Coopetition is the act of cooperation between competing companies with partial congruence of interests to gain advantage by cooperation and generating more value by working together.

Coopetition is the act of cooperation between competing companies with partial congruence of interests to gain advantage by cooperation and generating more value by working together.

Amazon makes up most of the US ecommerce sales. However, they rely heavily on 3rd party sellers. These sellers experience major pain related to ecommerce order fulfillment cost and time. It can be a challenge to meet the fast shipping demands of customers with 1-day and 2-day shipping costs nationwide cutting deep into profits.

Fast shipping is now an expectation, but it is expensive for most sellers. Sellers often limit fast shipping to very small items or to local addresses. This limits their Amazon buy box opportunities.

This presentation highlights how Sellers can save time and money on shipping by using strategic coopetition – a concept that has been around for centuries

Coopetion in Ecommerce Order Fulfillment from Cahoot Ecommerce Fulfillment

ANCIENT ROME HAD A LENDING PROBLEM

Rome offers a great example of coopetition strategy. Once upon a time around 3^rd Century BC, Roman Empire was immensely extended.

At this time, the 4 most lucrative business activities were: renting buildings, agriculture, lending money and maritime trade. The two last activities were closely linked because in order to engage in a trading business, one needed capital, which meant the need for borrowing money. Transport of goods on land for more than tens of kilometers were not feasible because of high costs and the material conditions to mobilize. Trade (especially maritime trade) had greatly contributed to the development of Rome and its Empire.

During this period of Roman antiquity, the organization of trade was significantly similar to ours, with mostly small businesses. Profession of maritime merchant at this time could be defined as a wholesaler activity. First, they had to purchase goods to sell it afterwards, hence the need to borrow money

But, long distance trade suffered from lack of information until the invention of telegraph. There was uncertainty all along the journey because no information was transmitted until goods’ final delivery. Hence, Landlords didn’t practice long distance trade, they sold their own products to local merchants who exported it afterwards. These merchants operated free markets and were in competition locally because “when several merchants sell the same products in the same area and there is formation of prices, there is competition”

Rich senators and landlords divided their wealth in two activities, on the one hand agriculture and on the other hand individual loans. Lending money was a very profitable activity and maritime loan was the most profitable but riskier. Its reimbursement rate was very low because of a very high level of defection, scams and many malice acts during Republic times. Being a landlord was honorable whereas being a merchant wasn’t. Tradespeople suffered from a very bad reputation. This resulted in a major lending problem at the time.

Around the 3^rd century BC, a rich landlord and a senator by the name of Caton, wanted to diversify his investments, and wanted to have more lucrative loans by mitigating his risks. So, he invented a concept of collective loan. To ensure reimbursement of loans, Caton asked his borrowers (the merchants in this case) to form an association. They had to create a society by assembling enough colleagues to gather fifty merchants and fifty ships. He would then loan the money to the group instead of an individual member. Caton allocated loans to a large number of ships, thereby reducing the risks of maritime incidents. He started the activity of collective maritime loan, comparable to modern concept of microcredit. This society worked following a principle of auto-selection and auto-management. Borrowers were therefore linked together and each had a part of responsibility, which established a social pressure on them. So, the merchants cooperated, via this common association. This collective loan had a fixed and high rate. This didn’t only decrease maritime risks, but also the one linked to borrowers’ disloyalty.

These loans allowed merchants to purchase goods, then they repaid it after having sold these goods. Collective loan is the first activity of collaboration between merchants during maritime trade process.

After having purchased their goods, merchants cooperated on another activity: sea freight. Acts of fraud and piracy occurred very often during Roman Republic, and also loss of goods due to weather related hazards. A shipwreck represented a terrible economic loss.

Facing these uncertainties related to navigation conditions and to avoid the complete loss of goods, merchants divided their total quantity of goods on various ships. This divided risks of loss of cargos due to maritime incidents or deliberates acts.

Second, transport of goods by sea were long and expensive. The higher the tonnage was and the cheaper the freight was, which motivated the merchants to fill boats for deliveries by joining forces. It was possible to rent space on a boat of another competing merchant. It did not make financial sense for each merchant to send ships with sub-optimal load to the same destination, hence these competing merchants came together to follow the “common freight for a journey” principle which was win-win for all of them.

With many owners for the same freight, risks were divided; the effect is the same as the one about the association imposed by Caton to his borrowers. It is an act of safety which needs many actors and transactions.

Romans combined cooperative and competitive activities in the trading process:

1. In the first activity of the value chain, to get collective loan, merchants cooperated via an association asked by the lender (Caton). Cooperation was not only informal but was institutional. Merchants were linked together via the association’s management, which imposed to them a social pressure, diminishing loan default risks.
2. Once funding is obtained, in the second activity of the value chain, merchants were rivals to purchase goods from suppliers at the best price. Loan obtained collectively allowed them to purchase goods individually, without any form of cooperation.

4. Into the third activity of the value chain, related to ship freight, merchants cooperated to minimize risks of cargos’ loss due to sea accidents or deliberate acts of piracy. Social pressure stayed strong but wasn’t institutionalized as for collective loan. This was the result of merchants’ deliberate strategy due to strong economies of scale in this activity of the value chain. Transportation costs greatly decreased when cargos’ burden increased, which made collective freight very profitable.
5. For the last activity of the value chain, once goods arrived at their destination, merchants ended any form of cooperation and sold their goods individually. Rivalry was very strong to sell their goods to the same consumers.

HIGH TIDE LIFTS ALL BOATS

The entire system benefitted:

• Commerce was a major driver of the Roman Empire and of wealth
• Maritime commerce one of the most profitable forms of commerce
• As coopetition increased the maritime merchants position improved, and so did the Empire’s.

WHAT IS COOPETITION

Coopetition is the act of cooperation between competing companies with similar interests to gain advantage by cooperation with the goal of generating more value by working together compared to the value created without interaction.

Coopetition is “the dyadic and paradoxical relationship that emerges when two firms cooperate in some activities, such as in a strategic alliance, and at the same time compete with each other in other activities” (Bengtsson and Kock, 2000, p. 412).

Think of it as “firms collaborating in order to increase the size of the business pie, and then compete to divide it up.”

Roman merchants used coopetition since the beginning of the 3^rd century BC. Hence, Coopetition is not a modern strategy driven by the double race to globalization and technology, which began at the beginning of the 1980’s. However, many major examples of coopetition are identified from the 1950’s. Driven by public policies in Japan, and in Europe, coopetition is responsible for many industrial successes.

