Amazon got us hooked on overnight delivery – now small businesses are paying the price

By Christopher Mims | Photographs by Gavin McIntyre for The Wall Street Journal 

Things were going well for Charleston Gourmet Burger, a small family business based in South Carolina. Founded by husband-and-wife team Chevalo and Monique Wilsondebriano in 2012, it has sold its burger sauces and marinades in thousands of stores across the United States, on the QVC shopping chain and directly to customers via his website. Just before the pandemic caused lockdowns in March, the couple made the fateful decision to stop selling in stores and focus on online sales.

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

In the age of Amazon, selling online is one thing, but delivering products to customers fast enough to make them happy is another. This is especially difficult if, like the Wilsondebriano, a merchant does not sell through Amazon, but still feels obligated to deliver on the e-commerce giant’s promises of free and fast delivery.

Their sales have plummeted from over $ 20,000 per month to as little as $ 3,000 per month, says Ms. Wilsondebriano. The family had no choice but to pack and ship the orders themselves, as they could no longer afford the third-party carrier they used.

Still, many potential buyers have complained about the shipping cost – around $ 8 on a $ 40 order – and that the sauces and marinades took too long to arrive, says Wilsondebriano.

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

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

America’s small and medium online merchants are separated into winners and losers based on their ability to adapt to changes in logistics driven in large part by Amazon and other large retailers. Amazon’s continued hiring frenzy and warehouse building frenzy makes Prime shipping faster and more free.

As a result, even merchants who don’t sell on Amazon are rushing to ship the products as fast as they can, either eating up the extra costs or jacking up prices and watching their sales drop, all while dealing with the ups and downs. supply chain bottlenecks.

For the Wilsondebriano, this means a daily ritual involving the whole family.

Every two weeks, pallets of goods – ranging from 1,500 to 3,000 bottles – are dropped off from the factory to a workshop adjacent to their garage, which serves as a makeshift warehouse. In addition to running the online advertising campaigns that they use to increase sales, Ms. Wilsondebriano and her husband have to process every order that comes in from the website.

In the moments of inactivity between distance classes held on Zoom, their 15 and 16-year-old daughters help pack boxes and write personalized notes thanking customers. Their 25-year-old son, eldest daughter and Ms. Wilsondebriano’s mother all participate when available.

After they put labels on the boxes, the husband and wife team loads them into an SUV and drives them to the local post office.

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

But it’s not an assembly line – let alone a warehouse filled with humans and robots, moving in a software-powered workflow meant to lower the cost of every online purchase.

Amazon was one of the first e-commerce companies to turn its supply chain into a competitive advantage, said Matt Crawford, general manager of shipping at BigCommerce, which helps merchants build and manage online stores. Once Amazon created its Marketplace, where anyone could sell merchandise, and Fulfilled by Amazon, its logistics department for the warehousing and shipping of the merchandise that these companies sold on Amazon, this benefit s is extended to all sellers willing to pay for these services.

Amazon has continually accelerated the rate at which most of the products sold on its site reach shoppers’ doors, offering first two days, then one day, and now frequently same-day delivery, while it deploys its Prime Now service on its main site. and app.

This has left sellers who want Amazon’s coveted Prime badge – which indicates fast shipping and significantly higher sales – with a tough choice, says Steve Denton, managing director of Ware2Go, a United Parcel Service subsidiary that matches small and medium enterprises. online merchants with warehouses from which to distribute their goods.

Sellers can either pay increasingly expensive fees to Amazon to store and ship their merchandise from the company’s own facilities, he says. Or they can ship from non-Amazon warehouses that meet the strict requirements of Amazon’s Seller Fulfilled Prime program, including nationwide availability and fast shipping. Some sellers, especially those who sell large items or don’t usually sell out quickly, find this option more affordable.

“You are going to see an ongoing elimination of merchants who cannot solve the supply chain problem. [of online sales]Shipping costs for traders, through carriers like UPS, the US Postal Service and FedEx, are rising 5% to 7% this year, as demand skyrockets, ”says Mr Crawford. And since Covid has disrupted supply chains around the world, Merchants must pay more to stock a larger supply of merchandise. Meanwhile, demand for faster shipping means retailers need to figure out exactly how many items to store in which warehouses are spread across a nationwide network, he adds, discouraging retailers from keeping items in their warehouses for a long time.)

To be part of the Seller Fulfilled Prime program, sellers must store merchandise in warehouses from which customers can be contacted within one or two days of delivery, for most views of a product on the site. and the Amazon app.

Amazon’s success with its marketplace has spawned many imitators. The things you buy from the websites of Walmart, Target, Wayfair, and dozens of other big merchants can be sold and shipped not by these companies, but by smaller companies that offer these retail giants reduced sales and may pay other fees in exchange for referral.

The proliferation of the market model and the way Amazon is shaping customer expectations means the growing demands the company places on primary sellers spill over into the entire e-commerce industry, Denton says. These other marketplaces are continually changing their own seller fulfillment requirements based largely on Amazon’s standards.

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

For small to mid-sized online sellers, keeping up with the latest Prime demands requires what until recently were considered extraordinary measures. This means operating warehouses at least six days a week and sometimes resorting to expensive second day or night shipping.

Some sellers are thriving in this new world. In the early 2000s, Lee Siegel founded ECR4Kids, a manufacturer of ready-to-assemble children’s play furniture and equipment. The company sold to traditional buyers, like resellers to school districts, as well as big box stores and even Amazon, but only as a wholesaler and seller. At the end of 2018, to increase his sales, Mr. Siegel put some of his merchandise up for sale directly on the Amazon marketplace.

When the pandemic hit, Mr Siegel thought his sales were going to explode, but instead they exploded, as parents of children learning at home rushed to buy things like desks, chairs. and lockers for children.

Around the same time it started selling in the Amazon Marketplace, ECR4Kids transitioned from running its own warehouses to outsourcing its execution to third-party logistics providers, including Ware2Go.

Previously, says Siegel, fulfillment services could be provided by anyone with “a forklift, a loading dock, and a large empty warehouse with shelves. But to survive against Walmart, Costco, Amazon and Wayfair, you need a completely different approach to customer satisfaction and speed of shipment. ”

Some are turning to companies like Productiv, which operates six distribution warehouses. While Amazon relies on its own bestiary of shelf-moving and packaging-sorting robots, companies like Productiv are testing systems with “tracking” robots that follow warehouse workers as they walk through. rows of shelves, then transport to conveyors whatever items humans choose from those shelves.

As in many other industries, this automation is in part a reaction to rising wages and a labor shortage. Demand for warehousing and order fulfillment is setting and breaking month-to-month records, leading to both increased competition for these services and a wider variety of them.

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

Additionally, the family will begin to experiment with using Amazon to sell and fulfill orders. Amazon launches pilot program to provide additional assistance to black business owners like the Wilsondebriano, including free advertising, free storage and processing of returns, waivers of certain fees, free consulting services and more again. Over the next two weeks, around 90% of the family’s website orders will be fulfilled by Amazon and their products will appear in the Amazon Marketplace.

“Exempting so many fees seems like a win-win situation,” says Wilsondebriano. “But I don’t know how it’s going to be.”

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June 12, 2021 00:14 ET (04:14 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.

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