in 2022). 

It’s a great deal for those that can get it, but it’s also limited in two key ways: 1) it’s an inflexible point solution and 2) Amazon simply doesn’t have enough space. And no wonder; Amazon added over 750,000 new 3rd-party sellers in 2020, so FBA can’t keep up with demand. Amazon’s response is to limit FBA to work well only for the SKUs that maximize their profit (not the sellers’) and to impose restrictive inventory limits.

Sellers that want to grow both on and outside of Amazon will need an alternative to FBA to keep their growth engine humming. Read on to learn more about what to watch out for with Amazon FBA and your options for other eCommerce order fulfillment solutions.

Why You Can’t Rely on Amazon FBA

Amazon FBA will do a great job of fulfilling a portion of the volume of your small SKUs sold on Amazon, but it falls short otherwise.

Source: Amazon FBA Revenue Calculator, DIY Shipping estimated using discounted shipping rates for Zone 4 Residential shipping, estimated ship date 9/20/2021

The above example is typical of Amazon FBA fees: their price for small and standard items beats other options, but even slightly oversized products like the example 5lb dog bed ends up costing almost double a merchant’s price shipping it on their own. The reason is simple – they’ve optimized their network for small, easy, and efficient products. 

As a result, Amazon sellers that use FBA for their shipping are boxed in when it comes to growth, and they all compete with one another to sell the same small, cheaper items. If FBA is your only good option, you can’t profitably expand your product line to larger, less competitive options because fulfillment fees will eat up your margins. If you raise price to compensate, then you’ll lose to the savvy merchants who have diversified their fulfillment strategies and can get the product to the customer at half the price.

The challenges don’t end there for Amazon FBA. 2020’s unprecedented boom in eCommerce growth has delivered massive returns to Amazon and Amazon sellers, but it’s also left FBA bursting at the seams. To compensate, they switched from ASIN-level inventory limits to product type inventory limits in April 2021, and overnight sellers saw their inventory limits cut by up to 65%. 

Source: US Census Bureau, Marketplace Pulse, Cahoot interviews with merchants

On top of the new, lower limits, Amazon FBA is also experiencing receiving delays of up to three weeks. This creates a huge window of time in which a seller can run out of stock on a key item: even if the seller sent a timely replenishment, receiving delays can create the issue. In the peak selling season, this is an even bigger problem. Demand surges can easily run an item out of stock in a matter of days or even hours, triggering a death spiral in which a product loses its search rank, which lowers impressions and conversions, which in turn lowers inventory limit again. 

It’s clear that Amazon FBA is no longer an all-in-one solution for Amazon sellers. It’s a point solution that can be an important part of a fulfillment strategy, but needs to be augmented to cover for its flaws.

Evaluating Different Amazon FBA Alternatives

Amazon FBA’s structure tells a valuable, if simple lesson: the most cost-effective way to offer nationwide 1-day and 2-day delivery is to create a distributed fulfillment network that always has inventory near the end customer. This setup enables 1- and 2-day delivery with economical ground shipping; the best of both worlds. 

To enjoy the same benefits of Amazon FBA’s network without the same drawbacks, sellers’ options generally fall into three main categories:

1. Open Multiple Fulfillment Centers: Merchants can take it upon themselves to open multiple US fulfillment centers, but today’s environment is extremely challenging. Warehouse space has never been more limited or expensive, and there are an incredible 400,000 open job positions for frontline eCommerce order fulfillment workers. On top of that, opening one’s own centers ties up significant capital and is risky – if a seller picks a sub-optimal location, or a location becomes sub-optimal as consumer preferences change, they’re stuck footing the bill.
2. Third-Party Logistics Companies (3PLs): Another option is to outsource fulfillment to multiple 3PLs. These are generally smaller, independent companies not connected to any specific marketplace. You will have to contract numerous 3PLs to get nationwide 1-day and 2-day coverage. Order routing across disparate 3PLs is complex and labor-intensive, so you may need to invest in expensive fulfillment software to make it more efficient. Fulfillment costs will vary between 3PLs, and not all of them can meet the strict SLAs needed to win the Buy Box on every marketplace, so be sure to use something like a 3PL request for proposal (RFP) template to get an apples to apples comparison.
3. Tech-enabled Fulfillment Network: A modern and affordable alternative to working with 3PLs is to use an e-commerce order fulfillment network. A tech-enabled fulfillment network upgrades the traditional 3PL model to cover the whole country. Merchants will send their inventory to multiple nodes in the network, and then the network’s software will automatically send parcels from the optimal location to the end customer, saving on shipping costs. In essence, these networks are “FBA-lite” – they have the same core functionality as FBA.