STRATEGIC COOPETITION BENEFITS

Grow Current Markets

In 2004, rivals Sony and Samsung joined forces to build a LCD manufacturing facility in South Korea in order to better compete against LG and Phillips. Partly because of the new factory, the average price for LCD televisions that are 40 inches or larger fell from about $8,000 to $1,500

Gain Resource Efficiency

Formed in 1997, Star Alliance now counts over 27 airlines as partners and serves over 640 million passengers each year. One of the biggest benefits of STAR ALLIANCE is codesharing. Using this arrangement, two or more airlines are able to sell the same flight using the same code. Codesharing reduces the costs associated with operating underbooked flights while it increases the visibility of an airline who is able to boast multiple routes worldwide despite not actually operating them. Increased scale allows partner airlines to gain efficiency and access to complementary assets.

ECOMMERCE ORDER FULFILLMENT PROBLEM

Fast shipping is the expectation, but fast shipping is expensive.

COOPETITION STRATEGY IN ACTION

Changing Dynamics of the Parcel Shipping Industry

• Explosion in parcel volume due to e-commerce
• Relationship between the players in the market is changing
• Coopetition is leading to a “win-win” situation

USPS Core Strengths

• “Last mile” connectivity
• Literally touches every doorstep, 153M delivery points
• Processing and handling capabilities that excel at smaller packages (< 5 lbs.)
• Low marginal delivery costs

UPS Core Strengths

• Highly automated distribution hubs that include larger vehicles, rail and airplane
• Superior routing logistics for large package transport
• Efficient airport-to-airport delivery
• Lower per unit upstream cost

Scope

• UPS picks up a package from the warehouse or distribution center and moves it through the UPS parcel network
• UPS delivers package to USPS for the “last mile” delivery to a residential address

Coopetition Results

• UPS and USPS share the revenue
• Increased market share and revenue
• Lower cost from optimized distribution efficiency
• Lower delivery charges for customers
• Improved customer service
• Sustainability and lower CO₂ emissions

COOPETITION RISKS AND BENEFITS

Whether you are familiar or not with the term, you’ve likely seen examples of coopetition in the news in some form or another. But of course, in these sort of deals, when two large competitors who first and foremost are looking to protect their own interests partner up, conflict happens. In fact, coopetition arrangements between larger competitors are often temporary…

COOPETITION REQUIREMENTS

• But the best, most successful, most sustainable coopetition arrangements – where you aren’t starting and restarting or terminating permanently – nearly always happen when then participants/stakeholders are looking to achieve something greater then themselves. Something greater than their own individual profits, or their combined benefits.
• A large external north star provides a guiding light for partners so that they don’t have to spend time, arguing over which priorities are most important. Or spend energy and resources focused on protecting themselves within the partnerships. A big bright, north star keeps them aligned on the same path for the long-term. 

MLS

“And sometimes, competitors come together to change the way an entire industry operates. Back in the 1800’s, U.S. real estate agents began to create multiple listing services.  Essentially, they paid into a listing service that allowed agents to see information regarding potential deals represented by competing agents.  And agents received additional commissions for helping one another out.  The approach allowed even the smallest firms to compete on the same footing as industry behemoths. 

• Sometimes, come together to change how entire industry operates
• 1800’s: US RE agents create multiple listing services: “Realtors would meet at the offices of their local association and share with one another information about the properties they were trying to sell.”
• Paid into a listing service that shared deal info of competing agents
• Shared commissions
• Fundamental principal: “Help me sell my inventory and I’ll help you sell yours.”
• Smallest firms can compete on same level as industry behemoths. 

Increase probability of long-term coopetition success:

• information is shared
• constant communication is present
• participants feel they can continuously learn
• information used to collectively adjust to external environment

In fact, MLS’s are still used today, even in the modern information age. Making the market liquid, helping agents earn their keep, and making easier for average citizen to buy into the American dream.

Governance

This case of Roman merchants during Antiquity also shed light on contractual forms of coopetition. Cooperation to get loan is an example of institutionalized coopetition through creation of an association by borrowers, driven by the lender (Caton). We find here an example of coopetition imposed by a third actor, as it could be possible in our contemporary period.

This actor plays a role of initiator and manager of coopetition. Structured management by the third actor appears as a tool and ensures good performance of implemented coopetition strategy.

Size of firms involved in coopetition is another interesting element of discussion. Coopetition in antic maritime trade appears in small business context. This contradicts the commonly shared idea by researchers that coopetition appeared first in big companies, in order to increase their power

• Another way to play this game. The Roman way. And coopetition works even better when things are set up so that many direct stakeholders benefit along the way.
• Often times, a collection of small businesses will use this way of coopetition to forward their collective interests in an entire region, market, or industry.

Constant data communication: Knowledge sharing/transfer/creation à competitive information asymmetry

Constant communication facilitates learning, opportunities, and trust

Data: A shared measurement system; Adapt to data

Backbone: Aware potential stakeholder synergies and power dynamics.

Proactive facilitator of stakeholder relationships and resources. Oversight of network performance, environmental risk.

Learning: Each partner believes it can learn from the other. Continuous and dynamic process that adjust to environment and helps participants evolve.

This brings up another point in putting together strategic coopetition arrangements.  An arrangement where information is shared, constant communication is present, and where participants feel they can continuously learn from the experience greatly increases the probable long-term success of a coopetition agreement.  Doubly so when information can be used to help the participants collectively adjust to any threats or changes in the external environment.”

Is Coopetition worth the trouble?

But is this really possible in today’s day and age? Why would two dominate forces look to spend resources to pursue benefits that are achieved beyond themselves?

The Big Reservation

• And, inevitably, at this point, a few will have a very specific reservation. It’s usually the small business owner.  The man or woman who has owned their business for 2, 5, maybe 20 years, and is worried about supporting their employees and surviving as they compete against companies many times their size.  They’ll say something like…
• Does coopetition really mean a few large companies orchestrate some way to grow the entire pie, and then have an even larger share of it? How can I be sure I benefit?
• Or in other words, do these big companies tout cooperation as something everybody benefits from, but really they operate in the same old way of doing business.

Yara Coopetition

We’ll take a broad look at how two very different companies—the Norway-based manufacturer Yara and the retail giant Walmart—have used collective-impact principles to improve their ecosystems for all concerned.

Yara is a global leader in fertilizer manufacturing based in Norway. It faced numerous obstacles in its effort to reach small African farmers from its port of entry in Tanzania. Yara’s Fertilizer had the potential to increase crop yields in the famine-afflicted country. But corruption in the government-controlled port delayed the unloading of shipments for many months. Roads were inadequate for transporting the fertilizer to farms and the produce back to the port; a third of the harvest was typically left to rot for lack of refrigerated transport. Farmers were poor, often illiterate, and unaccustomed to using fertilizer; they also lacked access to credit. A government ban on the export of key crops, meant to protect local consumption, had the unintended consequence of shrinking the market and curbing capital investment.

