Today, they attempted to clarify the impending cuts by stating, “We will be making changes to the SFN (Shopify Fulfillment Network) to help merchants compete with big-box retailers, such as prioritizing two-day shipping at affordable prices and access to easy returns for U.S. shoppers.”
The company is expected to update sellers and the market on their strategic shift during its earnings call next month, but in the meantime, merchants are confused.
How does scaling down the number of SFN fulfillment locations in the US help merchants using SFN access affordable two-day shipping, as they attest?
Wedbush analyst Ygal Arounian sums up Shopify’s challenge well: “Shopify is nowhere close to building a type of fulfillment operation at the scale of Amazon, and investors should not expect anything like that in the near term”. Investors have taken notice of Shopify’s recent struggles – the stock is down nearly 50% from its November high of 1,690.60.
We’d assert that this change is more important for merchants than investors, as it reveals that Shopify Fulfillment Network isn’t an FBA alternative, and instead is moving in the opposite direction.
Merchants that want to power their sales with affordable, reliable fast shipping will need to look elsewhere for a fulfillment solution.
Shopify Fulfillment Network’s Pros & Cons
Like Amazon FBA, Shopify is building its own logistics solution for eCommerce sellers, Shopify Fulfillment Network.
It combines seamlessly with a merchant’s Shopify account, making it an easy way to start fulfilling eCommerce orders for someone with a new DTC store. It also comes with software that helps merchants with order and inventory management, and it boasts a dedicated customer service team that helps merchants overcome operational challenges.
Unfortunately for merchants with big growth ambitions, it’s focused on fulfilling Shopify orders and not orders from other channels. On top of that, it doesn’t offer fast shipping by default. Merchants that want to win on multiple channels will likely need an additional 3PL for their other orders. More importantly, they won’t be positioned to offer affordable fast shipping to their customers. With Amazon and other national fulfillment services setting the bar at 1- and 2-day free shipping, merchants that rely on SFN will be left at a significant disadvantage.
Cahoot: The Best Shopify 3PL
If you need a fulfillment solution that keeps up with Amazon FBA at always-affordable prices, give us a call.
Unlike Shopify Fulfillment Network, Cahoot’s fulfillment network has no trouble keeping up with FBA. We’ll help you level the playing field with marketplaces and delight your customers with a stellar, Amazon-like delivery experience – right on your Shopify store.
It sounds expensive, but our innovative peer-to-peer model offers low-cost fast fulfillment by design. As a result, our pricing is typically lower than that of other top providers, but we can beat them on fulfillment speed and reliability.
And of course, we don’t stop there. We have pre-built integrations with major marketplaces to fuel your multi-channel growth.
If you’d like to find out how Cahoot can help your business, please get in touch with us. We can’t wait to show you how Shopify fulfillment was meant to be.
Offer 1-day and 2-day shipping at ground rates or less.
Sellers seeking a better deal have often turned to Third Party Logistics Providers (3PLs). They do so with the ambition of not just regaining control and autonomy over their logistics, but also boosting their profits.
The network collaborates to speed up order fulfillment and distribute inventory closer to the customer. The objective is to reduce shipping costs and improve customer experience with better and faster shipping.
Cahoot is an ecommerce network where ecommerce brands and retailers can join as order fulfillment partners and monetize their spare warehouse capacity, similar to Airbnb
FedEx Express and FedEx Ground will increase shipping rates effective Jan. 7, 2019 by an average of 4.9 percent, while FedEx Freight will increase by an average of 5.9 percent.
The change will impact the following: Express package and freight standard list rates for U.S., U.S. export and U.S. import services. In addition, there will be changes to FedEx surcharges and minimums also effective on Jan. 7
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations
Amazon is a competitive platform. You need to have a quality product, excellent listing content, and plenty of reviews to catch the attention of busy consumers
On June 21st, Shopify launched a brand-new service: B2B on Shopify. For over 15 years, Shopify has been synonymous with Direct-to-Consumer (DTC) ecommerce. Now, they see their next great growth frontier in the promise of B2B ecommerce.
When you ask the average American about ecommerce, their mind probably jumps first to Amazon Prime and their ability to get anything they want delivered to their front door. Little do they know, business-to-business shopping is already much more digitized than retail shopping!
According to Statista, 14.2% of retail sales happened online in 2021, and they expect that number to rise quickly to 21.9% in 2025. In contrast, Gartner expects that a whopping 80% of B2B sales interactions will happen on digital channels by that same date.
With numbers like those, it’s no surprise that Shopify is looking to muscle into B2B ecommerce.
In this article, we’ll cover the basis of B2B on Shopify, share our thoughts on how it will affect the broader ecommerce industry, and give a few tips on what you can do to take advantage of this new offering.
What is B2B on Shopify?
Per Shopify’s press release, B2B on Shopify is “a new set of features built specifically for B2B merchants, directly into our platform, and with access to all of Shopify’s most powerful customization features like store themes, discounts, and Functions—and it’s all included with Shopify Plus. This will allow you to manage your entire ecommerce business—whether it’s B2B, DTC, or both—all in one place.”
Business-to-business sales are significantly different from direct-to-consumer sales, so it’s only natural that Shopify needs to launch an entirely new service with a full suite of features to enable B2B ecommerce on its platform.
Shopify B2B Company Profiles
First and foremost, different business purchasers require different experiences. Almost all DTC online stores offer their customers the same experience: they see the same homepage, the same products, and the same prices. At most, customization comes down to whether the user can log into a saved profile.
In contrast, B2B purchasers need different experiences from one another. Some businesses will negotiate better prices and terms than others, so of course a seller doesn’t want the businesses paying more to see that others are paying less. Adding to that, businesses may have multiple purchasers that are in charge of procuring different items, so they need the ability to add different people to an account with varying levels of permissions.
Source: Shopify.com
B2B on Shopify will enable its merchants to create company profiles that save all of this differentiation and more. With it, they overcome one of the biggest hurdles involved in moving from DTC to B2B ecommerce.
B2B Price Lists
Building on the above, prices for business-to-business commerce are multiple degrees more complex than prices for direct-to-consumer sales.
B2B on Shopify will enable merchants to create variable price lists for all of their products and product variants, and it will also enable easy currency modifications. In this way, sellers will be able to manage complex international B2B ecommerce smoothly.
B2B Payment Terms
Business-to-business transactions are resolved with up-front payments much less frequently than DTC transactions, so a feature for payment terms is absolutely essential. In addition to assigning different payment terms to different merchants, B2B on Shopify also will help its users track, sort, and collect on payments as they become due.
On the other side of the transaction, businesses will be able to see their payment terms, check out with their approved terms, and keep track of upcoming payments within their company profile.
Shopify will also provide a personal checkout experience for business purchasers pre-loaded with assigned payment terms, payment methods, and wholesale discounts. The B2B Checkout feature thus will seek to help streamline conversion and keep customers happily ordering
Why is Shopify Targeting B2B Ecommerce?
In their announcement, Shopify exhorts its users, “With an expected global market value of $7.7 trillion, now is the time to expand into wholesale.” Their logic for why their users should wholesale also succinctly explains why they’re launching B2B on Shopify: there’s a ton of money to be won!
Ecommerce merchants are used to hearing the advice that they should sell to consumers on multiple channels, and many now are pursuing multi-channel growth strategies across their DTC sites and online marketplaces. Shopify is betting that the next big growth frontier won’t be DTC at all; instead, ecommerce DTC brands are going to start trying to win shelf space in physical retail.
Shopify may be feeling the need to take some big swings as the walls of DTC ecommerce seem to be tightening.
Source: Google.com
After a meteoric rise from $138 per share at the start of 2019 to $1,690 near the end of 2021, Shopify’s share price has crashed back to earth. Once tagged as the upstarts that would wrest control of ecommerce away from Amazon, they simply aren’t seeing the GMV growth that you’d expect from a giant slayer.
Moreover, Amazon is now the prime mover in the Shopify vs Amazon battle. Their new purchasing and fulfillment service, Amazon Buy with Prime, is a scary shot across Shopify’s bow. In short, Buy with Prime will allow DTC ecommerce brands to install the Prime buying and delivery process on their own website, thus offering fast and free shipping to their customers. If Shopify doesn’t allow its merchants to integrate with Buy with Prime, they’ll be at a disadvantage to all those that can use the service. If Shopify does allow the service, though, they’ll give up control of payments to Amazon. This would be devastating, as they rely on growth from merchant services like their payments solutions to drive their bottom line.