Cahoot’s Alternative to Amazon FBA

Cahoot is a robust FBA alternative, and it works just as well as a backup or enhancement of FBA as it does as a full replacement. And it’s much more than that – it’s the most flexible solution in the marketplace and can ship orders for every eCommerce sales channel.

Cahoot is the next generation of tech-enabled fulfillment networks. Unlike other networks that are collections of 3PLs, Cahoot’s innovative approach unlocks empowers merchants across the country to fulfill orders for one another. Our peer-to-peer network is a collective of highly vetted eCommerce retailers who offer up excess warehouse space and resources to provide high-quality order fulfillment to other merchants. 

As a result, costs are typically lower than what you get with a traditional 3PL fulfillment company, and service levels are higher. With a P2P network, multi-channel fulfillment with nationwide 1-day and 2-day delivery is the norm. Merchants can use the network solely for outsourced fulfillment – similar to FBA, or they can choose to fulfill orders for other merchants and offset some of their own outsourced fulfillment costs.

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Fulfillment is often an afterthought for sellers – after all, “sellers” want to sell. Your eBay fulfillment strategy, though, has a much bigger impact on sales than you might realize. If you’re not offering fast and free shipping, you’re severely limiting your growth. And if you don’t have the right provider, you’ll pay an arm and a leg for that shipping, eating up precious profits.

In this article, we’ll highlight the importance of fast and free shipping on eBay (if you’re not already convinced) and give a primer on your different options for eBay fulfillment. By the end, you’ll feel much more confident in your ability to turn operations into a growth driver for your business.

Why is Fast and Free Shipping Important for eBay Fulfillment?

1. Online Shoppers Want Fast and Free Shipping

Thanks to Amazon Prime, online shoppers now expect their orders to arrive quickly and for free. In fact, a recent McKinsey study found that over 90% of customers view 2- to 3-day delivery as the baseline for eCommerce. eBay sellers used to be relatively immune from these rising customer expectations, but those days are over.

Ignore fast and free shipping at your own risk – 75% of US consumers expect free shipping even on orders under $50, and 63% of all cart abandonment is caused by unexpected shipping costs. 

eBay now automatically applies “Free delivery in 2/3/4 days” tags to qualifying products – like the Fast ‘N Free badge that preceded it, this marker gives shoppers exactly what they want. eBay sellers with the tags stand out in search results and convert better, driving higher revenue.

2. Improve your Seller Rating

Fast and free shipping is a key rating factor that can help to boost your eBay seller rating. Shipping time and shipping fees both have their own line item in “Detailed seller ratings” on eBay, and of course, a high seller rating has a huge impact on eBay sales.

Furthermore, qualification for the lucrative Top Rated Seller Program depends in part on fast shipping – so if you want to be in the top echelon of eBay sellers, you’re going to need fast and free shipping.

3. Increase Impressions

Free shipping helps you win more impressions and clicks. 

eBay gives users the ability to filter by “Free shipping”, meaning that if you’re charging for shipping, some buyers are completely excluding you from consideration. Even if they don’t filter out “Free shipping”, many others will sort their search results by “Price + Shipping” – that’s right; eBay’s price sort includes the cost of shipping, so if you undercut your competitor on product price, but have a shipping fee, you’ll still lose out.

On top of that, eBay prominently writes “Free shipping” for products that don’t charge for shipping, making them stand out against others that come with hefty shipping fees.

The combination of filters, sorts, and “Free shipping” copy all combine to make it an excellent way to boost your search page results on eBay.

4. Lower Cart Abandonment and Boost Conversion Rate

The impact of fast and free shipping isn’t limited to the product search experience. In truth, it makes the biggest difference once customers are on the product page itself. Consider the following statistics on online consumer behavior:

• 9 out of 10 people say free shipping is the #1 incentive that would make them shop online more often
• 47% of people say they typically back out of purchases if they realize shipping isn’t free
• 30% of people will wait to purchase until there’s a free shipping offer

Consumer preferences are clear – they convert more often and abandon their shopping cart less frequently when they’re offered free shipping. 