All this added up to a classic market failure that propagated famine and poverty and also curtailed Yara’s growth. The problem was deeply entrenched: The farmers had little power to influence government policy, and they were suspicious of any changes to their traditional methods. International aid temporarily alleviated hunger but left the underlying issues untouched. No single intervention could prevail; success required that all the interrelated obstacles be addressed at once.

Starting in October 2009, Yara worked to bring together 68 organizations, including multinational companies, civil society groups, international aid agencies, and the Tanzanian government, in a partnership known as the Southern Agricultural Growth Corridor of Tanzania (SAGCOT). The mission was to build a $3.4 billion fully developed agricultural corridor from the Indian Ocean to the country’s western border, covering an area the size of Italy. It involved investing in infrastructure, including the port, a fertilizer terminal, roads, rail, and electricity; fostering better-managed farmer cooperatives; bringing in agro dealers and financial services providers; and supporting agro-processing facilities and transport services. Public sources have provided one-third of SAGCOT’s funding; the rest comes from the participating private enterprises. Although originally envisioned as a 20-year project, the corridor was well established within 3 years and has already bolstered the incomes of hundreds of thousands of farmers. Yara was decisive in launching the effort but did not lead or control it. Nor was the company’s investment—$60 million—a major part of the funding. Yet the project has boosted Yara’s sales in the region by 50% and increased the company’s EBITDA by 42%.

Walmart Coopetition

Societal constraints are not limited to emerging markets, of course.

In 2012, as Walmart was working to reduce its packaging costs by eliminating 20 million tons of greenhouse gas emissions from its supply chain and, it encountered an unexpected roadblock: Its suppliers could not source enough recycled plastic to use in their packaging. It turned out that 45% of the U.S. population lived in cities that were still dumping trash in landfills. Even though recycling would have yielded significant new revenues and savings, cash-strapped municipalities could not afford the up-front investment required for collection and sorting equipment and for campaigns to change consumer behavior. So in April 2013 Walmart, like Yara, convened a cross-sector coalition of NGOs, city managers, recyclers, major consumer brand companies (including direct competitors such as Unilever and P&G), and financing experts from Goldman Sachs. Many of the participants had spent years trying to launch their own recycling programs; by the time they met, all recognized that the problem could be solved only by collectively addressing the challenge of financing municipal curbside recycling.

Together, 10 companies invested in the $100 million Closed Loop Fund, whose purpose is to promote investments in recycling infrastructure across the United States. It is governed by an independent committee of experts in finance, the environment, recycling, supply chain, and municipal management.

To date the fund has financed 10 projects. As the result of one project, every household in Memphis, Tennessee—a city that had no curbside recycling whatsoever—now has access to convenient recycling carts. These 10 projects alone are expected to reduce annual waste to landfill by more than 800,000 tons and cut greenhouse gas emissions by more than 250,000 tons while creating hundreds of jobs.

And the benefits to Walmart are considerable: The increased availability of recycled materials strengthens its supply chain and reduces the cost of packaging. Again like Yara, Walmart neither led nor controlled its cross-sector effort—but it provided the necessary impetus.

A SOLUTION FOR ALL
So at this point, you should have some sense of not only what strategic coopetition means, but when done right, what it can achieve for those who decide to participate.  It’s generally, at this point, when I can get people to understand the true power of coopetition, that people get excited.  They began to think about ways to leverage this approach for the benefit of their own businesses, or problems they know everyone in their industry or neighborhood are facing.

GREED IS GOOD
In the words of Gordon Gekko, “Greed, for lack of a better word, is good.” Greed is a clean drive that “captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.” If the first caveman didn’t greedily want cooked meat and a warm cave, he never would have bothered to figure out how to start a fire.

BUT, GOOD IS BETTER
The problem with greed however is that it’s a zero sum game; somebody wins, somebody loses. Money itself isn’t lost or made as Gekko said; it’s simply transferred.”

The goal of strategic coopetition on the other hand is to increase the size of the pie, such that all the players reap the benefits proportionately.

THE NEW WAY WORKS BEST 

The Power of Many: Coopetition Examples

There’s another way to play this game. The Roman way, if you like. Coopetition works even better when things are set up so that many direct stakeholders benefit along the way. Often times, a collection of small businesses will use this way of coopetition to forward their collective interests in an entire region, market, or industry.

Porto Alegre Beer: For example, in the Porto Alegre region of Brazil, local microbreweries very much did as the Romans.  They worked together to collectively purchase and distribute goods to lower costs and achieve scale in making and delivering their products.  They went one step forward, creating formal and informal associations that worked together to successfully position Porto Alegre beers as premium products.   [5 small firms producing specialty beers located in the Anchieta neighborhood in the city of Porto Alegre, Brazil work together to forward local microbrewery market. Initiatives include purchasing and distribiution. à This all seemed to happen fairly recently, in the 2000’s/2010’s. Led to revitalization of local neighborhood.]

California Dairy: In the United States, dairy farmers across California collectively invested in shared advertising campaigns to further penetrate their collective markets.

Pic Saint Loop Wine: French wineries in the Pic Saint Loup region did same in an even more organized fashion, running creating one organization that successfully position Pic Saint Loup wines as premium brands and grew their collective market in the process. [Informal community to exchange practices and resources. guided by a proactive economic effort: the positioning in a niche for “premium” wines. Decided to found a collective brand in order to follow their individual strategies. Thus, the winemakers of Pic Saint-Loup took part in a global movement to launch a collective brand. The collective brand supports a coopetition strategy based on quality improvement of the products. The relationships between the members, the rules of production and the union were formalized.

BIG CHALLENGES REQUIRE EVOLVED THINKING
In the past, companies rarely perceived themselves as agents of social change. Yet the connection between social progress and business success is increasingly clear. For example: The first large-scale program to diagnose and treat HIV/AIDS in South Africa was introduced by the global mining company Anglo American to protect its workforce and reduce absenteeism. The €76 billion Italian energy company Enel now generates 45% of its power from renewable and carbon-neutral energy sources, preventing 92 million tons of CO₂ emissions annually. And MasterCard has brought mobile-banking technology to more than 200 million people in developing countries who previously lacked access to financial services.