So, with DTC ecommerce only becoming more competitive, more saturated, and more difficult to win, Shopify is betting that by opening a new front with B2B ecommerce, they’ll go where others can’t and quickly grab market share.
How Can B2C Sellers Add B2B?
Shopify exhorts its users to add B2B to their growth strategy – if only it were that simple! Business-to-business sales are a completely different ballgame from direct-to-consumer. We won’t be able to teach you how to add a fundamentally different sales channel in the space of a few paragraphs, but we can at least share the basics.
First, what’s similar: you’ve learned to tell your brand’s story to win consumers, and you’ll need to do the same with business purchasers. Everyone loves a good story and a compelling brand, and it will help you stick in the mind of prospects. Moreover, a great story will help the retailer sell your product once it’s on shelves, so they need to know that your product will sell.
Next, start local. Consumers like to buy local, so retailers like to stock local products. Go door to door with samples, and talk to your local small business owners! You can connect with them as a fellow small business owner, and if your product is good, they’ll be able to find a place for it as the next best thing to come out of your town.
Once you’ve got your foot in the door and a little track record of success in business-to-business wholesaling, you can think bigger. Trade shows are a fantastic place to meet tons of retailers at once (including big regional and national ones) and to get your product into as many hands as possible. This is just the start of your sales journey, though, and where things really start to diverge from DTC ecommerce.
You’ll have to learn to love the long sales cycle: wholesale deals don’t happen overnight (or even over a month, or a year!). Retailers rarely have shelf space just lying around, waiting for someone to fill – so you have to develop relationships with them and either convince them to knock off a different product, or be ready to snap up an opening. We won’t try to teach you business-to-business sales here, but suffice to say that you’ll need to learn about how to build long-term relationships with potential buyers and to speak to their needs.
Finally, you need the right tools! This is where not only B2B on Shopify comes in, but also a whole host of other tools that make B2B hum. For instance, you’ll likely need a Customer Relationship Management (CRM) tool to manage long sales cycles with retailers. And you’ll need a fundamentally different Shopify fulfillment strategy that sends infrequent, large shipments to repeat customers instead of small orders all over.
Shopify B2B Fulfillment: Cahoot
Whether you’re just thinking about starting up B2B sales, or you’re an old pro who’s going to take advantage of Shopify’s new platform, you need a Shopify 3PL like Cahoot that has the flexibility to optimize for both DTC ecommerce and B2B replenishment.
Cahoot has created a robust ecommerce order fulfillment network that makes low cost, fast and free shipping a breeze for every eCommerce sales channel. We have built a dense network of dozens of locations that specialize in different aspects of fulfillment, so we provide affordable fast DTC shipping as easily as we can optimize low-cost, efficient replenishment for B2B.
Instead of having to contract with different 3PLs for your DTC and B2B orders, you can consolidate your inventory and your operations with us. You’ll enjoy economies of scale from being able to run leaner on inventory, and you’ll save employee time and headaches from not having to manage multiple providers. You can read or watch our case studies to see just how powerful consolidated operations for multi-channel ecommerce sales can be for your growth.
Contact Cahoot today to learn how we can design a custom fulfillment solution to power your profitable online growth, no matter the channel.
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations
Amazon is a competitive platform. You need to have a quality product, excellent listing content, and plenty of reviews to catch the attention of busy consumers
New York, April 28, 2020 — The winners of Fast Company’s 2020 World Changing Ideas Awards were announced today, honoring the businesses, policies, projects, and concepts that are actively engaged and deeply committed to flattening the curve when it comes to the climate crisis, social injustice, or economic inequality.
New York, April 28, 2020 — The winners of Fast Company’s 2020 World Changing Ideas Awards were announced today, honoring the businesses, policies, projects, and concepts that are actively engaged and deeply committed to flattening the curve when it comes to the climate crisis, social injustice, or economic inequality.
Cahoot is an eCommerce order fulfillment network that helps online businesses offer nationwide free 1-day and 2-day delivery to its customers at no additional costs. It cuts down the distance packages need to travel by having nearby businesses store and ship products for each other. So instead of flying packages by air long-distance to customers, merchants can ship via economical and greener ground shipping. In 2019 alone, Cahoot has cut down more than 2 million miles of carbon emissions for its network members. Also, Cahoot’s peer-to-peer model allows merchants to offset storage and fulfillment costs by fulfilling orders for each other. Therefore, every merchant on the platform can ship locally and beat fast shipping standards with better margins. This year, Cahoot is awarded Honorable Mentions for The Best World Changing Idea in North America and the Experimental category.
Now in its fourth year, the World Changing Ideas Awards showcase 26 winners, more than 200 finalists, and more than 500 honorable mentions—with Health and Wellness, Corporate Social Responsibility, and AI and Data among the most popular categories. A panel of eminent judges selected winners and finalists from a pool of more than 3,000 entries across transportation, education, food, politics, technology, and more. The 2020 awards feature entries from across the globe, from Vancouver to Singapore to Tel Aviv.
Illustrating how some of the world’s most inventive entrepreneurs and companies are addressing grave global challenges, Fast Company’s May/June issue celebrates, among others, an electric engine for airplanes that eliminates emissions from flights—and expensive fuel from the tricky financial calculus of the airline industry; a solar-powered refrigerator that finally frees people in remote villages from daily treks to distant markets, transforming the economics of those households; an online marketplace that connects food companies with farms to buy ugly and surplus produce to fight waste; and an initiative to offset all of the carbon costs of shipping, creating a new model for e-commerce sustainability.
Cahoot aims to continue making the world a greener place while leveling the playing field in eCommerce. “The key to sustainable one-day delivery is having fulfillment centers close to customers and shipping them cheaply using ground services,” says Manish Chowdhary, founder and CEO of Cahoot. “It is near impossible for smaller brands to build a distribution network to compete on a level playing field. We need to change the game. We can’t work in siloes building our own facilities trying to compete against Amazon. The only way forward is to work together.”
“There seems no better time to recognize organizations that are using their ingenuity, resources, and, in some cases, their scale to tackle society’s biggest problems,” says Stephanie Mehta, editor-in-chief of Fast Company. “Our journalists, under the leadership of senior editor Morgan Clendaniel, have uncovered some of the smartest and most inspiring projects of the year.”
About the World Changing Ideas Awards: World Changing Ideas is one of Fast Company’s major annual awards programs and is focused on social good, seeking to elevate finished products and brave concepts that make the world better. A panel of judges from across sectors choose winners, finalists, and honorable mentions based on feasibility and the potential for impact. With a goal of awarding ingenuity and fostering innovation, Fast Company draws attention to ideas with great potential and helps them expand their reach to inspire more people to start working on solving the problems that affect us all.
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
USPS announced its GRI will take effect January 27, 2019.
The Details: – Priority Mail Express will increase 3.9% – Priority Mail will increase 5.9%. – Mailing Services product prices will increase 2.5% – First-Class Package Service will move to zone-based pricing – First-Class Mail Forever stamps will increase from $.50 to $.55
USPS’ dimensional weight (DIM) pricing is also increasing substantially. Currently, the Postal Service only uses DIM pricing for Zones 5-9 Priority Mail. In Q2 2019, expect USPS to implement DIM pricing for all Priority Mail, Priority Mail Express and Parcel Select packages that are larger than one cubic foot. Furthermore, the DIM will be reduced from 194 to 166—a small change that can have a big impact on parcel shipping costs. https://about.usps.com/news/national-releases/2018/pr18_086.htm
FedEx
FedEx announced its GRI will take effect January 7, 2019.
The Details: – FedEx Express and FedEx Ground will increase by an average of 4.9% – FedEx Freight will increase by an average of 5.9%. – Look out for changes to FedEx surcharges and minimums – FedEx Express and Ground minimum increases will range from 3.5% to 5.4%.
Remember, increases will not be implemented across the board. While FedEx Express and Ground report that “on average” rates are going up 4.9%, some categories will experience hikes as high as 8.2%. For example, Surcharges and Fees will be increasing in most cases upwards of 5%, and the Print return labels pricing is doubling. Be aware of how you send packages and take action if necessary to soften the blow of the increases. https://www.fedex.com/en-us/shipping/current-rates.html
UPS
Most of UPS’ GRIs take effect December 26, 2018.