5. Improve Customer Lifetime Value

Shoppers will often go the extra mile for free shipping, which opens up creative strategies to boost your repeat purchase and retention rates.

Invesp found that 58% of customers will add items to a cart to qualify for free shipping, 47% will search for an online promo code, and 31% will join a loyalty program. 

If you don’t want to offer free shipping right off the bat, then you can introduce an order value minimum or offer free shipping to people that sign up for a loyalty program. Both of these actions will improve your customer lifetime value – bigger carts are self-explanatory, and loyalty program members repeat shop again and again.

Overview of Options for eBay Fulfillment Services

So, you’re convinced – you want to offer fast and free shipping on eBay. But how do you do it without breaking the bank? Here are the pros and cons for the different ways you can fulfill orders.

1. Self fulfillment

eBay allows you to ship your items yourself. With in-house fulfillment, you own the process, the profits, and the risks.

The benefit, of course, is that you have full control over the fulfillment process. You can choose where and how your products are stored, ensuring that they’re in the best condition possible when they get to customers. If there are errors in fulfillment, you have the power to immediately fix issues.

The main drawbacks of self-fulfillment are that it’s extremely time-consuming and it isn’t cost-effective in the long run. If you’re fulfilling your own orders, your success comes with a price – more and more of your time will be consumed by managing operations.

If you’d like to learn more about how to go it alone, here’s a more in-depth look at how to offer free shipping and still make a profit.

2. Local pickup

This eBay fulfillment option is ideal if you sell large or bulky items. It allows you to arrange pickup with the buyer so you can avoid shipping costs and price your items even cheaper.

You’ll need to provide a ZIP code, at least one electronic payment method (in addition to Pay on pickup), customer service, and generate your Proof of pickup to protect yourself in case of “item not received” disputes.

Of course, local pickup limits your market to your locality or contiguous areas. Sellers with serious growth ambitions will need to combine local pickup with another fulfillment option.

3. Drop shipping

eBay sellers can also use drop shipping to fulfill orders directly from a wholesale supplier. Under this arrangement, your supplier will deliver orders directly to your customers.

Your supplier handles the entire fulfillment process on your behalf using the buyer information available to them. It’s simple and will dramatically reduce your overhead compared to self fulfillment. However, your customers will still hold you responsible for timely delivery and overall customer satisfaction. If the dropshipper makes a mistake, you’re the one that pays the price.

For quality, you don’t get to inspect the product before it gets to the customer. You have to rely entirely on the dropshipper, and when things go wrong, you’re left on the outside looking in. 

Just as importantly, your customers won’t be delighted by fulfillment provided by dropshippers. Since they’re almost always shipping from one location, the delivery won’t be fast for customers across the country – and as we explained above, that’s a critical piece of modern eCommerce. Since they’re often shipping long distances, the shipping is more expensive than it needs to be as well.

If you choose this option, don’t list an item on eBay and then purchase it from another retailer or marketplace that ships directly to your customer. If you do, you’ll face sanctions ranging from listing cancellations to forfeiture of fees paid or payable to your account.

4. 3PL fulfillment

If you’re looking for a fulfillment service that offers the benefits of self-fulfillment without all the hassle, then using a third-party provider is your best bet.

The best 3PLs will give you access to a nationwide network of warehouses and carriers, so shipping products will take less time than if you were going it alone – in most cases within one or two days. Furthermore, if a 3PL places your inventory across the country strategically, you’ll always pay ground rates for shipping, so fast delivery will come at low prices.

Like dropshipping, trusting a third party means giving up some control over your product before it gets to the customer. This challenge can become apparent with 3PLs that aren’t built for eCommerce, as products get damaged in their rush to fulfill orders. Modern 3PL networks that specialize in eCommerce, though, have very low defect rates and may even improve on your own delivery record.

This can introduce complexity and increase your handling fees. A 3PL Request for Proposal can help you to weigh your options.

Why Cahoot Is the Best Option for eBay Fulfillment

Cahoot’s eBay fulfillment service will power affordable fast and free shipping for your listings, increasing revenue and margin. Our best-in-class fulfillment network partners with eBay sellers to make fulfillment a breeze – we can get you up-and-running with an improved delivery experience in as little time as it takes you to send us inventory.

With Cahoot, your listings will automatically get eBay 2-day, 3-day, and 4-day fast shipping tags (formerly Fast N’ Free Shipping), boosting conversion. 