If business could stimulate social progress in every region of the globe, poverty, pollution, and disease would decline and corporate profits would rise. In recent years creating shared value—pursuing financial success in a way that also yields societal benefits—has become an imperative for corporations, for two reasons. The legitimacy of business has been sharply called into question, with companies seen as prospering at the expense of the broader community. At the same time, many of the world’s problems, from income inequality to climate change, from childhood obesity to human trafficking, are so far-reaching that solutions require us to combine our expertise and resources and evolve our way of thinking.

But even as corporations pursue shared value strategies, businesses inevitably face barriers at many turns. No company operates in isolation; each exists in an ecosystem where societal conditions may curtail its markets and restrict the productivity of its suppliers and distributors. Government policies present their own limitations, and cultural norms also influence demand.

These conditions are beyond the control of any company. To advance shared value efforts, businesses must foster and participate in multisector coalitions—and for that they need a new framework. Strategic coopetition is one such framework. Companies that embrace such new frameworks will not only advance social progress but also find economic opportunities that their competitors miss.

Learn more about how you can leverage the power of coopetition. Offer 1-day and 2-day shipping at ground rates or less. Drive
down your shipping costs, delight your customers, and scale as big as you want.

Offer 1-day and 2-day shipping at ground rates or less.

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Agile ecommerce order fulfillment alternatives to make the switch to FBM

Amazon Sellers are Awash with Disruptions

Last week the Amazon FBA (Fulfilled by Amazon) community was shaken by Amazon’s decision to restrict the kinds of inventory it’s receiving until April 5, 2020. Shipments of inventory turned away, and many FBA sellers left to fend for themselves amid the crisis. Many sellers who still have FBA inventory are panicking after seeing delivery dates pushed to April, and some items would even take a month to deliver. Many voiced concerns about losing an entire month of sales.

2021 Update: To learn about the latest FBA restrictions and to discover how to mitigate risk and maximize Amazon sales in Q4 and beyond, check our article and on-demand webinar on How To Improve Your IPI Score & Maximize Amazon Sales

Amazon SFP Sellers are Also Hitting Bumps

As merchants rush to convert their listings to Fulfilled by Merchant (FBM), some merchants on the Cahoot Order Fulfillment Network have reported that Amazon has started assigning weekend delivery dates to some Seller Fulfilled Prime (SFP) orders. It’s unclear at this time as to the reasons or which orders or merchants are impacted. One example is a medical supply Cahoot merchant in California. The merchant received several prime orders with a Saturday delivery deadline. Unfortunately, the only delivery option available through Amazon for the deadline was a $120 one-day air service for a $40 item. This is most likely a glitch in Amazon systems. Still, Sellers must fulfill these orders using expensive overnight shipping to maintain their good standing with Amazon or risk losing the SFP selling privileges.

Agile Ecommerce Order Fulfillment is the Present and the Future

COVID-19 situation has exposed a fundamental flaw of over-reliance on a single fulfillment channel. Just like an investor would diversify its portfolio between multiple asset classes, Amazon Sellers should not rely exclusively on FBA for their order fulfillment. There are order fulfillment options that are within your reach, and some of them can even be set up and running in a matter of days.

At Cahoot, we believe in agile order fulfillment that can quickly adapt to changes. Agile fulfillment requires three parts: (1) Flexibility, (2) Resilience, and (3) Scalability. Flexibility implies fulfillment that follows the money, so you can quickly adapt and make changes—for example, quickly adding order fulfillment capabilities in regions where demand is concentrated. If you get a surge of orders from California, having a fulfillment option regional or local to in California would help you lower shipping costs while speeding up deliveries. Flexibility also means the ability to shift fulfillment locations when demand patterns change naturally or as a result of new sales channels or marketing campaigns.

Resilience in ecommerce order fulfillment means making sure your pick, pack, and ship operations continue during disruptions. Major events like the Amazon FBA restriction won’t bring your business down if you have redundant fulfillment capabilities.

Scalability means ensuring your order fulfillment capacity can scale to support your business’ growth and downturn. Having multiple fulfillment options and the technologies that tie them all together can minimize disruptions as your business grow. The aim here is to right-size your operations to suit your business demands while optimizing costs

4 Order Fulfillment Alternatives for Amazon Sellers

Below are 4 popular agile order fulfillment options for sellers to consider.

Own Warehouse

Setting up order fulfillment operations within your own warehouse could be a reasonable stop-gap measure if you have the systems, supplies, and staff. This is a good redundancy strategy to continue selling if FBA goods ever go out of stock.

However, continuing to do order fulfillment using a single fulfillment center is unsustainable when compared to the cost and speed of FBA. Fulfilling 1-day or 2-day delivery prime orders from a single location is very costly. A guaranteed next-day express shipping service is four times the cost of an economical ground shipping.

Pros:

• Suitable for a temporary back-up option for FBA
• At full capacity utilization, order fulfillment can be very economical
• Complete control over your operations and full flexibility in how you package your items

Cons:

• Requires considerable time and resources to find, train and manage staff and day-to-day operations
• Limited coverage via Ground service to deliver orders within 1-Day and 2-Day
• Reaching and maintaining full capacity utilization year-round is very hard
• May not be suitable for Amazon orders if the Operations are brand new which can lead to unacceptance fulfillment defect rates

3PL (Third Party Logistics)

3PLs can provide flexibility by allowing you to add order fulfillment locations faster than building your own warehouses. Smaller 3PLs may be willing to offer lower prices to compensate for their limited coverage.

Smaller 3PLs are a good choice if you already have your own order fulfillment operations and are only looking for a new location to have better two-day ground coverage. Smaller 3PLs are often mom-and-pop operations with limited technology and capacity. Hence, limited in scalability. If you’re looking to offer free one- or two-day shipping across the U.S., working strictly with small 3PLs can be complicated. It may require working with multiple companies, integrating all of their systems to yours, and maintaining them regularly. Plus, you will not have the flexibility to re-calibrate your fulfillment in response to changing customer demand patterns. And, you will be impacted if your single 3PL site has to shut down or downsize their operations for whatever reason.

Pros:

• Add new locations to complement your own order fulfillment
• Access to discounted freight and parcel shipping rates negotiated by the 3PL
• Supports multichannel order fulfillment

Cons:

• Limited capacity and flexibility. They often require long-term contracts with a minimum volume commitment for favorable pricing.
• Limited technology to provide real-time visibility and intelligence into the orders and fulfillment
• Difficult to reliably achieve economical 1 or 2-day delivery nationwide.
• Support for Seller-Fulfilled Prime orders may be limited due to demanding SLAs and special requirements

On-Demand Warehousing

On-demand warehousing or 4PLs (Fourth Party Logistic Model) are services that manage multiple 3PLs so merchants can quickly add warehouses as needed. They help merchants find new warehouses that fit their location, timing, or special handling needs (e.g., hazmat, temperature-controlled, perishables, to name a few). Companies such as Flexe, Flowspace, and Ware2Go are platforms that connect 3PLs who have excess storage space with sellers who need them. 4PLs make it simpler for merchants to work with multiple 3PLs because merchants only need to integrate with the 4PL and have the flexibility of short-term space rentals (instead of the long-term commitment typically required by 3PLs).