The Details: – The rates for UPS Ground, Air and International services will increase an average 4.9%. – Fuel surcharges will apply to Additional Handling, Over Maximum Limits, Signature Required and Adult Signature Required accessorials. – A $2.00 processing fee per package will be charged when Package Level Detail (PLD) is not provided to UPS prior to delivery. – The rates for certain value-added services and other charges will increase. https://www.ups.com/us/en/shipping/rates-update.page?WT.mc_id=VAN701700
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations
Amazon is a competitive platform. You need to have a quality product, excellent listing content, and plenty of reviews to catch the attention of busy consumers
Typically, peak shopping season begins in the US late in the year – during Thanksgiving, Black Friday, Cyber Monday and the Christmas holidays that follow. Elevated order volumes during these times is for obvious reasons – these are festive occasions, and there’s lots of shopping people need to get done. In recent years, all of those occasions trail behind two days in July – Amazon’s Prime Day.
Prime Day represents an opportunity to get in front of many buyers – but especially the young consumer whose purchasing power and influence continues to grow all the time, as data from a 2021 Profitero survey shows:
Customers do not shop on Prime Day with the intention of gifting things to their loved ones for a festive occasion – rather, it is about the thrill of the treasure hunt, where many products are available at sharp discounts and there are deals which may not come around again. Forbes reported that 48% of Prime Day shoppers make purchases they never actually planned for – largely driven by the fear of missing out on a great deal.
However, as an online merchant, if you’re expecting people to only be shopping on Amazon, you’d be wrong – Forbes goes on to say that as many as 58% of people compare prices on other websites before checking out on Amazon. And why wouldn’t they? Many of Amazon’s competitors, such as Walmart and Target now run their own competing programs at the same time as Prime Day.
While the surge in order volumes means an opportunity to acquire new customers and boost sales, it brings with it increased order fulfillment complexity – due in large part to Amazon themselves, customers now expect free, fast same or next day shipping on nearly any online purchase they make.
In Amazon’s own words, Prime Day boosts sales both on and off their website. As an online seller, navigating the avalanche of orders flooding in from many different channels while managing to delight customers with free, ultra-fast shipping can seem overwhelming and expensive. But merchants do have a number of options that help them manage the logistical complexity and deliver on customer expectations, many offered by Amazon themselves.
Order Fulfillment Options Offered by Amazon:
In recent years, Amazon has become as much a logistics company as a retailer, offering merchants different options through which they can have orders fulfilled:
Fulfilled By Amazon (FBA): The vast majority of SKUs on Amazon are shipped by the company itself, where merchants send their inventory to its warehouses, and then have their orders picked, packed and shipped for them.
Amazon Multi Channel Fulfillment (MCF): In recent years, Amazon has expanded its reach significantly – its Multi Channel Fulfillment (MCF) offering allows merchants to have Amazon fulfill all of their orders across various channels – such as their own website or Shopify / BigCommerce storefronts.
Buy With Prime (BWP): Prime shipping standards have become the norm for everyone, on and off the Amazon marketplace. Amazon’s most recent and noticeable step in normalizing these high standards is Buy With Prime, which enables merchants to offer the Amazon Prime shipping experience on their own website. Customers login to their Amazon accounts and checkout and orders are fulfilled by Amazon.
These options come with significant advantages and drawbacks, a few of which we outline below:
Advantages of Using Amazon for Order Fulfillment:
Picking, packing and shipping are taken off your plate as a merchant – there’s not a lot of work to be done, except sending the inventory in time to Amazon warehouses.
FBA makes products automatically eligible for the Amazon Prime badge, which is a filter many shoppers on Amazon apply while searching for items.
Amazon (in most cases) is able to meet the gold standard of shipping items by the next day – which can elevate customer satisfaction and prompt repeat purchases.
For MCF purchases made outside Amazon, buyer confidence may be increased if they see that Amazon is fulfilling their order.
For small D2C merchants looking to make a mark and establish themselves, Buy With Prime can provide a lot of trust in the buyer’s mind about the quality of not just their shipping, but the larger brand they’re engaging with.
While these are definitely strong positives, the programs do have a few significant drawbacks for merchants to keep in mind and weigh when making a decision.
Drawbacks of Using Amazon for Order Fulfillment:
The charges and fees associated with FBA have continued to rise – according to Marketplace Pulse, they’ve climbed by as much as 30% since 2020.
Research and analysis performed using Marketplace Pulse data by Cahoot shows that while the new Buy With Prime program can offer merchants savings of as much as 43% compared to Multi Channel Fulfillment, it can still be twice as expensive as FBA (where sales are restricted just to the Amazon marketplace).
Possibly most importantly, when merchants use the Buy With Prime program, they send the customer to Amazon to checkout – where marketing or promotions may divert the buyer to an alternative (possibly cheaper) option.
Lastly, with BWP, merchants do not have access to data about the customers on their very own website because the customer logins to their Amazon account to checkout, not through the merchant’s gateway.
Many merchants seeking to regain control of their customer data and improve their margins have tried to pivot away from Amazon FBA towards using a 3rd Party Logistics provider (3PL). 3PLs bring some of the same convenience that FBA does to merchants, but come with their own sets of limitations:
Advantages of Using a 3PL for Order Fulfillment:
Using a 3PL offers merchants a more cost-effective way to manage orders outside of Amazon, rather than using a program like MCF.
3PLs might offer merchants possibilities for kitting and customization, which are not possible when shipping with Amazon.
3PLs simply take care of shipping and stay out of the engagement between you and your customers, unlike a program like Buy With Prime.
However, the staple source of revenue for a 3PL lies in shipping, and that has unfortunately become a more and more expensive activity.
Drawbacks of Using a 3PL for Order Fulfillment:
3PLs are in the business of shipping, and various activities of the shipping lifecycle have gotten more expensive – leasing warehouses, shipping costs and the cost of labor.
The General Rate Increases of the shipping carriers has consistently exceeded the prevailing inflation rate, while it now costs $19 / hr to hire workers for warehouses with quit rates at an all time high. Additionally, warehouse availability is low, driving leasing costs higher.
All these mean that 3PLs are forced to pass on increased costs to customers, eroding margins.
Conclusion:
As a merchant, you might be prompted to wonder whether there’s no solution that can both help you delight your customers while costing you less and allowing you to extract more margins. Consider order fulfillment solutions with differentiated models such as Cahoot that distribute your inventory strategically in warehouses across multiple locations in the country.
By placing your product closer to the customer, it is possible to achieve same or next day shipping, while deriving cost efficiencies. Oh, and it uses ground shipping – which is better for the environment than air cargo!
Already working with a traditional 3PL but want to switch to a better network, like our peer-to-peer model? We know migrating fulfillment partners can be an uncertain and stressful process which prevents merchants from exploring superior alternatives. To make that process simpler, check out our 3PL migration guide which provides you step-by-step details on how to make a smooth, seamless switch.
The mid-year shopping season brings with it new customers and supercharged sales but also logistical complexities to overcome. It is essential for merchants to have a solid game plan for order fulfillment across all of their channels, with a strategic order fulfillment partner that offers both savings and operational excellence. It might just be the decision that provides your e-commerce rocketship its fuel.
Offer 1-day and 2-day shipping at ground rates or less.
Most people are familiar with the requirements that Amazon expects sellers to meet, but far fewer are aware of the roadblocks that make success hard to achieve. An even smaller number are aware of the strategies they can deploy to meet Amazon’s criteria and surpass them.
For customers, Buy With Prime is a great service, but for ecommerce merchants, it’s a Trojan Horse. Amazon Prime circumvents the entire order checkout process from the merchant’s platform, and payment processing goes through Amazon
Amazon is a competitive platform. You need to have a quality product, excellent listing content, and plenty of reviews to catch the attention of busy consumers
Podcast: Episode 185 – Avoiding FBA Limits with an Alternative Order Fulfillment Network with Cahoot
The Smartest Amazon Seller Podcast discussed the issue of warehouse inventory limits, which is becoming a major challenge for all Amazon sellers. Amazon’s warehouse inventory limits are getting lower as Q4 ramps up, leading to difficulty for sellers to send everything into FBA – Fulfilled By Amazon. The problem is exacerbated by Amazon’s challenge in hiring order fulfillment workers across its warehouses. The podcast host, Scott Needham, invited Manish from Cahoot to discuss an alternative solution. Cahoot is a company that has created a peer-to-peer network for order fulfillment, allowing sellers to use its warehouses to store their products and deliver them to customers. Cahoot was first trying to do a co-mingled Fulfilled By Merchant (FBM) solution, but has now pivoted to an order fulfillment services network. Its order fulfillment services are intended to create efficiency, reduce order shipping costs and transit time, and make it easy for sellers to operate in a highly profit-challenged environment. The podcast discussed how Cahoot’s order fulfillment service can help sellers overcome the problem of Amazon’s strict inventory limits.