If you’d like to find out how Cahoot can help your business, please get in touch with us. We can’t wait to show you how fulfillment can power your growth on eBay.

Offer 1-day and 2-day shipping at ground rates or less.

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UPS offers a host of services to ensure that your packages are delivered quickly to customers. Small improvements in which service you pick can have a big impact on customer experience and profitability, so in this guide we’ll walk you through your options and how to make the right choice for your business

What is UPS 2nd Day Air?

UPS 2nd Day Air is one of a few expedited shipping options from UPS, and they describe it as their “economical option for shipments that do not need overnight service”. As you can imagine, 2nd Day Air ensures that a package will arrive at its destination in two business days, but the ‘type’ of 2nd Day Air you choose will affect the delivery time. 

As customer expectations for fast shipping increase, services like UPS 2nd Day Air gain prominence. It’s simple – slow delivery speeds blunt online store growth because products with slow shipping are added to carts less frequently, and their carts are abandoned more often than products that ship quickly. A late 2021 McKinsey study of consumer preferences found that >90% of online shoppers see 2- to 3-day delivery as the baseline, and a quickly growing 30% said that they expect same-day for many purchases.

There are two different types of 2nd Day service – the standard service and AM. When someone absolutely needs an item from you first thing in the morning, you need to spring for the much more expensive 2nd Day Air AM. Without it, UPS only guarantees an end-of-day delivery time, which can of course stretch late into the night.

In addition to 2nd Day Air, UPS also offers 1-day and 3-day expedited services. The 1-day service is called UPS Next Day Air, and as you can imagine the 3-day service is called UPS 3 Day Select. 

How Much Does UPS 2nd Day Air Cost?

Cahoot’s internal shipping metrics show that UPS 2nd Day doesn’t come cheap – in fact, we observe that it’s often roughly 2 times as expensive as UPS Ground. 

If you’re used to paying $8 or $9 to ship your packages via Ground and seeing them take a week to deliver, 2-day delivery is going to cost you somewhere in the upper $10 dollar range. In the hyper-competitive eCommerce world, an extra $5-10 in shipping costs can often be the difference between making and losing money on a product. 

UPS 2nd Day Air AM balloons the cost of shipping far beyond the standard version of 2-day. Our data shows that the AM option nearly doubles the cost of standard – so it often comes in at nearly 4 times more expensive than UPS Ground. To us, the small added benefit of an early delivery won’t often justify the large added cost.

How to Ship Fast Without UPS 2nd Day Air

To quickly recap – customers expect fast shipping, so you need to offer it to boost growth. Fast shipping, though, is prohibitively expensive. If you’re like the vast majority of eCommerce merchants and can’t eat $10 extra in shipping on every single item, you need a better way.

The trick is to ensure that you always have inventory close to the customer so that UPS Ground delivers in 1- to 2-days without the extra cost – many call this a “distributed fulfillment strategy”. Typically, this means ensuring that you never ship farther than Zone 4, and it requires ~4 fulfillment locations strategically placed throughout the United States. This simple principle, though, is anything but simple in execution. 

Here’s the three ways that merchants can adopt a distributed fulfillment strategy:

1. Open Multiple Fulfillment Centers: merchants can open multiple US fulfillment centers and manage the four walls themselves. While having control may seem appealing, there’s never been a worse time to try to stand up merchant-operated fulfillment. Warehouse rents are hitting record highs, and if you can even find people to work for you, you’ll have to pay them $22.50 per hour to compete with Amazon’s rates. This strategy is also time-consuming and risky – you’ll spend countless managerial hours on operations instead of selling, and you’ll have to tie up significant capital.
2. Marketplace Fulfillment Services: Amazon and Walmart offer their own in-house fulfillment networks, Amazon FBA and Walmart Fulfillment Services, for sellers on their platform. They enable fast shipping nationwide, and crucially, they allow vendors to place Prime Badges and Walmart TwoDay tags on their listings to boost visibility and conversion. While attractive, these solutions come with significant drawbacks. They’re designed for small products, so FBA is much more expensive for large items, while Walmart doesn’t accept them at all. Additionally, they’ll only solve your fulfillment needs for the marketplace itself. Amazon FBA’s multi-channel solution, Amazon MCF, is significantly more expensive than FBA, while WFS only works for Walmart orders.