4PLs generally provide customer support and additional services such as receiving inbound shipments, storage, pick-and-pack, and outbound shipping. But through multiple facilities in distributed geography instead of just one.

Like 3PLs above, merchants need to make sure the 3PLs they are working with are capable of offering 1-day or 2-day delivery nationwide. Not all 4PLs are geared toward fast and cost-effective B2C e-commerce order fulfillment as some tend to specialize in services such as bulk store replenishments, short-term storage facilities, or FBA inventory prep. Because 4PLs are primarily selling 3PL storage and fulfillment services, sellers have to figure out how to optimize their overall costs and business operations by themselves.

Pros:

• Only pay for warehouse space you need without the long-term commitment.
• Minimize complexity from integrating with multiple 3PLs to just one 4PL
• Storage fees may be cheaper than conventional 3PL models because warehouses on the platform mostly list their unused space.
• Supports multichannel orders

Cons:

• Does not specialize in Amazon eCommerce order fulfillment.
• Support for nationwide Amazon Seller-Fulfilled Prime (SFP) fulfillment could be unpredictable, where the performance metrics are very demanding and there is little to no room for errors.
• Space availability varies frequently and dependent on the 3PL partners who are simultaneously servicing their own clients and other platforms.
• Potentially more expensive than a traditional 3PL for eCommerce order fulfillment because both the warehouse and the platform need to make money.

Peer-to-Peer Order Fulfillment^TM

Services like Cahoot offer Peer-to-Peer eCommerce Order fulfillment^TM, which is a hybrid between in-house fulfillment and 3PLs. It combines the flexibility and reach of a 4PL with the cost efficiency of in-house fulfillment. In the peer-to-peer model, ecommerce sellers exchange warehouse space and fulfillment services.  Under this model, merchants who currently do their own order fulfillment can now work together in a coalition and offer free and fast shipping to each others’ customers wherever they may be located.

Peer–to–peer model offers the most agile order fulfillment because it connects ecommerce sellers to a network of trusted peers, thereby creating a very large network.

First, it provides unparalleled flexibility because online retailers can quickly and easily re-calibrate their fulfillment strategy and locations in response to their inventory demand graph as opposed to serving all customer orders from a fixed fulfillment configuration. This enables Amazon sellers to win the buy box more often and without undue compromise to their margins.

Second, it provides resilience because online sellers collaborate with multiple geographically distributed fulfillment nodes simultaneously on a large-scale global network. So if one partner falters, the merchant can still continue their operations without any business disruption.

Third, peer-to-peer order fulfillment provides high scalability due to the sheer number of high-performing members on the network who each has varying scales of warehouse capacity and resources.

Peer-to-peer’s workshare model allows for the lowest overall storage and order fulfillment costs compared to other options.It takes mere days to start having your stuff fulfilled through Cahoot, and you can get shipping in no time. To learn more or get started, contact us today.

Pros:

• Peer-to-peer gives brands and retailers access to the widest range of ecommerce order fulfillment locations, both domestic and international.
• Overall storage and fulfillment fees are the lowest because of its unique “workshare” model.
• Works with other merchants of repute who have a proven record of handling fast same-day SFP orders and defect-free operations.
• Scales easily and cost-effectively to support the most demanding SLAs

Cons:

• Not always a solution for newer merchants as acceptance into the network requires a proven track record of high-performance fulfillment that can be verified
• Does not offer custom branding or packaging inserts currently.
• Merchants may need to arrange for inbound freight to the receiving warehouses.
• Not suitable for drop-ship merchants or ones who carry just-in-time inventory.

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Like anyone in the ecommerce world, small business owners are always looking for ways to streamline their operations and enhance the customer experience. A critical aspect that often gets overlooked is packaging design. It’s not just about making products look attractive; it’s about making smart, cost-effective choices that simplify the order fulfillment process and reduce packaging costs. This article will delve into innovative strategies that ecommerce businesses can employ to revolutionize their packaging approach, ultimately cutting down on supply chain expenses and boosting customer satisfaction.

Understanding the Impact of Packaging Materials Choices

The type of packaging chosen plays a pivotal role in the overall success of any ecommerce business. Whether it’s a sturdy cardboard box, a sleek mailer, or eco-friendly packaging, each element contributes significantly to the brand identity and customer unboxing experience. However, beyond the aesthetics, smart packaging design is about optimization and cost savings. It’s about selecting box sizes and packaging materials that not only protect products but also reduce shipping costs and carbon footprint, while shipping safely and efficiently.

What is Dunnage?

Dunnage is a crucial component in the shipping and logistics industry, playing a vital role in ensuring the safe transportation of goods. Dunnage materials come in various forms, including common dunnage materials like bubble wrap, kraft paper, corrugated paper, crisscrossed dunnage, and kit packs. These materials are essential in the shipping process as they provide a protective barrier that absorbs shocks and vibrations, ensuring that products reach their destination in perfect condition.

The type of dunnage used can vary depending on the specific needs of the shipment, such as wood, plastic, or custom designs. Understanding the different types of dunnage, from lightweight to heavy-duty options, is crucial for optimizing shipping safety and maintaining the integrity of shipments across industries.

Benefits of Using Dunnage Materials

Dunnage offers numerous benefits to businesses and individuals involved in shipping and logistics. Some key advantages include:

• Damage Protection: Dunnage materials help prevent damage to goods during transit by absorbing shocks, vibrations, and impacts, which is particularly important for fragile items that are susceptible to breakage.
• Moisture Protection: Certain dunnage materials, such as corrugated paper, can protect goods from moisture damage during shipping. For products that are sensitive to humidity and water exposure, such as cosmetics, this is necessary to ensure successful delivery.
• Shock Absorption: Dunnage materials like bubble wrap and air pillows can absorb shocks and vibrations, reducing the risk of damage to fragile items and ensuring that products remain intact even when subjected to rough handling.
• Easy Handling of Heavy Items: Dunnage materials can make it easier to handle heavy items by filling gaps and preventing them from shifting during transport. This standard practice not only protects the goods but also simplifies the loading and unloading process.
• Air Circulation: Dunnage materials can improve air circulation in tightly packed shipping containers, reducing the risk of mold and mildew.