Scott Needham:
Welcome to the Smartest Amazon Seller Podcast, your host, Scott Needham. I am an Amazon seller for 10 years, and in my 10th year, I’m actually literally about to wrap up, hit 10 years. Something has happened again, that’s become an issue for all Amazon sellers, that if you’re really paying attention, inventory limits are, they’re getting lower as Q4 ramps up, which is kind of, it’s the opposite of what we want. Usually you want your limits to go up when you, because right now you want to spend all your money to buy inventory to bulk up for the next eight weeks. I’m recording this right before November. So a lot of people are getting challenged. They can’t send everything into FBA, and if you don’t have an alternative solution, you’re kind of stuck. So I’ve got with me someone that has an alternative solution that I actually think is quite scalable. I’ve got Manish from Cahoot. Manish, welcome.
Manish:
Scott, thank you for having me.
Scott Needham:
So let’s just chat through this. If we’re talking big picture, how I see things, Amazon, because of COVID and 2021 and 2020, they increase their capacity considerably. Actually, I’m seeing reports that they increased it too much, but they also have a different problem. If you increase your capacity, they also have to have employees to do that, and they have hired hundreds of thousands of people, but they’ve also had huge turnover, lots of turnover. So much that they do have a business challenge in that they are exhausting the number of people that are available for employment across some of the warehouses that they serve in different markets. So that leads me to think, inventory limits, they’re going to be around. It’s going to be cyclical. Who knows? We’re fighting against market forces, bigger market forces. Are there a hundred thousand people that can work in this capacity in this market? And that’s either a yes or no, and if not, then they can’t receive everything. So that’s how I would set the stage. And why, again, a year after the worst of these inventory limits, we’re seeing this again. How do you see this?
Manish:
Well, that’s a great question, Scott. And you said it right. Half of Americans of the available workforce has either applied or worked at Amazon or has worked and quit at Amazon. So Amazon is running out of order fulfillment workers to hire, and that’s no secret. I mean, everybody knows that. So you have a bit of a dichotomy. On one hand, two quarters ago, Amazon came out and blamed their excess build, they actually added more warehouses in 2020 and 2021 than they had done in the previous 18 years of their operation. So they went all in, and then of course they came back and they said, “Oh, we made less money because we overbuilt. We have tons of excess capacity. We’re going to go rent out or sublease, hundred million or so square feet of space.”
And then you as a seller, and many others that I speak with regularly, are complaining that their stock limits are down. So it’s highly confusing for the seller because they’re getting news from both sides of their mouth, and that’s not… So the reality is, what we believe and suspect, that while the facilities might have been built, they are not online. So you could count them as overbuilding, but they’re not enough. They’re not online. They don’t have enough order fulfillment workers to make those facilities work. And that’s why the sellers are continually facing strict inventory limits at FBA. So it’s a real problem.
Scott Needham:
I’ve got two selling businesses that I check in on every day. One of them does have limits, and the other one actually has the opposite of the problem, has actually more space than we need. So it affects people at different sizes in different ways. And every business model is slightly different. And some people can transition to FBM on their own and some people can’t. Just like I do think one of the benefits of E-commerce is you can work out of your house and you don’t have to ever touch inventory if you are using, if you’re being creative, if you’re aware of either prep centers or 3PLs, whatever.
I’ve been aware of Cahoot for a while, and if I get anything wrong about your background, but you guys have slightly pivoted in that Cahoot was first trying to do a co-mingled FBM solution. Where if I was selling Head & Shoulders shampoo and I had it in my warehouse, in my backyard in Utah, but the customer was in New Jersey, if someone else had that same product, that same skew in New Jersey, they could satisfy the customer for about half the price. And now you created this peer-to-peer network for order fulfillment. And that’s a really creative and interesting solution, kind of a hard problem to solve because of all the different variables. But that’s how Cahoot started, right?
Manish:
Yes, we are… We’ve been fanatically focused on optimization. And the idea is how do you reduce the shipping costs, the transit time, and make it easy for sellers to operate in a highly profit challenged environment? So all our solutions are intended to create efficiency. And yes, you’re right about our history.
Scott Needham:
You had to create a lot of tech, tech that you actually still use, but you guys now lean in a little bit more to an order fulfillment services network. So basically an alternative to FBA. And if say someone wants to sell 10,000 units of Head & Shoulders shampoo, they get to utilize your network as opposed to FBA. And I actually think there’s a few cool things that we’re going to talk about with the Cahoot network that are kind of different, never heard of before. And I was like, “Okay, this is a worthwhile conversation and worth exploring.”
Manish:
Absolutely. I mean, sellers can, we believe in supporting the sellers wherever they sell. Cahoot takes a full service approach to fulfillment. So we support, if the merchants want to send some inventory to FBA, we also support the highest standard in fulfillment, which is Seller Fulfilled Prime (SFP). Which is very, very hard to find a solution for because of the extremely stringent metrics. So if you are listening, and if you’re a seller that has Seller Fulfilled Prime (SFP), you should hang onto it.
And if you wanted to do FBM and if you were affected by FBA restock limits or you are unhappy with the receiving delays, which we know there’s a long receiving delay at FBA, or other challenges. Like returns, so that’s a big problem because your return rate is 20% generally higher with FBA than FBM or if you’re selling on other marketplaces and channels, whether Shopify, your website, on Walmart, eBay, other places, because every seller ought to be selling on multiple channels. So you can come to Cahoot and Cahoot can provide an Amazon FBA like service, and it’s an alternative to FBA so that you can continue selling regardless of whether you can get your inventory into FBA or not.
Scott Needham:
I mean, Seller Fulfilled Prime (SFP), it’s tough. I’ve done it, seen it work out, seen us get kicked off a few times as you need to get stuff out the door fast. So right now people need space, they need alternatives to FBA. And you guys, very straightforward, kind of offer your network. And you could even make some comparison to an Uber model for shipping and FBM and so much that you actually have some sellers that join the network and make their warehouse available, whether it’s space-
Manish:
That’s right.
Scott Needham:
And fulfillment.
Manish:
Right. That’s right. I mean, what’s unique about Cahoot is it’s a peer-to-peer network. So essentially it’s a peer-to-peer collaboration platform. So on one side of our network, the demand side, which is ecommerce brands and retailers that are looking for affordable fulfillment services, akin to if you were looking to outsource your fulfillment, some are part of it. So we would support that and we would place our client’s inventory at one or more warehouses in the Cahoot network. And Cahoot provides a very, a technologically advanced solution. So we connect directly with the sales channels, we have deep integrations with every popular channel out there. And then we provide a very simple pricing to our clients so that they don’t have to deal with the complexities of, “Hey, what’s the SLA in California? And what’s the storage fees at California versus New York or versus Miami?” Or what have you.
Because sellers are looking for simplicity, they’re looking for predictability, and they’re looking for one throat to choke, so as to speak, when it comes to holding people accountable. And that’s what Cahoot provides. And that’s the only reason why Cahoot is able to achieve Amazon Seller Fulfilled Prime (SFP) metrics, which is frankly very difficult to achieve through traditional 3PLs. So that’s a demand side of our network. And on the supply side, these are warehouses that belong to other ecommerce brands and retailers that have excess capacity in their warehouse. So right now, if you are running your own warehouse and you’ve got five, 10, 20,000 square feet of excess space, it’s literally sitting idle. You’re not making any money. Your rent, your mortgage, your utilities are the same. So you have the opportunity for the very first time to join the order fulfillment services network and make some extra cash.