3. Third-Party Logistics Companies (3PLs): Your last option is to outsource fulfillment to one 3PL with national fulfillment services, or to multiple single-location 3PLs. The best 3PLs will have 10 or more locations across the United States, so they can strategically place your inventory right near your customer base. Modern 3PLs designed for eCommerce also have built native integrations with all major marketplaces and shopping carts, so you can use one provider for all of your fulfillment needs. Fulfillment costs will vary between 3PLs, though, and not all of them can meet the strict SLAs needed to win the Buy Box on every marketplace. Be sure to use something like a 3PL request for proposal (RFP) template to get an apples to apples comparison.

Cahoot Enables 2-day Shipping at Ground Rates

Cahoot’s nationwide network of over twenty warehouses provides affordable national eCommerce order fulfillment for eCommerce merchants. Thanks to our dense network, we’ll strategically distribute your inventory so that you reach 99% of the country in 2 days, but always pay low ground rates.

Unlike other providers, Cahoot has the flexibility to upgrade existing merchant-owned warehouses (if you have them). We’ll analyze your existing network and customer base, then add a few locations of our own to seamlessly extend your network into a nationwide footprint. With this approach, you can continue to get value out of your existing assets while delighting your customers and your bottom line with affordable fast shipping.

Getting started with Cahoot is fast and easy – with pre-built integrations for major eCommerce channels like Amazon, Walmart, Shopify, and BigCommerce, we can get merchants started in as little time as it takes to send us your inventory.

Talk to one of our experts today and explore how we can be the key that unlocks the next level of your profitable eCommerce growth.

Offer 1-day and 2-day shipping at ground rates or less.

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If you’re shipping large items, then you know the pain of high storage, handling, fulfillment, and especially shipping costs eating up your margin. 

While you’ll always pay more to ship a chair than a pen, you shouldn’t resign yourself to eating sky-high rates. With higher shipping costs come larger opportunities to save money, and cutting a few dollars off cost off of each order goes straight to your bottom line.

In this blog, we’ll cover three of the top ways that you can reduce your cost while shipping heavy items. Implement them, and watch your profit jump and headaches melt away!

Distribute Inventory to Reduce Shipping Zones

To state the obvious, the farther you’re sending a package, the more you’ll be charged. Within the continental United States, shipping distance is governed by Zones. Short trips will be designated Zone 2, while shipping something across the country will usually be designated Zone 8.

If you’re fulfilling out of just one warehouse, you have no choice but to routinely ship to Zones 5 and up, which is especially costly with large packages. Even with two warehouses, much of the country will be outside of the low-cost Zones 2 & 3. 

The simple trick is to ensure that you always have inventory close to the customer so that every shipment originates from Zone 4 or less; many call this a “distributed fulfillment strategy”. It requires 3 to 4 fulfillment locations strategically placed throughout the United States. Cutting your average shipped-to zone will drive savings straight to your bottom line.

Distributed fulfillment also comes with the enormous added benefit of enabling fast eCommerce order fulfillment – after all, if your product isn’t shipping far, then it won’t take more than 1 or 2 days to get to the customer. You can stop worrying about using extremely expensive services such as UPS 2nd Day Air and pay ground rates for customer-pleasing fast delivery.

This simple principle, though, is anything but simple in execution.

Based on Ground Shipping speeds

If you already have one warehouse, then it can be tempting to take it upon yourself to open 1-2 more US fulfillment centers across the country. While maintaining control of your customer experience is appealing, there’s never been a worse time to try to stand up merchant-operated fulfillment. Warehouse rents are at record highs, and Amazon has pushed the cost of labor as high as $22.50 per hour.

If you’re a marketplace seller, then you may already be using Amazon and Walmart’s in-house fulfillment networks, Amazon FBA and Walmart Fulfillment Services. These services will solve the distributed inventory challenge for you and enable fast shipping, but they also come with significant drawbacks. They’re designed for small products, so they both significantly raise prices for large items. Walmart, for instance, charges all items with a side length of over 96 inches or a combined length and girth over 130 inches as at least 90 lb no matter their actual weight, and then they add a $25 surcharge to boot.

Source: marketplace.walmart.com

Your last option is to outsource fulfillment to one 3PL with national fulfillment services, or to multiple single-location 3PLs. The best 3PLs will have 10 or more locations across the United States, so they can strategically place your inventory in the perfect position for your customer base. Be sure to use something like a 3PL request for proposal (RFP) template to get an apples to apples comparison between providers and the best deal.