By incorporating dunnage materials into the shipping process, businesses can protect goods, reduce the risk of damage, and ensure that products arrive in excellent condition.

Optimizing Packaging Solutions

While packaging is often thought of as a cost center, innovative packaging solutions can minimize overall costs while also turning a necessary expense into an effective marketing tool.

Leveraging Sales Data for Efficient Packaging

One of the most effective ways to optimize packaging needs is by analyzing sales data. This can reveal the most common purchase combinations, allowing the opportunity to streamline inventory management and reduce the number of different shipping boxes required. By consolidating packaging options based on popular orders, simplifying the packing process while minimizing warehousing space and labor costs involved in handling too many packaging supplies.

Double-Sided Printing: A Packaging Game-Changer

Incorporating double-sided printing in packaging solutions can have a surprisingly significant impact on the bottom line. By printing product instructions or disclaimers on the inside of mailer boxes, sellers can eliminate the need for additional inserts. That not only saves on the cost of packaging materials like custom inserts and bubble wrap but also reduces the time-consuming task of including these extras during the packing process. It even enhances the customer experience by presenting all necessary information in a clear and convenient manner.

The Role of Custom Packaging and Damage Protection Dunnage

Custom packaging, while seemingly a luxury, can be a practical choice for ecommerce businesses focused on cost savings and sustainability. By choosing the right type of packaging, such as corrugated options or sustainable filler materials, significant reductions can be made in the dimensional weight of shipments. This directly impacts shipping rates, leading to substantial cost savings. Furthermore, custom dunnage tailored to specific product packaging needs can minimize product damage, thereby reducing the costs associated with returns and replacements.

Using Product Returns Data to Optimize Packaging

Analyzing product returns data can be a game-changer for improving packaging design. Start by digging into the reasons customers list for returns—especially damage-related ones. Look for patterns: Are certain products being returned more often due to damage? Is there a specific packaging style linked to these returns? Sometimes, it’s as simple as noticing that fragile items packed in thin boxes are more prone to breakage, or that certain shapes of packaging don’t hold up well during shipping. Categorizing returns by product type, packaging material, and type of damage can help you pinpoint weak spots.

Once recurring issues are identified, test alternative packaging solutions. For example, if glass items are cracking despite bubble wrap, consider using molded foam inserts or sturdier boxes. Don’t forget to factor in shipping methods—if certain carriers handle packages more roughly, you might need to beef up protection even more. Over time, track if changes reduce damage-related returns. The goal is to strike a balance between cost-effective packaging and product safety, ultimately boosting customer satisfaction and cutting down on return-related losses.

Prioritizing Sustainability in Packaging Strategy

Sustainability is no longer just a buzzword; it’s a crucial aspect of modern business practices, especially in the packaging world. Opting for sustainable packaging not only aligns with the growing environmental consciousness of consumers but also contributes to cost-effectiveness. Materials like eco-friendly packaging, void fill, and recycled cardboard boxes reduce carbon footprint and often come with the added benefit of being lighter and less expensive. Alignment between business practices, social media trends, and consumer values also enhances brand identity and can lead to increased customer satisfaction and loyalty.

Reusable Packing Materials

Reusable packing materials are an essential aspect of dunnage, offering a cost-effective and environmentally friendly solution for businesses and individuals. Some common types of reusable packing materials include:

• Bubble Wrap: A popular choice for protecting fragile items, bubble wrap can be reused multiple times. Its cushioning properties make it ideal for safeguarding delicate products during transit.
• Kraft Paper: A versatile and affordable option, kraft paper can be crumpled, torn, or wrapped around items to provide medium protection. It is also biodegradable, making it an eco-friendly choice.
• Corrugated Paper: A high-tech option, corrugated paper can carry a wide range of weights and provide sustainable packaging solutions. Its strength and durability make it suitable for various applications.
• Dunnage Bags: Large, inflatable bags used to keep cargo from shifting or colliding with other cargo during shipping. These bags are reusable and can be easily inflated and deflated as needed.
• Packing Peanuts: An eco-friendly and versatile dunnage material that can be packed around irregularly-shaped goods. They provide excellent cushioning and can be reused multiple times.

By using reusable packing materials, businesses and individuals can reduce waste, save costs, and minimize their environmental impact. These materials not only offer effective protection for goods but also contribute to a more sustainable shipping process.

Automation and Optimization: The Future of Packaging

The future of packaging in ecommerce lies in the intelligent use of automation and optimization techniques. By automating certain aspects of the packaging process, such as filler placement or box sealing within a shipping container, ecommerce businesses can achieve faster fulfillment services and reduce labor costs. Additionally, ongoing optimization of packaging strategies, informed by data analytics and customer feedback, ensures that all packaging solutions evolve with any business, always meeting the changing demands of the market and the seller’s specific packaging needs.

In Conclusion

Effective packaging design is a multi-faceted strategy that goes beyond mere aesthetics. It’s a combination of data-driven decision-making, custom solutions, sustainability considerations, and the smart use of technology. By focusing on these areas, small ecommerce brands can significantly reduce their packaging and shipping costs while enhancing the overall customer experience. The result is bigger margins, faster growth, and new opportunities.

Phillip Akhzar, Founder & CEO, Arka

Frequently Asked Questions

How do I know what kind of dunnage to use?

Choosing the right dunnage for your packaging comes down to balancing product protection, cost-efficiency, and sustainability. Here’s a simple framework to guide your decision:

1. Assess Product Fragility and Weight: Fragile items (like glass or electronics) need cushioning materials such as bubble wrap, foam inserts, or molded pulp to absorb shocks, while heavy products require sturdy dunnage like corrugated inserts or molded foam that won’t collapse under weight. Light, non-fragile items can use simpler void-fill materials like kraft paper or air pillows.
2. Factor in Packaging Efficiency: Space matters! In small packages, use dunnage that minimizes movement without wasting space—custom inserts or snug-fitting foam work well. For multi-item shipments, dividers or molded trays keep products separated and secure.
3. Weigh Cost vs. Sustainability: Air pillows and bubble wrap are affordable but less eco-friendly unless you opt for recyclable versions. Kraft paper and molded pulp are biodegradable and a solid choice for eco-conscious brands. If you’re shipping high-value goods regularly, investing in reusable dunnage like foam inserts or corrugated plastic dividers can cut costs over time.

In short, the right dunnage keeps your product safe, controls shipping costs, and aligns with your brand’s sustainability goals.