Scott Needham:
Yeah. I’ve definitely had a facility where we’ve had tens of thousands of square feet and I’m like, if you push us, yeah, we could actually set aside 10,000 and utilize the space better. And especially… Certain parts of the season, there’s always more ways to utilize space better. We’re not always great at that. But if there’s an economic incentive, like what you guys have, to be able to rent some of the space, basically take your rental costs down, that’s very interesting. And obviously there’s some areas of the country that are just more in demand, California and the northeast coast, because that’s where most ships are coming in. So that’s really interesting. And I like seeing what solutions work for some people. People ask me frequently, and sometimes there’s just always trade-offs. What would you describe, how expensive is it to fulfill Seller Fulfilled Prime (SFP) through your network? Because I think people still want the Prime badge, but they don’t want to, we can’t pay $30 for every single shipment.
Manish:
No, nobody does, Scott. I think that is not a economically viable solution for vast majority of the sellers. So what Cahoot does is, you’re utilizing the economy ground shipping to ship the items and still meet that one-day, two-day delivery requirements of Seller Fulfilled Prime (SFP).
Scott Needham:
Is that because you guys are, because you’re distributing the inventory across the network?
Manish:
That’s right. In order to achieve two-day delivery target, Scott, you need at least four to five strategically placed warehouses. And in order to achieve one-day delivery target using economy ground like a UPS ground or FedEx ground, you need nine locations. And so what Cahoot does is places the inventory based on the demographic of your customers so that we can continue, one, meeting the SFP metrics that is needed in order to protect your account. And number two, do it affordably using the ground service. So you actually pay less than you would pay from your single warehouse.
Scott Needham:
Do you have sellers split up the shipment? Obviously that happens at the beginning, but do you ever do any transshipping yourselves or is that kind of like you’d rather replenish through having the seller replenish one at a time?
Manish:
I mean, both options are available on the Cahoot network. So essentially sellers can ship directly to the warehouses that they have been assigned based on the data. So we are very, very data driven. So that’s how we are able to minimize cost. Or in many cases, we would have a hub location that would act as your primary reservoir for inventory, and then we would trickle in the inventory across the nation as the demand warrants. So it’s the model behind the scenes is not fundamentally much different than how Amazon runs its own FBA network.
Scott Needham:
Yeah, that sounds exactly like that. You must have some pretty big warehouses.
Manish:
We have large and small because Cahoot was always designed to level the playing field. So if you had a warehouse that had 10,000 square feet, we don’t want to exclude that because there is power in numbers. There is a power in working with entrepreneurs, and some of them are absolutely top-notch. I mean, they do phenomenal job. And that’s probably the reason, or one of the very important reasons why Cahoot is able to offer the industry’s highest order fulfillment standards at a lower cost.
Scott Needham:
You know what? You make me feel like the world is just bigger. I just keep learning and just figuring out there’s this whole network going on and I haven’t even been… Keenly aware of it. I don’t know. It means there’s a ton of sellers that need this and then there’s a ton of warehouses that can meet Seller Fulfilled Prime (SFP). That’s not easy. And to make that, to get, like you said, nine different locations across the US and this was happen-
Manish:
It may look daunting to others, but it is business as usual at Cahoot. This is what we do, and we have been doing this for several years and we are the best in class when it comes to that level of accountability. Because I think there’s another big development that you may or may not be familiar with, Scott, is this Amazon Buy with Prime. So this concept of Seller Fulfilled Prime (SFP) is coming to every channel. And if your sellers are not aware, the audience is not aware, I’ve got a really awesome presentation on Buy with Prime and how that is going to affect the consumer expectation on every channel because this whole Seller Fulfilled Prime (SFP), or Prime-like delivery is going to be expected on every channel, on and off Amazon. And there’s a whole presentation, if people are interested, they can check it out on our resource library at www.cahoot.ai.
Scott Needham:
Interesting. So I mean, obviously some of your clients are multichannel, not just Amazon. Sure, there was a few different ways to go with that. What do you think someone that’s brand new, starting out, selling on anywhere, what would their experience be like? This is where I’m actually going to is you talked about accountability and that you, accountability to me means that you kind of need a web portal. You need to be able to see a view of your inventory and receiving and all things that are going on through hopefully what is on your website. Can you run me through that?
Manish:
Yeah, I mean, we have a best in class software. Everything is on the web. So the seller can pretty much access, if you’re familiar, akin to Amazon Seller Central, you know, will log in, you’ll see the movement of your orders. Orders are coming in from all the integrated channels, then your current inventory position at each of the locations where your inventory is currently situated. So you have realtime visibility into that and also realtime visibility into how orders are being picked, packed, and shipped. And additionally, you can also stay on top of the delivery to make sure that the orders are being delivered on time. In fact, we go one step further because we hold the carriers accountable as well. So if the carriers, they miss the SLA or if Cahoot misses the SLA, we like to expose that to our audience, to our sellers. Because for us, it’s a network, which is you are, we are in it together, and therefore it’s very important that we are making that information available so that all parties are holding each other accountable.
Scott Needham:
Love it. That’s awesome. And is there any part of this network? I feel like we’ve covered the very immediate need that a lot of people have. I do think that having an FBM alternative to FBA is good diversity, especially in Q4. What part of what you guys do, do you feel like we haven’t covered yet?
Manish:
Well, one, I think the whole net impact of this innovation is lower cost, higher quality. People think that if you need higher quality, you need to pay more. And Cahoot is turning that on its head that because of this peer-to-peer network, we’re able to lower cost than the traditional options that you may have available. Number two, it’s a myth that FBA is cheaper or cheapest for everything. That is a big myth that is not true. FBA fees have gone up 30% in the last two years, so you should look at your rates today, not two weeks from now, not two months from now. So you would be shocked that FBA is not cheap and certainly not for multichannel fulfillment. So if you’re using FBA to fulfill your website orders or Walmart orders, you should look at that again. And Cahoot is able to offer something very affordable. Besides that, we also have the best in class shipping software, which-
Scott Needham:
Well-
Manish:
So if you have a warehouse… sorry about that.
Scott Needham:
No, you win me over with pricing. Pricing matters. If people were to take a loan, yeah, the interest rate matters. Money is money. So 6% is a higher interest rate than 3%. But in similar, shipping is shipping. Where if you’re paying a dollar extra in one spot versus another, you can’t ignore that over time.
Manish:
And this is the benefit of the network, as you know, is it just keeps getting stronger by the day. And then our goal is to return the additional benefit back to our members, back to our, on both sides of the aisle. So we welcome anybody who is listening, who has a warehouse that is either thinking about utilizing their excess capacity, they should come check us out at www.cahoot.ai, fill out the contact us form, we’ll get in touch. And if you are a seller that is reliant exclusively on FBA, my strong advice to you would be that you should have an option, you should have a backup. It’s just like your computer hard drive. You always want a backup. You don’t want all your eggs in one basket. Even if it is the best basket in the world, you need, you must have a backup to protect your business.
Scott Needham:
In some situations, it’s not the best basket. But I mean, I do love FBA. They’ve kind of created something awesome, but it doesn’t work in every situation, especially the multichannel, like you were saying.
Manish:
And we recognize that, Scott, unlike our competition, that takes probably a hard line. I mean, we support FBA, we support the seller. For us, it’s about supporting the seller. So what’s best for the seller is how we like to empower them and how we like to support them.
Scott Needham:
Awesome. Well, Manish, tell me what is the most important tool that you use that helps you do your business? I mean, I will accept any answer other than Gmail.
Manish:
Well, Scott, we use a number of technologies and tools internally. I mean, the few things that comes to my mind is from a… We use Marketo as our email sales intelligence software. That is-
Scott Needham:
As I understand, Marketo is like, that’s enterprise grade. That’s a pretty robust tool.
Manish:
It is owned by Adobe now. It is a competitor to HubSpot. It is an enterprise grade technology that allows us to communicate with our-
Scott Needham:
I did not expect that. And you might be one of the first people I’ve ever met that’s actually used it. Why is it better than HubSpot?
Manish:
Well, I haven’t done the deep comparison with HubSpot. I think it just plays, I think Marketo existed prior to HubSpot. Certainly it has a very strong integration with salesforce.com, which is our CRM.
Scott Needham:
Okay.
Manish:
And we live in this new world where sales intelligence plays a huge role, that if I’m trying to contact you, what time would be ideal to contact you? Things like that can make or break, let’s say, depending on your routine, you may be a evening person versus somebody else may be a morning person. So if you send the wrong, even if you send the best message at the wrong time, it may not get noticed and things like that. So that’s one of the tools we use.