Ship Heavy Items with the Right Carrier

Not every carrier is created equal when it comes to shipping heavy items, and relatively small adjustments in your package size and weight can have big implications when it comes to choosing the most cost-effective option.

FedEx’s guidelines on how to ship oversize items detail that they add an oversize shipping fee when packages have a girth of more than 130 inches. Note that if a package is over 150 lbs, or if its combined length and girth is more than 165 inches, then FedEx will classify it as freight and apply a completely different set of rules.

UPS governs its large items a bit differently. It will designate a package as a “Large Package” when its length plus girth combined exceeds 118 inches, but does not exceed its maximum size of 157 inches. In addition to assessing a Large Package Surcharge for packages that meet this criteria, Large Packages in UPS are also subject to a minimum billable weight of 90 pounds, regardless of their actual billable weight. 

Finally, USPS is less equipped to ship large packages, and thus has more restrictive rules. Their maximum size for most mailpieces is 108 inches in combined length and girth, but USPS Retail Ground has a slightly larger allowance of 130 inches. Regardless of size, the maximum mailable weight of any mailpiece sent through USPS is 70 lbs. Packages that are between 108 and 130 inches in combined length and girth are subject to a special oversized price on USPS.

These guidelines leave wiggle room for savvy merchants to optimize their shipping costs. Note that FedEx’s oversize charge only kicks in on packages with a girth of more than 130 inches, while UPS and USPS have lower limits. On top of that, the latter two’s limits are based on combined length and girth. If your package fits under FedEx’s bar for oversize, but over the bars for the other carriers, then you know that you can avoid surcharges by shipping with FedEx. 

You can take it upon yourself to negotiate with the carriers separately, or if you’re using shipping software like ShipStation, you can set manual rules and rate shop to scrutinize your orders for the best rates. On the other hand, our next gen shipping software will do the hard work for you by automatically comparing major and regional carriers against each other for each order. Without any manual intervention, the software will take quirks like differences in surcharges into account and ensure that you’re getting the best deal, every time.

Optimize Package Size

Small changes in package size can make a big difference in your final shipping cost. When you’re shipping large and oversize items, every additional pound usually adds $0.30 – $0.50 to your cost, which adds up quickly! 

Package size matters because of Dimensional Weight, or DIM weight for short. Major carriers introduced DIM weight around 2015 as a way to charge more for bulky, yet light products. The calculation is fairly simple: DIM weight is equal to L x W x H of your package, divided by 139. If the resulting number is larger than the weight of the package in pounds, then the shipping weight used to calculate price will be elevated to the DIM weight.

Source: JayGroup.com

In this way, inefficiencies in package design quickly add up to boost your shipping cost to well more than it should be.

Consider a package that is 24 x 24 x 24. This 2 ft cb package’s DIM weight is 99.45 lbs. If you’re shipping two pillows in that package, the actual weight is probably less than a tenth of the DIM weight. In that scenario, DIM weight increases your cost by $30 or more! What if you could shave 4 inches off one of the sizes by more efficiently compacting your pillows? 

Those 4 simple inches cut the DIM weight all the way down to 82.88 lbs, a nearly 20% reduction. That package would fall into FBA’s “Medium oversize” category, with a shipping weight between 70 – 150 lbs. FBA’s fulfillment fee rises by $0.44 for each pound in that category, so shaving the 4 inches off of one side of the package would save you over $7 per order.

Cahoot Ships Heavy Items at Low Cost

Cahoot’s nationwide network of over twenty warehouses provides affordable national eCommerce order fulfillment for eCommerce merchants. 

We cover each of the three key pillars of reducing the shipping cost of heavy items for you:

1. We’ll strategically distribute your inventory to 4+ locations
2. Our next-gen shipping software automatically finds the lowest cost shipping label that meets your delivery SLA
3. We work with you to shrink package size

Unlike other providers, Cahoot also has the flexibility to work alongside existing merchant-owned warehouses (if you have them). We know that many merchants with oversize goods carefully manage fulfillment themselves due to how difficult the process can be. Cahoot will analyze your existing network and customer base, then add a few locations of our own to seamlessly extend your network into a nationwide footprint. 

With this approach, you can continue to get value out of your existing assets while delighting your customers and your bottom line with affordable fast shipping.

Getting started with Cahoot is fast and easy – with pre-built integrations for major eCommerce channels like Amazon, Walmart, Shopify, and BigCommerce, we can get merchants started in as little time as it takes to send us your inventory.