What is the best dunnage for small packages?

The best dunnage for small packages depends on the product’s fragility, weight, and shipping conditions. For the best results, match the dunnage to the product’s needs. Fragile items benefit from cushioning materials like foam or bubble wrap, while sturdier items might only need air pillows or paper to prevent movement. Always ensure there’s minimal empty space in the box to reduce the risk of damage.

How can I keep track of my shipping supplies, such as dunnage?

To effectively track shipping supplies like dunnage, use an inventory management system (whether robust software or a simple spreadsheet) for monitoring stock levels, usage rates, and reorder points. Categorize dunnage types (e.g., bubble wrap, air pillows, kraft paper) and create standard “recipes” for each product to predict material needs. Integrate tracking with your order management system to align usage with sales volume and set minimum stock thresholds to trigger reorders. Regular physical audits help catch discrepancies, while analyzing usage trends over time can reveal seasonal patterns or inefficiencies. For larger operations, using barcodes or QR codes streamlines tracking and reduces manual errors, ultimately helping control costs and improve packaging efficiency.

BRIDGEPORT, CT (April 14, 2021) – Cahoot, the world’s first peer-to-peer eCommerce fulfillment network, announced that it has been named on the Fast Company’s Prestigious List of the World’s Most Innovative Companies for 2021. Cahoot enables brands and online retailers to affordably provide one-day and two-day delivery nationwide by storing and fulfilling goods for each other.  

Fast Company’s Most Innovative Companies (MIC) list honors the businesses that have not only found a way to be resilient in the past year but also turned those challenges into impact-making processes. These companies did more than just survive; they thrived—making an impact on their industries and culture as a whole. This year’s list features 463 businesses from 29 countries.

“We are honored to be named one of the World’s Most Innovative Companies and recognized for our work. We are enabling businesses of any size to affordably offer their customers the same superfast delivery experience as Amazon” said Manish Chowdhary, Founder and CEO of Cahoot.

Like the Airbnb marketplace of homeowners and travelers, the patented Cahoot fulfillment network brings together the collective power of many SMBs and their warehouses to fulfill orders, thus reducing fulfillment costs and expediting delivery. Cahoot’s optimization algorithm further analyzes all combinations of warehouses, carriers, and shipping services to find the most affordable and efficient way to deliver orders fast.

With consumers flocking to online shopping in 2020 due to COVID, eCommerce grew an unprecedented 44% year-over-year, nearly three times the historical annual growth. At the height of the pandemic, even Amazon’s fulfillment services faltered. Customer orders took almost a month to arrive as warehouses struggled to fulfill orders. Amazon stopped accepting non-essential goods in its warehouses and prioritized its direct sales over those of its marketplace sellers, leaving hundreds of thousands of sellers that rely on its popular fulfillment service (FBA) scrambling for alternatives. Such incidents have caused merchants to always be prepared with a backup provider when they need it.

This eCommerce explosion has led to a shortage in warehouse space, well-priced and available labor, and carrier capacity. Warehouse vacancies reached an all-time low in Q3 2020 while rents were at an all-time high. LinkedIn also reported a surge of 73% job openings for fulfillment workers, the highest among all categories, and wages began creeping up. Moreover, all major carriers, including USPS, increased rates and added surcharges to handle the unprecedented increase in demand. All of this has resulted in much higher operational costs for retailers. And, at a time when most consumers are struggling financially, raising prices is not an option for merchants.

“Traditional solutions do not meet the needs of SMBs – unlike large corporations that have the power to negotiate aggressively with landlords and carriers to stay competitive. With Amazon pushing its popular prime membership program to transition from 2-day free delivery to now 1-day, even the largest retailers are facing logistical challenges. But Cahoot changes all that by intelligently aggregating the power of many,” said Chowdhary.

By unlocking previously unavailable warehouse capacity from tens of thousands of merchants across the U.S., Cahoot is transforming eCommerce fulfillment into a new collaborative model that’s more efficient. Cahoot’s fulfillment model is also environmentally friendly besides scaling up to meet the rising consumer expectations of free and fast delivery. And for the first time, online merchants can monetize their existing warehouse space and labor in a way previously not imagined or possible. “Before Cahoot, we didn’t really know how to leverage our extra space and fulfillment capacity. Becoming a Cahoot Fulfillment Partner has been a great way to make extra money without the hassle of becoming a full 3PL. Onboarding was fast and easy; Cahoot software is so efficient that we pick Cahoot orders before our own!” said Robert Hill, CEO of Seismic Audio Speakers.

With Cahoot, merchants can expand to regions previously too far for fast ground shipping and too expensive for expedited air shipping. “My customers now expect free 1-day and 2-day delivery, which is very expensive and difficult to provide. But with Cahoot, I can now offer 1-day delivery in both the East and the West with ground shipping, in addition to my home state of Kentucky,” said Darren Somerville of Impact Battery.  

By providing fulfillment as a utility-like service as opposed to a competitive advantage previously available only to the largest and highly capitalized corporations, Cahoot aims to fuel even greater innovation – sure to benefit consumers around the world.

“Before Cahoot, we were selling only on Amazon. The inventory restrictions imposed by Amazon FBA were difficult for my business,” said Eli Miller, owner of Twinkle Toy. “Cahoot helped us grow by serving customers nationwide across multiple selling channels, including our own website. It’s a whole new opportunity that I would never have had without Cahoot.”

Cahoot’s shipping volume increased five-fold year-over-year in 2020. Many merchants have found success through Cahoot: 

• A chocolatier in Brooklyn, NY, added 34% more sales just by outsourcing fulfillment to 2 additional locations.
• A prominent battery merchant in the Midwest maintained their Amazon Seller Fulfilled Prime eligibility by expanding 1-day ground coverage to 45%+ of U.S. consumers.
• Another merchant selling big, bulky products saved 88% on two-day delivery costs and tripled sales in just three weeks.

Fast Company’s editors and writers sought out the most groundbreaking businesses across the globe and industries. The World’s Most Innovative Companies is Fast Company’s signature franchise and one of its most highly anticipated editorial efforts of the year. It provides both a snapshot and a road map for the future of innovation across the most dynamic sectors of the economy.  

Cahoot is available for merchants looking to expand their reach for one- and two-day delivery services across all popular 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 that helps online businesses offer nationwide 1-day and 2-day deliveries. Cahoot offers drastically lower fulfillment fees because it enables merchants to store and ship the merchandise for each other. This novel business model also enables merchants to make extra money using their existing warehouse space and personnel.