Scott Needham:
Awesome. Cool. All right. Well Manish, thank you so much. This is a really timely thing. If people want to learn more and maybe get pricing, figure out if this is a solution that works for them, it’s cahoot.ai, right?
Manish:
Yes. www.cahoot.ai. That’s C-A-H-O-O-T.ai. And just fill out the contact us form, and we’ll, a live human will be in touch very quickly.
Scott Needham:
Okay. Awesome. All right. Well thank you, Manish. This is very illuminating. Hopefully everyone, the quantity limits aren’t killing your business too much. They’re a little ugly at times. It’s cost us plenty of money in years past and fought some awkward situations. So figure it out, if you ever have any questions, you could reach out to Manish, you could reach out to me. It’s an interesting thing other than how to get your inventory limits higher? I don’t always know because Amazon’s not very consistent.
Manish:
And there are some tools that I’ve got a nice webinar on how to clean up your account on Amazon so that you make the most of your limits that you already have. So I encourage people to check out the resource library because many times there are many things you could do and you should be doing in order to make the most of the limits you have, rather than letting the limit be underutilized or wasted. So there are things that you could do and you should do.
Scott Needham:
Yep. Awesome. All right, well we’ll wrap up there. Manish, thank you for coming on so much.
Manish:
Scott, thank you for having me.
Scott Needham:
Okay. And to everyone else, have a good Q4. Stay listening. So happy. I’ve been doing this podcast for three years and we’re only getting… I enjoy it. It’s fun. It’s great. Okay, hopefully everyone have a great day. We’ll see you.
Offer 1-day and 2-day shipping at ground rates or less.
Most people are familiar with the requirements that Amazon expects sellers to meet, but far fewer are aware of the roadblocks that make success hard to achieve. An even smaller number are aware of the strategies they can deploy to meet Amazon’s criteria and surpass them.
For customers, Buy With Prime is a great service, but for ecommerce merchants, it’s a Trojan Horse. Amazon Prime circumvents the entire order checkout process from the merchant’s platform, and payment processing goes through Amazon
Amazon is a competitive platform. You need to have a quality product, excellent listing content, and plenty of reviews to catch the attention of busy consumers
On January 18, 2022, Amazon will increase FBA fees for fulfillment, removal, and disposal. It will then follow up on those changes with increases to storage fees on February 1st, along with a brand-new long-term storage fee that will kick in on inventory sooner than the current 365 days.
Many Amazon FBA sellers struggle with the slim margins imposed by fierce competition, so even seemingly small changes have an outsized impact on a business plan. Read on to make sure that you know exactly how much more you’ll have to pay Amazon in 2022 in FBA fees, and decide whether it’s time to come up with an Amazon FBM backup plan.
How are Amazon FBA Fees Changing in 2022?
Unsurprisingly, Amazon FBA fees in 2022 will increase across the board. All of the biggest categories will see increases – fulfillment fees, storage fees, and removal and disposal. So – what are those changes?
Amazon FBA Fulfillment Fee Changes
Amazon will hit every size tier with a fulfillment fee increase, and percentage increases will range from 2% on the low end to as much as 12% on the high end.
Source: Amazon Seller Central
Notably for many sellers, each of the Small Standard categories will see an increase of 8%. For the smallest items, that will result in a $0.22 increase, and for the larger items in that range, the fee will go up by $0.27. It sounds like a small increase, but sellers know how much even ten cents matters for small, low-margin products. This change will cut already-thin margins and likely force some sellers into the unenviable choice of either dropping part of the product line or raising prices and risking a severe drop in sales.
An Amazon FBA seller on r/FulfillmentByAmazon sums up the dilemma well: “If I was assessed the [2022] FBA fees retroactively for the past 4 months it would average out to a cut of 22.5% at the unit level net profit. All you can do is raise prices, but when Amazon is your competitor, that’s not always possible. Great.”
Amazon FBA Storage Fee Changes
Of course, Amazon isn’t stopping at raising fulfillment fees. They will make two separate changes to FBA Storage Fees – 1) they’ll raise rates and 2) they’ll institute a new, more punishing long-term storage fee.
FBA Storage Fees will increase by $0.08 per cubic foot, or 10.6% on February 1st, 2022. Like the fulfillment fee rate increase, this is a seemingly small change, but given that Amazon FBA sellers are already operating in a cutthroat, low-margin environment, the overall effect of a few small changes to fees can be punishing.
On top of that, Amazon is also tightening their definition of long-term storage. On May 15th, 2022, they will introduce a brand-new “aged inventory surcharge” to units that have been in Amazon’s fulfillment centers for 271 to 365 days. While that time period used to accrue zero additional storage fees, it will now add $1.50 per cubic foot on top of regular storage fees, nearly tripling storage cost.
There’s simply more demand for FBA than Amazon can fulfill, so they’re able to make changes like this to squeeze more out of sellers and cut all but the best sellers out of their network. This is the logical extension of changes like their April 2021 adjustment to FBA inventory limits, which are designed to optimize what inventory sellers place with FBA and punish those who don’t adhere to their ever-stricter standards.
Amazon FBA Removal and Disposal Fee Changes
Finally, Amazon is more than doubling the Removal or Disposal Order Fee for most SKUs. Missing on a new product, or getting undercut and outcompeted is about to become a lot more expensive. If you keep trying to sell a struggling product, you’ll face the early kick-in to long-term storage fees as detailed above. If you decide to cut the product, you’ll pay much more per unit.
In fact, every product size except for the smallest will see its Removal or Disposal Order Fee more than double. A SKU between 1-2 lbs, for instance, will increase for $0.35 to $0.75 per unit – a 114% jump.
As mentioned above, this change is aimed squarely at removing all but the fastest-moving SKUs from Amazon FBA. If you’re uncertain about how a new product will perform, or you see existing products getting undercut and pushed out of the Buy Box by cheap competition (or competition from Amazon itself), then you need an efficient Amazon FBM solution to keep selling.
Cahoot’s Alternative to Amazon FBA
Cahoot’s excellent FBA alternative can fully replace FBA or serve as an affordable backup. And it’s much more than that – it’s the most flexible solution in the marketplace and easily integrates and ships orders for every eCommerce sales channel. With our innovative peer-to-peer fulfillment network, multi-channel fulfillment with nationwide 1-day and 2-day delivery is the norm.
Unlike other networks that are collections of 3PLs, Cahoot’s innovative approach empowers merchants across the country to fulfill orders for one another. Our peer-to-peer network is a collective of highly vetted eCommerce retailers who offer up excess warehouse space and resources to provide high-quality order fulfillment to other merchants.
As a result, costs are typically lower than what you get with a traditional 3PL fulfillment company, and service levels are higher. Merchants can use the network solely for outsourced fulfillment – similar to FBA, or they can choose to fulfill orders for other merchants and offset some of their own outsourced fulfillment costs.
Offer 1-day and 2-day shipping at ground rates or less.
Most people are familiar with the requirements that Amazon expects sellers to meet, but far fewer are aware of the roadblocks that make success hard to achieve. An even smaller number are aware of the strategies they can deploy to meet Amazon’s criteria and surpass them.
For customers, Buy With Prime is a great service, but for ecommerce merchants, it’s a Trojan Horse. Amazon Prime circumvents the entire order checkout process from the merchant’s platform, and payment processing goes through Amazon
Amazon is a competitive platform. You need to have a quality product, excellent listing content, and plenty of reviews to catch the attention of busy consumers
The thrill of growing your own ecommerce business can quickly give way to backaches as you personally store and fulfill tens or hundreds of orders per day. And that’s not even mentioning the garage-full of inventory that you can hardly navigate!
On the other end of the spectrum, large businesses can also easily see their logistics overwhelmed by growth. They may need additional warehouse space, new fulfillment capabilities, or a better footprint across the country to reduce final mile shipping distances.
Both of these types of sellers need the same thing: a third-party logistics (3PL) partner.
In this article, we’ll provide a quick rundown of what a 3PL does before providing an in-depth guide to what you should look for in a 3PL when you need to outsource fulfillment.
Third party logistics (3PL) refers broadly to a company that handles inventory management, warehousing, and fulfillment for retailers. The industry has undergone a massive transformation over the past two decades as retail growth has shifted online, but the basic principles have remained the same.