Talk to one of our experts today and explore how we can be the key that unlocks the next level of your profitable eCommerce growth.

Offer 1-day and 2-day shipping at ground rates or less.

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It has been a difficult year filled with price increases for Amazon sellers that rely on Fulfillment by Amazon (FBA), and it’s about to get even more difficult.

On August 16th, Amazon announced that for the first time ever, they will implement a Holiday Peak Order Fulfillment Fee to take effect from October 15th, 2022 to January 14th, 2023. Per Amazon, the fee will be an average of USD 0.35 per item sold using US and Canada FBA. Even in isolation, a 35 cent increase in fulfillment fees can be difficult for sellers to absorb. Considering the enormous pressure that inflation is already putting on sellers and other FBA price increases, this could be the straw that breaks the camel’s back.

How has Amazon ratcheted up the price pressure on FBA sellers this year, and what can sellers do to fight back and protect their margins?

Amazon FBA Price Increases in 2022

Amazon has raised prices across the board for FBA sellers multiple times in 2022. How do they add up?

Source: Amazon Seller Central, Cahoot analysis

Annual Amazon FBA Fee Increase

It started with annual FBA fee increases that kicked in on February 1st. Order fulfillment fees increased from 2% on the low end to as much as 12% on the high end. Sellers with items in the Small Standard categories saw increases of 8%, or $0.22 to $0.27. For small products selling under $20 or even $10, this immediately shaved off a few points of margin.

On top of that, FBA Storage Fees increased by $0.08 per cubic foot, or 10.6%. Again, this increase can shave off a point or two of margin, making enduring profitability that much more difficult.

Finally, Amazon increased Removal and Disposal Fees by over 100% for many items. For instance, a SKU between 1-2 lbs will increase from $0.35 to $0.75. Sellers don’t usually plan on having to pay for removal, but nevertheless some products will fail to sell and need to be liquidated – especially in the cutthroat environment of Amazon’s 3P marketplace. This change raises the overall cost of doing fulfillment business.

Amazon Fuel and Inflation Surcharge

Just two months later, Amazon added a 5% “fuel and inflation surcharge” on top of the previously announced price increases. This kind of surcharge was a first for Amazon, and like the previous changes it adds another ~20 to 50 cents in cost to most items. Taken together with the Q1 increases, by this point FBA had already added a dollar or more to total fulfillment costs for many items.

Amazon Holiday Peak Order Fulfillment Fee

The new fee in question, the Holiday Peak Order Fulfillment Fee, will be applied on top of both of the February price increases and the Fuel and Inflation Surcharge. It will be in effect from October 15th of this year to January 14th in 2023, so for the entirety of peak.

At an average of another 35 cents on top of the other increases, there are few, if any, items that haven’t shot up over a dollar in cost to fulfill through FBA this year. When you consider that many smaller items only cost $3 or $4 to fulfill through FBA, that’s a staggering 25%+ increase in one of the most important operational costs in one year. Sellers with small, $10 items have now likely seen over 10% more of their revenue disappear in FBA fees in just over half a year. That, unfortunately, is fatal to most sellers.

The Top Amazon FBA Alternative: Cahoot FBM

Cahoot has created an Amazon-like ecommerce order fulfillment services network that makes low cost, fast and free shipping a breeze for every eCommerce sales channel – including Amazon FBM.

Cahoot is the next generation of tech-enabled order fulfillment networks. Unlike other networks that are collections of third party logistics warehouses (3PLs), Cahoot’s innovative approach empowers merchants across the country to fulfill orders for one another. Our peer-to-peer network is a collective of highly vetted eCommerce retailers who offer up excess warehouse space and resources to provide high-quality order fulfillment to other merchants. Since they fulfill their own DTC orders, they know how important top-notch fulfillment is, and they put the same care and energy into your orders as they do for their own.

Because Cahoot is leveraging excess capacity in merchant-owned warehouses, we’re less pressured by rising warehouse and labor costs than Amazon is. As a result, costs are typically lower than what you get with a traditional 3PL fulfillment company. With a P2P network, multi-channel fulfillment with nationwide 1-day and 2-day delivery at economy shipping rates is the norm.

Still unconvinced? Here’s a deep dive into how you can make the choice between Amazon FBM vs FBA – or decide to use a mixed strategy.

Offer 1-day and 2-day shipping at ground rates or less.

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