Against All Odds: How One Logistics Company Hopes to Topple Amazon Prime
Amazon has never been one to make friends, but these days the online retail behemoth looks to be in the business of minting enemies.
The list includes large publisher Hachette, which claims the retailer charges more for its e-books than it should, or refuses to ship non-virtual copies in a timely fashion. There's also its shareholders, who are miffed that Amazon's earnings weren't as strong as they'd hoped for in the second quarter. Or the class action suit, filed in February, by customers who claim the cost of its 48-hour shipping service Prime was secretly added to the cost of retail sales.
Particularly in its rush to get consumers their products within 48 hours, Amazon seems to be ruffling a lot of feathers. Add to this list a group of small retailers who also ship using Prime, who say they are getting slammed by the service, even when they're not selling anything.
Among their gripes: Amazon uses its ability to crunch big data from sales to test-market products and then undercut the competition, which includes its own merchants. And it's using competitors' products, once they're in Amazon warehouses, to fufilll each other's orders.
"Amazon doesn't need a buying department. They let the small retailer do the research for them, and then decide, based on metrics, to sell those products and then cut the merchant out," says Joseph DiSorbo, founder and CEO of Webgistix, a logisitics and fulfillment company, based in Las Vegas.
Amazon did not respond to a request for comment. Though, on its site, the company claims retailers' shipping costs are included in their fees with "no extra charge for Amazon Prime free two-day shipping."
Webgistix, which was founded in 2001 by DiSorbo, was acqiured last year by Japan's own e-commerce giant Rakuten. That company competes directly with Amazon for online sales and product fulfillment. Rakuten uses Webgistix for North American logistics, which includes everything from supply chain management to to freight oversight, and has recently launched its own two-day delivery service.
It claims to offer an alternative to Amazon's hyper-competitive environment. And that appeals to some online retailers.
"It's hard to sell on Amazon these days because things have gotten very sophisticated," says Andy Kim, founder and owner of Sunnyvale Wheels, an outdoor sporting goods merchant in Sunnyvale, California. "It is the size of the marketplace, where you can find any item, and you are competing against 10 to 20 sellers plus Amazon, all selling the same things."
Kim founded Sunnyvale Wheels in 2010, and in addition to Amazon, he sells directly from his own Website, as well as eBay, and more than two dozen other channels. He's opted not to use Amazon for fulfillment, and instead uses Webgistix.
Logistics and fulfillment are a complicated part of e-commerce. They involve everything from storing and locating items to figuring out the most expedient method for shipping them, as well as providing merchants with actionable information about the selling and shipping process.
There are dozes of companies that participate in the space, linking directly to online retailers at the checkout page. Amazon, which by some estimates has 32 million people signed up for its Prime service, has its own much-imitated and adimred method of fulfillment, for which it relies heavily on FedEx, UPS, and increasingly its own fleet of trucks for the last mile of shipping.
At the same time, Webgistix, which services dozens of Amazon's multi-channel merchants, says a growing number of its retailers are leery about using Amazon for fulfillment. And they are looking for an alternative.
Among the gripes DiSorbo has heard, Amazon uses warehouse slots of its merchants to fill orders of competing merchants, if they happen to be out of stock. That means the competing merchant loses out on a sale and worse, a new customer.
No Way Out
The lack of information about customer sales on Amazon rankles Kim, who says he gets little more than the name and an address of who's buying. That means Kim often misses out on the chance to develop a customer relationship. But he doesn't see an alternative to selling there, simply because the potential market is so big.
"Amazon has the size to outmatch you in their pricing, and that's a disadvantage for a smaller business," Kim says. "It is something we have to accept, and there is no way of out this, except to stop selling [on Amazon.]"