An expansion of Amazon’s supply chain services will give sellers the ability to distribute products in bulk from Amazon’s warehouses to fulfillment channels and physical retail stores not affiliated with the e-commerce giant.
The move, announced Tuesday morning, further broadens Amazon’s services for sellers beyond the virtual walls of Amazon.com. The company is pitching this larger set of services as a way for sellers to simplify their operations and reduce costs in moving products from warehouse to customer.
But it raises the question of whether sellers will become even more dependent on a company that already gets more than half their revenue, in some cases.
The news comes in advance of Amazon’s annual seller conference in Seattle this week, and amid reports that the Federal Trade Commission is poised to sue Amazon on allegations including unfair business practices in its logistics services for sellers and pricing for third-party products.
Combined with the company’s existing seller services, including Amazon Warehousing and Distribution, the new Multi-Channel Distribution service completes the basic infrastructure of what the company is now calling “Supply Chain by Amazon,” which it describes as an end-to-end set of services to move products from manufacturer to customer regardless of sales or distribution channel.
“The reality is, sellers are going to sell through multiple channels,” said Dharmesh Mehta, Amazon vice president of Worldwide Selling Partner Services, in an interview this week. “It’s a rational thing for brand owners to do, and so we want to support them across all the sales channels.”
With the expanded offering, Amazon is stepping up its competition against companies such as Shopify, Walmart, WareIQ, and others than offer various forms of e-commerce fulfillment and distribution for sellers.
San Francisco-based Flexport has likewise been expanding its own supply chain services into an end-to-end solution, including its acquisition of Shopify Logistics and Deliverr, before the abrupt departure last week of CEO Dave Clark, a former Amazon executive.
Flexport announced its own new end-to-end fulfillment service for small businesses a few hours before Amazon on Tuesday morning, and Flexport is planning its own event for customers in Seattle on Tuesday night, on the eve of the Amazon Accelerate seller conference.
Amazon’s expanded supply chain initiative builds on the core Fulfillment by Amazon service that traditionally stores sellers’ products in Amazon fulfillment centers and delivers them to Amazon customers. The company also offers an existing service called Multi-Channel Fulfillment, which supports Amazon’s Buy With Prime program to fulfill orders made on competing e-commerce websites.
Whereas the existing Multi-Channel Fulfillment service ships individual packages, the new Multi-Channel Distribution service will move pallets of product in bulk.
“Slowly but surely, Amazon is replicating the AWS playbook by broadening the availability of its fulfillment network,” wrote Wedbush analyst Scott Devitt in a note to clients, referring to the Amazon Web Services cloud platform. “Today’s announcement is another example of Amazon’s ongoing platform democratization, enabling monetization of incremental eCommerce and retail transactions by leveraging existing infrastructure.”
Amazon’s Mehta gave the hypothetical example of a seller currently working with multiple supply chain partners, requiring them to split up the goods from a shipping container for different sales and distribution channels. If they make a mistake in the allotment for one channel, it’s difficult to move products around.
“Having a single pool of inventory in bulk storage is helpful, to be able to optimize from there,” Mehta said. “All of those things drive more efficiency and lower costs for the seller. And so there’s a bunch of reasons it makes sense, not only for us to do, but in terms of the benefits it provides [to the seller].”
A February report by Marketplace Pulse, based on its review of financial documents from a sample of anonymous Amazon sellers, said more than 50% of their revenue is now going to Amazon, primarily in the form of fulfillment fees, advertising costs, and referral fees.
“Sellers are paying more because Amazon has increased fulfillment fees and made spending on advertising unavoidable,” the Marketplace Pulse report said.
Amazon’s revenue from third-party seller services topped $32 billion in the second quarter, up 18% year-over-year. Seller services were responsible for more than 24% of the company’s overall revenue for the period, second only to online store sales among Amazon’s major categories of revenue.
Other new seller services announced by Amazon on Tuesday include:
- Automatic discounts on cross-border transportation for Amazon Global Logistics customers;
- The expansion of Amazon Warehousing and Distribution to all customers, with reduced prices;
- Automated inventory replenishment through Fulfillment by Amazon.
Updated with analyst comment and details of Flexport’s new service.
