Small shipping firms are chasing Amazon’s market share

A growing number of startups are looking to poach business from Amazon's costly fulfilment services.
2 November 2018

Shoppers Peter Freese, right, and Peter Ray check out pre-made meals at the Amazon Go January 22, 2018 in Seattle, Washington. Source: AFP

Amazon’s monopoly on e-commerce is no secret, but its grip on the global market isn’t just down to sales of its own stock.

In the third quarter of this year, over half (53 percent) of shopping behemoth’s paid units were sold by its network of third-party sellers. In 2017, the company took in $US31.9 billion in revenue for its Marketplace sellers— a near 50 percent increase the year prior.

For Amazon itself, revenue from seller services accounts for its second-largest segment (behind its AWS cloud platform). It’s big business, and that’s because companies can build a fully-functioning e-commerce business on the platform— from inventory management to fulfilment— for the cost of a (growing) chunk of sales.

This full-service proposition is attractive to online retailers who know that reliability and speed of delivery can be the difference between an abandoned basket and a loyal, returning customer.

To this end, Amazon’s Prime delivery service is a game-changer, but that means coughing up to shore up stock in the company’s own Amazon Fulfillment Centers (AFC). And while these depots do also cater to the retailer’s logistical needs for channels outside of its own Marketplace, including eBay and Shopify, AFC members cannot attain Prime-level delivery speed on orders made outside of it.

For smaller e-commerce sites with a spread of sales channels, the cost and limitation of these services can be frustrating, and that’s precisely why a new breed of e-commerce warehousing and shipping specialists are entering the market with ambitions to compete with the pace of Amazon, without the same restrictions.

One such startup is Deliverr, whose co-founder, Michael Krakaris, told the industry publication FreightWaves, “You can send inventory into the Deliverr network which we store and once orders come in from an e-commerce channel, we get the order, pick, pack, ship and deliver the order to the customer.”

According to Krakaris, the objective of Deliverr is to provide a software layer to orchestrate where inventory sits in relation to buyers, and how these orders are shipped out based on the carrier.

“There wasn’t a service that had clear pricing or had quick onboarding outside of FBA – which was a great solution for Amazon, but wasn’t great for any warehouse outside of it.”

But Deliverr is not alone; the market for providing competitively-priced, full-service alternatives to Amazon’s fulfilment service is extensive. Parcelhub, Cloud Fulfilment and EasiLogic – among no shortage of others – promise to receive, ship, handle orders, and cover packaging costs for up-and-coming e-commerce sites.

Prices for these services vary, but ultimately they aim to be at least on par with Amazon. The complete fulfilment of a phone case order, for example, comes in at US$6.05 for two-day delivery and US$0.025 per cubic meter of warehouse storage.

So, while Amazon’s monopoly on the e-commerce market certainly won’t dwindle, when it comes to giving the smaller retailers a helping hand and other options from the offset, a fleet of startups await to make scale a little less painful on the top-line.