This is a guest post from the Zentail team on their interview with Deliverr Co-Founder Michael Krakaris.
Fulfilling orders for one channel is hard enough. When you’ve got multiple channels in the mix, fulfillment gets exponentially more complex—and many sellers wind up testing various options before finding the one that makes sense, both financially and operationally.
In an “Ask the Ecom Experts” interview with partner Zentail, Deliverr Co-Founder Michael Krakaris offers some guidance by laying out the different fulfillment options available today. He explains how to pick the right solution and how to offer Prime-like delivery on every channel you sell on. Watch the full interview below or continue reading for key soundbites.
The Challenges of Working with a 3P Warehouse (8:50)
There’s a reason why many sellers opt to outsource fulfillment; working directly with a third-party (3P) warehouse can be brutal.
First, there’s the negotiation process. At this stage, you need to be able to determine the expected number of orders that will go through the warehouse. Many sellers who’ve never sold on a certain marketplace will blindly guess 10% of their normal Amazon sales—but oftentimes, that number is incorrect.
From there, it’s a slippery slope. Warehouses will base your pricing on that projection. If you fail to perform as expected, then the warehouse may threaten to get rid of your inventory and/or terminate your contract.
You’ve also got various fees to consider: receiving fees, pick-pack fees, box fees, etcetera. You might be limited in the type of packaging you can use or the carrier you can ship through. Not to mention, if there’s a hiccup during the fulfillment process, disputing a warehouse issue or charge can get messy. This only scratches the surface of the potential challenges you could face when dealing with the wrong warehouse.
“Also the warehouse doesn’t want you to go to multiple warehouses, even if that one warehouse company has four warehouses in their network. They want to put you in one because that’s easier for them to track. When you go to multiple, it’s harder. So for them, they’re trying to optimize the amount of revenue out of the fixed asset they’re paying on, so they don’t want to spread you out at all. But you as a business want to be spread out because you want to get faster delivery speeds.”
In a nutshell, it’s usually easier to work with a company that already has an “in” with multiple fulfillment centers.
What Deliverr Offers and How It Works (6:06 and 13:10)
Deliverr was born out of the idea that sellers should be able to connect with a large, diverse network of warehouses without having to set up the infrastructure or negotiate contracts themselves. Think: Twilio’s ability to link software developers to telecom networks without requiring users to deal with AT&T or Verizon directly.
Deliverr lets you tap into a network of 3,000+ warehousing companies across the country from one self-service platform. You can enable two-day (even next-day) shipping across various eCommerce marketplaces and benefit from FBA-like services instead of employing your own warehouse workers.
While getting started with a 3PL could take anywhere between four to eight weeks, getting setup with Deliverr may take as short as 48 hours.
“[Sellers] didn’t have to talk to anyone. They didn’t have to fill out any contracts or questionnaires or anything. They literally just get the product, send it and go. “
At a time when buying behaviors are fluctuating rapidly, this capability is especially important. Deliverr’s asset-light model makes it possible to scale operations quickly and transfer inventory to multiple locations as needed.
How Important is 2-Day Shipping? (23:40)
The short answer: very. Sellers who’ve enabled fast shipping on their Shopify stores, for example, have seen major benefits.
“[CPG sellers are] seeing half their Cost Per Acquisition (CPA), which is insane. Usually a 5% improvement in CPA is enough to really increase investment. Here you’re seeing it decline by 50%…when they’re putting two-day or next-day on a consumable item.”
On the marketplace side, 2-day shipping tags are the norm on Walmart. In fact, some Walmart category pages are completely dominated by Deliverr sellers (since Deliverr is Walmart’s official fulfillment partner, sellers are pre-approved for 2-day shipping tags).
“If you look at the adoption curve [for two-day shipping], you’re now getting further down the curve. I wouldn’t say you’re at the late adoption phase, but you’re getting near your peak for certain verticals…I think though, what has happened is that you do see a little bit of reduction on the early movers. Initially, you’re maybe seeing three, four times improvement of sales on two-day. That has come down. I think Walmart gave some established numbers on the webinar two weeks ago, and they came out saying it’s around 38% now lift-in-sales, two-day versus standard.”
At the same time, the Walmart Marketplace overall has grown. Free 2-day shipping has made its products more attractive to buyers, and soon, next-day shipping could propel interest even more.
Outside of Walmart, marketplaces like Wish are also working on fast-shipping programs in partnership with Deliverr. Two-day is quickly becoming the industry standard. Anything slower could hurt marketplaces’ and sellers’ chances of landing a sale over a competitive site or merchant.
FBA, WFS—or Deliverr? How Do They Compare? (32:30)
Just like Walmart and its newly-minted fulfillment services (WFS), most marketplaces may try to offer their own fulfillment services. But these programs, including Amazon FBA, are designed for single-channel usage. Even Amazon Multi-Channel Fulfillment (MCF) puts sellers in a precarious position because other marketplaces will reject FBA packages, and Amazon itself will deprioritize MCF orders for Amazon orders.
“When you look at something like what WFS brings to the table, it works really well if you’re just going to sell on Walmart, and that’s what it’s there for. It’s there to help you if you’re just gonna sell on Walmart. But if you want to sell in a lot of different places, it’s not going to help. It’s not going to put a two-day badge on your Wish listing. It’s not going to put a badge on your eBay listing.”
For sellers with a highly-distributed channel mix, like Zentail sellers, Deliverr makes more sense. Deliverr offers greater flexibility over where your inventory gets stored, how it’s distributed to account for varying sales levels across channels and different shipping speeds. More than 95% buyers may see your items with fast-shipping tags, whereas less than 30% of buyers typically see badges on seller-fulfilled products.
“We see the world outside of Amazon getting more fragmented, not less…I don’t see it getting more consolidated. In a world where it gets more consolidated…putting your inventory with a certain sales channel makes more sense. In a world where it gets more distributed, it makes less sense.”
COVID-19 Impacts on Brands: “Evolve or Die” (37:30)
Diversification has become the common rhetoric in the wake of the COVID-19 coronavirus pandemic. The pandemic has created a sense of urgency among brands to start putting more money behind their online strategies.
What was once viewed as a supporting asset to physical stores is now the lifeline for many brands; online D2C channels are starting to take priority.
While evolving to an eCommerce-first company may look different depending on the vertical or type of business, it’s a necessary step to remain successful in the post-coronavirus world.
“I think, unfortunately, you are going to see a section that just can’t evolve. As with any big trends, any big movement, there’s going to be a subsection of merchants that just cannot change their systems and they will go away. [But] there will be a subsection that do find a way, that do find that urgency and they do evolve. And it’s certainly going to be painful for those companies to do that. It’s gonna be a lot of work and a lot of moving parts to be able to make it happen, but I do think you are seeing a fundamental shift there where it is ‘evolve or die.’”
As you look to go multi-channel, consider which fulfillment option gives you the most freedom to scale and stay in control of your operations in the long run. Often, a channel-owned program can only offer advantages on its own marketplace. A 3PL, on the other hand, can give you more control and opportunities to expand.
For sellers doing larger volumes across more sales channels, Deliverr offers the greatest coverage with its extensive network of warehouses and logistics solutions.