It’s been another big couple of weeks. Keeping up with the latest store closures, emerging tech, and what Amazon is doing could easily be a full-time job. Luckily for you, it’s ours.
This week we take a look at:
- FedEx moving to every-day delivery
- The strategy behind Nordstrom Local
- Amazon’s rumored small-supplier purge
Let’s talk logistics
Through rain, snow, and now, weekends
On Thursday, FedEx announced that its FedEx Ground subsidiary will begin delivering seven days a week starting January 2020. The move comes as a way to “further serve the fast-growing eCommerce market.” According to FedEx president and COO, Raj Subramaniam, “the average daily volume for small parcels in the U.S. is expected to double by 2026.” So, FedEx is proactively building out the operations to support growing demand. But, this isn’t an overhaul—FedEx already delivers six days a week and ramps up to seven during the holiday season. However, the official move demonstrates that delivery speeds aren’t slowing down anytime soon. The demand for faster, cheaper delivery will only continue to increase and everyone from retailers to logistics providers will have to keep pace.
Via Supply Chain 247
According to a recent study by Deloitte, the market for U.S. warehouse space is forecasted to cool down slightly. Within the next three years, they predict that new construction will (finally) outpace demand and the “availability of warehouse space is likely to rise to 10.3% by 2023.” Currently, the industrial availability rate stands at a record-low 7%. This prediction is estimating a 47% increase in available capacity. That’s huge. As a result, retailers will have more flexibility in how they manage their warehousing and fulfillment networks and, ultimately, how effectively they can move goods.
One-day is not enough
Not to be outdone by Amazon and Walmart’s one-day shipping plans, Target announced that it is also investing in its delivery promise—expanding its same-day delivery services. This comes after a report revealed it had 5% YOY growth in its Q1 earnings—growth that is largely due to its “same-day fulfillment services including Order Pickup, Drive Up, and delivery through Shipt.” They have yet to match Walmart and Amazon’s free-ish one-day delivery offerings, but that doesn’t mean they aren’t competing. By offering their customers a broad range of delivery options, they’ve created a strategy centered around convenience that, for many, may be more appealing than just a standard one-day delivery promise.
Via Business Insider
Nordstrom goes Local
Facing a Q1 sales slump, Nordstrom is course-correcting with a greater focus on Nordstrom Local—its inventory-free stores that offer services such as online order pickup, returns, tailoring, manicures, and coffee. Chief executive, Erik Nordstrom, told analysts the stores are the “model for the future" and a way to “engage with customers across channels and services.” Erik Nordstrom has said that 50% of their in-store visits start with an online session, making this process one their customers are already taking advantage of. Except now when they come to the store, they’ll be even more incentivized to hang out for a while.
While the model is currently working, Neil Saunders, managing director of GlobalData Retail, points out that it’s more suited to urban areas rather than rural ones where “Nordstrom's prices are often too high and its assortment often fails to resonate.” He notes that “there is still a question mark over how Nordstrom can turn around performance in stores outside of the big cities.”
Via Retail Dive
Costco has a website?
Costco, the place where your mom buys toilet paper in bulk, is finally stepping into the 21st century and prioritizing its eCommerce strategy. At present, eComm only accounts for 5% of their sales, but where they are able to find value is in pushing goods that don’t move as well in stores. These include seasonal goods, that otherwise would only be in the stores for a few weeks, and bulky items like home appliances. They’ve added buy-online-pickup-in-store (BOPIS) options and lockers to make that process more efficient. But they still have a long way to go, and digitally native competitors like Boxed have already figured out a way to tap into the online, wholesale market. Costco has a strong customer base, but the decision to upgrade their website’s UX and grow that sales channel is the next obvious step. Though they're a little behind the curve, there’s no time like the present.
What’s Amazon up to?
Scaring its small suppliers
Amazon vendors that sell less than $10 million in product a year got some very scary news. Citing a number of anonymous sources, Bloomberg reports that Amazon is planning a purge of thousands of its smaller wholesale suppliers. The goal is to “cut costs and focus wholesale purchasing on major brands like Procter & Gamble, Sony, and Lego...That will ensure the company has adequate supplies of must-have merchandise and help it compete with the likes of Walmart, Target, and Best Buy.”
Amazon is denying these claims, tweeting that, “We review our selling partner relationships on an individual basis as part of our normal course of business, and any speculation of a large scale reduction of vendors is incorrect.” But Forbes outlined four reasons why it’s very possible Amazon could do this:
- For Amazon, managing Sellers requires much less work than managing Vendors, as Sellers are responsible for managing and planning their own inventory. Moving to a Seller-only approach for its smaller accounts would save Amazon a significant amount of resources.
- Currently, Amazon is managing two retail platforms: Seller Central and Vendor Central. Dropping Vendor Central would save Amazon money on platform maintenance.
- The margins are better for Amazon with Sellers than Vendors because they get a 15% referral fee on each sale.
- Moving to a Seller-only approach requires no capital investment from Amazon, and removes the risk of having inventory that may not sell.
If this does come to fruition, mom-and-pop Amazon Sellers who formerly sold in bulk to Amazon will instead have to sell directly to customers—drastically changing their business model. According to Anderson Salgado, a former Amazon Vendor manager, “smaller Amazon vendors should prepare now by learning how to sell on Amazon’s marketplace to make the transition more smoothly.”
FLEXE news & events
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Move fast and don’t break things
Our Co-Founder and CEO, Karl Siebrecht, was interviewed on the Leaders in Supply Chain podcast about how on-demand warehousing is the AWS of logistics, the challenges and rewards of creating a new category, and what greatness means at FLEXE. Check it out here.