3PLs receive inventory from their customers, and then they safely store it in the manner required to support efficient outbounds. They integrate with their customers’ sales channels, so that when an order comes in, the 3PL fulfills it without intervention from the seller. Within that broad characterization, there’s as much variety in the 3PL industry as there is in retail.
Some 3PLs focus exclusively on retail replenishment, while others take the opposite approach and only work with ecommerce sellers. Some will specialize based on the type of goods fulfilled, as many require special handling or conditions in the warehouse (such as oversize items or refrigeration). Others will focus on creating dense networks in certain regions of the country, while many now compete with Amazon to create robust nationwide networks.
How do 3PLs work?
Generally speaking, a 3PL owns two critical aspects of the ecommerce logistics chain: inventory storage and pick & pack fulfillment. As reverse logistics become more prominent, many 3PLs are also building out the ability to operate “in reverse” to help their clients manage returns.
In this section, we’ll provide a run-down of standard 3PL processes that make the operation hum.
Technical integration
To start, ecommerce 3PLs need to be able to see orders received by their clients in real time in order to be able to fulfill them quickly. Before the rise of ecommerce, and even in the early days, speed was not a priority for order fulfillment. Many clients would manually send their 3PLs orders in Excel spreadsheets (or even in Word docs) at the end of each day or week, and then the 3PL would get to work fulfilling the orders.
You don’t need us to tell you that the world works a bit differently these days.
Today, any 3PL set up for ecommerce insists on building a direct integration between their systems and a customers’ sales channels. Without an instant, consistent feed of orders from ecommerce channels like Amazon or Shopify, orders wouldn’t be shipped on time, and sellers would be faced with a deluge of unhappy customers asking why their shipments are delayed. The best 3PLs have pre-built integrations with major marketplaces, shopping carts, and ecommerce platforms, so integrations are as simple as a few clicks for their customers. They also have open APIs that support more custom integrations to reflect the diversity of tech stacks that modern sellers have built.
Inventory receiving
Next in the process is receiving – after all, a 3PL can’t fulfill orders with inventory that it doesn’t have. Sellers can send their inventory via freight directly from their manufacturer to their 3PL, while giving the manufacturer any receiving specifications the 3PL might have. This minimizes the number of intermediary stops for inventory, which reduces cost and the potential for inventory to get stuck inaccessible in the wrong location.
Generally speaking, 3PLs prefer to receive pallets with as few SKUs as possible, prepped for shipping, and pre-labeled. This “platonic ideal” of receiving, though, is rarely fully true, and so many 3PLs offer inventory prep services to get items ready for shipping. This enables the seller to still ship directly from the manufacturer to the 3PL, even if the manufacturer isn’t well versed in how to prepare items for ecommerce.
Long receiving times are a big problem in the eCommerce world – Amazon FBA, for instance, takes up to 14 days to get inventory that is at their fulfillment centers ready to ship. A two week wait is unacceptable for sellers who could see their best sellers go out of stock while waiting. That’s why Cahoot’s fulfillment services offer an industry-leading 48-hour receiving SLA.
Inventory storage
Much of the floorspace in a warehouse is dedicated to inventory storage, but the way in which 3PLs store inventory has changed dramatically thanks to the shift towards ecommerce order fulfillment.
Warehousing services that focus on B2B replenishment store their inventory efficiently in large bundles – think of a full pallet of goods, or a pallet of goods off of which multiple cases can quickly be picked.
Inventory storage at a warehouse that fulfills ecommerce orders is instead optimized so that orders can easily be picked in eaches (or single quantities). The speed with which a warehouse picker can get to items and pull one or more out is vital to operations because they have to repeat the process hundreds of times per day.
Warehouse fulfillment
Pick and pack fulfillment is the term for the process by which 3PL personnel select the items that a customer ordered and put them in boxes ready to ship. This is the most vital part of the process for ecommerce sellers, because speed and accuracy underpin a positive customer post-purchase experience.
Amazon Prime’s continual push to cut delivery times shorter means that warehouses can’t wait to fulfill orders; each customer that presses “buy” needs to have their item picked, packed, and dropped off with the carrier that same day. Anything less will result in a delivery delay, and delivery delays lead to negative customer reviews.
Next-gen 3PLs like Cahoot have developed intelligent software controls to maximize the speed and accuracy of picking and packing in their warehouses. Cahoot software, for instance, intelligently directs warehouse personnel to maximum speed and efficiency with pick lists of products. The pickers then use barcode scanners to ensure that the right product is picked every single time. In this way, Cahoot achieves both speed and accuracy, ensuring zero-defect, fast fulfillment that customers demand.
Returns processing
eCommerce warehouses must be able to handle returns – those that don’t leave their customers unable to provide a critical service to the end customer. Marketplaces again have led the market with super-easy no-fault returns policies, so online merchants of all stripes are under heavy pressure to offer the same on their DTC sites. So, warehouses have to be able to receive returns, assess whether they’re damaged or not, and process them back into available stock whenever possible to minimize loss.
What should you look for in 3PL companies?
If you’re an ambitious seller looking to boost your growth, you should know that the right 3PL can be a revenue driver, and not just a cost center. The best 3PLs will improve your delivery experience, which makes for happy customers that buy again and again.
Here’s the most important things to look for in your 3PL:
Nationwide warehouses
Even if you’re small now, you can still strategically distribute your inventory to unlock affordable fast shipping. That is, if your 3PL has nationwide USA fulfillment centers.
A recent McKinsey study found that a whopping 90% of US online shoppers expect free two- to three-day shipping, and Amazon metrics show that turning on the Prime badge can net 50% growth for a product. If you or your current 3PL only have one or two locations to ship from, though, two-day shipping to customers halfway across the country requires eye-watering expedited shipping rates. That’s where strategic inventory distribution comes into play.
The best 3PLs offer true national fulfillment services by placing inventory in 4+ locations strategically across the country. The benefit to you is that these networks will cover 99%+ of US consumers with 2-day shipping at economy shipping rates. No matter where your customer wants their product shipped, you’ll have inventory nearby. They get their item lightning-fast, and you pay the cheapest possible rate.
User-friendly software
If you can’t get real-time updates on the status of your orders, your inventory levels, and shipping and fulfillment costs, then you’re not working with a cutting-edge 3PL.
Older (and even some of the new) 3PLs can feel like a black box into which sellers send their inventory, and then they have no idea how much of what product they have left due to inconsistent communication.
The best 3PLs, on the other hand, have software that proactively notifies customers with critical information. Unfortunately, things go wrong all the time in the logistics world. It can be as simple as an undeliverable address input by a customer, and as complex as a worldwide shipping crunch. Your 3PL shouldn’t leave it up to you to find issues in fulfillment – for instance, the software should alert you when a customer places an order with an undeliverable address. You can then fix the issue with the address before it turns into a late shipment, and you’ll keep the customer happy.
Top-tier reliability
Reviews are your lifeblood, and a happy customer is a repeat customer. You probably can recall poor reviews and lost customers that were due to errors from your 3PL that you couldn’t control!
The best 3PLs almost never make mistakes thanks to the technology they use to ensure accurate and fast picking. Look for an on-time fulfillment rate of 99.9% or higher – anything less signals a 3PL that isn’t built for the rigorous demands of modern eCommerce.
Cahoot achieves zero-defect fulfillment with a mix of top-tier professionals and top-tier software. Our commitment to high standards starts with the warehouses that we accept into our network: we turn away many more than we accept, and we demand that they have a long track record of demanding ecommerce fulfillment environments like executing Seller Fulfilled Prime. Then, they install our rigorous software on top of their already excellent operations, and the result is a 3PL that leads the way with over 99.9% on-time fulfillment and 99.95% order accuracy.
Flexibility and scalability
It shouldn’t be hard to connect your Amazon account and Shopify store to your 3PL – the best ones have pre-built integrations that will do it with a few clicks.
Ecommerce merchants are pushing into multiple sales channels to maximize growth, and your 3PL should be able to easily integrate with all of them. Their integrations make it easy to switch fulfillment and get up-and-running with the new service in no time.
Scalability goes past just easy integrations, though. Many 3PLs, and especially many of the newer “tech enabled 3PL networks”, are optimizing narrowly for only certain types of products. Amazon FBA and its copycats, for instance, are amazingly cheap for small & light products, but they’re expensive for items that weigh just a few pounds.
The flexible Cahoot peer-to-peer fulfillment network, in contrast, can handle efficient retail replenishment as easily as it handles low-cost fast ecommerce fulfillment. We handle challenging beauty products’ fulfillment as readily as we excel in consumer packaged goods. Unlike others that have built or partnered one type of warehouse over and over across the country, we install our flexible software in warehouses with diverse specialties. The only common thread they have is their excellence. The result is that we scale our customers’ operations no matter their selling channel; for instance, some of our most successful customers are winning growth on Amazon, Shopify, and with retail stores like Nordstrom all at the same time.
Responsive customer service
Finally, you should be able to get in touch with your 3PL easily to troubleshoot challenges and come up with fixes. Look for a 3PL that offers you a real person to work with your account, and multiple ways to get in touch with them. If it’s a small issue, live chat will do. Thornier challenges, on the other hand, should be governed by a detailed ticket system. And of course, you need a phone line for critical issues.
Cahoot clients agree that our service team is the lifeblood of our 3PL. With other big 3PLs, you’ll have to re-explain your business and your needs every time you submit a ticket. With Cahoot, our US-based team takes the time to learn who you are and what you need to succeed, so that if an issue arises, they can get right down to fixing it immediately.
Top 3PL Companies
Now that you know what to look for, how do a few of the top players in the industry stack up? We’ve provided a primer to help jump-start your research.
Fulfillment by Amazon (FBA)
FBA, the elephant in the room, is Amazon’s fulfillment solution for 3rd party merchants selling on their marketplace.
Pros:
Automatically qualifies you for the Prime badge on Amazon.com
Low rates for small products
No integration required for Amazon – everything is pre-built
Cons:
Receiving delays of up to two weeks can knock products out of stock and threaten sales rank
Expensive for products that are over a few pounds
Expensive for multi-SKU, multi-item orders
Only works with Amazon.com
Amazon Buy with Prime
You can use Amazon’s fulfillment network, FBA, to fulfill direct-to-consumer (DTC) orders. Buy with Prime is the next evolution of their existing service, Amazon Multi-Channel Fulfillment.
Pros:
Biggest eCommerce fulfillment network in the USA, powers fast shipping
Prime checkout experience pre-loads information for Prime users on your website
Cons:
Much more expensive than FBA, despite being the same service
Cedes control of your customer experience to Amazon
Walmart Fulfillment Services
Walmart is building a fulfillment network to compete with FBA, named Walmart Fulfillment Services. Like FBA, it’s built solely for 3rd party sellers selling on Walmart.com.
Pros:
Automatically qualifies sellers for Walmart TwoDay badges
No integration required for Walmart – everything pre-built
Cons:
Only works for Walmart.com
Sellers must apply for space, as the network isn’t big enough to handle all their volume
ShipBob
ShipBob is a 3PL that focuses on serving eCommerce merchants. They have a nationwide network of fulfillment centers that enable fast shipping, but they charge extra for guaranteed 2-day shipping.
Pros:
Nationwide network of fulfillment centers
Direct integration with Shopify as well as major marketplaces
Chat & phone support
Cons:
Not fast shipping by default; have to pay more and not always ground rates
Pricing is opaque – they say that Pick and Pack and Standard Packing is “free”, but they make up for that by overcharging elsewhere
ShipBob competitors offer superior pricing, reliability, and customer service
Red Stag Fulfillment
Red Stag Fulfillment is a more traditional 3PL, with only a few locations in the United States. They offer B2B fulfillment in addition to B2C, as they have a wider focus than eCommerce.
Pros:
Shipping discounts across different carriers
Focus on oversize items
>99.9% order accuracy
Cons:
Network not large enough to efficiently cover all Americans with two day shipping
Don’t work with small and medium size products
Prefer DTC sellers and sometimes turn away marketplace-focused sellers
Cahoot: The Next Gen 3PL
Cahoot’s fulfillment network is built for eCommerce. We’ll help you delight your customers with a stellar, Amazon-like delivery experience while reducing the amount of time your team spends on operations. We support your growth, no matter where you sell – we have pre-built integrations with major marketplaces and shopping carts and we power efficient B2B fulfillment.
Our innovative peer-to-peer model offers low-cost, fast fulfillment by design. We’re “peer to peer” because our fulfillment network is made up of ecommerce sellers with excess capacity in their own, excellent operations. We help them fully utilize their capacity by fulfilling for other sellers like you, and as a result, our pricing is typically lower than that of other top providers listed above. Because we only add the best of the best warehouses to our network, we also beat the competition on fulfillment speed and reliability.
If you’d like to find out how Cahoot can help your business, please get in touch with us. We can’t wait to show you how easy operations can be.
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations
Sellers seeking a better deal have often turned to Third Party Logistics Providers (3PLs). They do so with the ambition of not just regaining control and autonomy over their logistics, but also boosting their profits.
Marketplace Sellers Leverage Peer-to-Peer Fulfillment to Grow Sales with Affordable Nationwide Fast Shipping.
BRIDGEPORT, CT (August 30, 2021) – Cahoot, the world’s first peer-to-peer eCommerce fulfillment network, announced its partnership and integration with Walmart (NYSE: WMT). Cahoot is now a certified shipping and fulfillment solution for Walmart’s marketplace sellers.
Cahoot’s revolutionary peer-to-peer fulfillment model enables brands and online retailers to affordably provide one-day and two-day delivery nationwide. With its rapidly growing network of eCommerce order fulfillment centers coast-to-coast, Cahoot is quickly becoming the fulfillment provider of choice for high-volume sellers on marketplaces such as Walmart, Amazon, and eBay and eCommerce platforms such as Shopify, BigCommerce, and Magento.
“We’re excited to integrate with Walmart ahead of the record-breaking holiday season just around the corner,” said Cahoot Founder and CEO Manish Chowdhary. “The industry’s rapid growth has fulfillment capacity bursting at the seams. Our novel peer-to-peer model solves this problem by unlocking thousands of eCommerce merchants’ excess warehouse space and fulfillment capacity. Collectively, the Cahoot network is doing for eCommerce fulfillment what Airbnb did for lodging.”
A Reliable Solution for Walmart’s Free 2-Day Delivery Program
Cahoot’s Walmart Marketplace Integration enables approved sellers to participate in Walmart’s 2-Day delivery program and display the Free 2-day shipping badge on their marketplace listings. Walmart has observed that sellers with this badge enjoy an up to 50% increase in conversion, making it one of the most powerful ways sellers can grow their sales. To help merchants delight their customers with exceptional delivery experience, Cahoot provides affordable same-day fulfillment 6 to 7 days a week and maintains a strict service level agreement of 99.95% on-time fulfillment and 99.9% order accuracy.
Flexible Across Channels & Works Seamlessly with In-House Operations
The patented Cahoot eCommerce order fulfillment platform provides eCommerce merchants with unsurpassed ease of use and complete visibility into inventory, orders, fulfillment performance, and package tracking – across all sales channels. Unlike traditional 3PL networks, the Cahoot network can seamlessly integrate with existing merchant fulfillment, which upgrades their strategy without introducing more complexity. With Cahoot, orders automatically flow to the optimal shipping point, whether it’s a Cahoot fulfillment center or the merchant’s own warehouse.
Cahoot has really helped us grow our multi-channel sales. We use Cahoot to fulfill our Walmart 2-Day orders and our Amazon standard and SFP orders. In addition to saving us money, we really like that their software and their fulfillment network work seamlessly with our own in-house fulfillment operations. Our old 3PL couldn’t do that.
Kris Koesema Battery Jack
The Power of Many
Like the Airbnb marketplace of homeowners and travelers, the patented Cahoot order fulfillment network brings together the collective power of SMBs and their warehouses to fulfill orders, thus reducing fulfillment costs and expediting delivery.
Cahoot is available for merchants looking to expand their reach for one- and two-day delivery services across all selling channels, including Amazon, Walmart, eBay, Shopify, BigCommerce, and more. Merchants can reach a Cahoot fulfillment expert at www.Cahoot.ai.
ABOUT CAHOOT
Cahoot is the world’s first peer-to-peer eCommerce fulfillment network. It helps online businesses offer nationwide 1-day and 2-day deliveries. In addition, Cahoot’s model is the lowest cost by design because it enables merchants to store and ship merchandise for each other. This novel business model also allows merchants to make extra money using their existing warehouse space and personnel.
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
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