ABOUT FAST COMPANY
Fast Company is the only media brand fully dedicated to the vital intersection of business, innovation, and design, engaging the most influential leaders, companies, and thinkers on the future of business. Fast Company’s Most Innovative Companies issue (March/April 2021) is now available online here, on iTunes, and on newsstands beginning March 16, 2021

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As more grocery sellers move to add online channels, they’re quickly discovering that the third party logistics industry hasn’t yet built up the specialized muscle needed to store and ship their products with the care they need. The growth of grocery online has caught logistics professionals off guard. After all, very few people bought food online as recently as 2019.

Just two years before the COVID pandemic, eCommerce made up only 2.7% of US grocery sales. Now, market forecasters expect it to make up a full 20% of the grocery market in 2026, an astounding growth rate.

Explosive growth can come with deep challenges, and many grocers that have added online channels have seen the promise of ecommerce turn sour due to high damage rates and inefficient shipping from their fulfillment partners. Unfortunately, many 3PL warehouses simply don’t know what it takes to offer top-notch services and manage food supply logistics effectively.

In this article, we’ll provide you with an inside look into what you need to look for in a 3PL that will support your profitable growth as an online food seller with food-grade warehouses.

What is Food Grade Warehousing?

Food grade warehousing refers to the specialized storage and handling of food products in facilities that meet stringent standards for cleanliness, sanitation, and safety. These warehouses are designed to protect the integrity and quality of food products, ensuring they remain safe for consumption throughout the storage period. Equipped with specialized equipment and staffed by trained personnel, food grade warehouses handle a variety of food products, including dry goods, frozen items, refrigerated products, and perishables.

In the food supply chain, food grade warehousing plays a critical role by preventing contamination, spoilage, and damage to food products. This ensures that the food reaching consumers is both safe and high-quality. By adhering to rigorous standards, food grade warehouses help maintain the trust and confidence of food manufacturers and consumers.

Importance of Food Safety in Warehousing

Food safety is paramount in food grade warehousing. Given the susceptibility of food products to contamination, spoilage, and damage, stringent food safety protocols are essential. These protocols include rigorous sanitation practices, effective pest control measures, and precise temperature control to inhibit the growth of harmful bacteria, mold, and other microorganisms.

Food grade warehouses must comply with regulations and standards set by authoritative bodies such as the Global Food Safety Initiative (GFSI) as well as legislation like the Food Safety Modernization Act (FSMA). These regulations ensure that food products are handled and stored in a manner that protects public health. By prioritizing food safety, food grade warehouses not only safeguard consumers but also uphold the reputation and reliability of the food supply chain.

What You Need From Your Food 3PL

While there are many similarities between fulfilling online orders for the food industry and general consumer packaged goods, food products have special needs that many third party logistics warehouses (3PLs) aren’t equipped to handle. Proper food handling practices are crucial to prevent contamination and ensure safety during storage and processing, with certifications like SQF and AIB validating adherence to these standards.

In this section, we’ll break down the added requirements that 3PLs need to excel in to provide excellent food grade order fulfillment.

FDA Approved Food Grade Warehouses

In 2011, the Food Safety Modernization Act (FSMA) raised the standards for manufacturing, processing, and storing food. An FDA-certified warehouse is a storage facility, food manufacturing plant, or order fulfillment center that is officially registered with the FDA to safely store food in accordance with the FSMA and food industry regulations.

The certification process ensures that the warehouse has a host of plans and procedures designed for the safe storage and handling of food products. Some elements include sanitation and cleaning procedures, glass and clear plastic policies, and pest control.

Relying on an FDA-approved warehouse as your food 3PL gives you the peace of mind that comes from knowing that your food products are stored safely, minimizing the chance of spoilage or contamination that could hurt customers and your ecommerce business.

In addition to FDA certifications, food-grade warehouses can acquire a number of other certifications from government and industry groups that indicate they are following up-to-date best practices for food handling and storage:

• Global Food Safety Initiative (GFSI) Recognized Certifications
  • BRCGS (Brand Reputation Compliance Global Standards) Storage & Distribution – Ensures proper storage and transportation of food and packaging materials.
  • SQF (Safe Quality Food) Storage & Distribution – A globally recognized standard that verifies food safety and quality management.
  • IFS Logistics – Covers food and non-food storage and transportation requirements.
  • FSSC 22000 (Food Safety System Certification) – Based on ISO 22000 and recognized by GFSI.
• ISO Certifications
  • ISO 22000 – International standard for food safety management systems.
  • ISO 9001 – Quality management system certification that ensures consistent service quality.
• Organic and Specialty Certifications
  • USDA Organic Certification – For warehouses handling organic products, ensuring compliance with National Organic Program (NOP) standards.
  • Non-GMO Project Verified – For warehouses storing non-GMO products.
  • Gluten-Free Certification – Ensures compliance with gluten-free handling requirements.
  • American Institute of Baking (AIB) – evaluates the safety, cleanliness, and compliance of food processing and storage facilities.
• Hazard Analysis & Critical Control Points (HACCP) Certification
  • A preventive approach to food safety, identifying and managing potential hazards in food storage and handling.

Thanks to Cahoot’s unique peer-to-peer ecommerce model, we have warehouses that don’t just occasionally work with food products but instead have specialized in food order fulfillment for decades.

Climate Controls

One of the most important considerations when choosing an ecommerce fulfillment company is the type of climate conditions that your products will require. More than most other products, many foods have strict temperature limitations that must be followed, or products will be damaged. Many sellers assume that if they don’t need refrigeration, then any 3PL warehouse will do, but they learn the hard way that isn’t true.

Unfortunately, many 3PLs maintain warehouses at warmer temperatures in order to save money on air conditioning, which makes them too warm for many food items. Especially in summer months – and in the southern US – many warehouse temperatures rise into the 80s or even 90s Fahrenheit, which can irreversibly damage many food items and lead to a big write-down.

And product loss in the warehouse isn’t where the problem ends. Your outsourced warehouse team may not realize that products are damaged before they ship them out. Suppose you sell chocolates, and you have a product line that ships in opaque boxes. The warehouse team wouldn’t be able to see the damage, and if the warehouse temperature rose to melt the chocolate, shipments would continue without pause. That leads to a mass of customers all receiving damaged products at once, and when they take to social media to complain, it will create a lasting negative impression of your brand.

Therefore, it’s critical that the 3PL warehouse that you choose is equipped to handle, store, and ship your food items in optimal climate conditions so that your customers are able to receive the very best version of your product.

A good rule of thumb is to ask your 3PL warehouse whether they guarantee their warehouses at or close to room temperature. Since the most commonly shipped food items are designed to be stored in cool, dry conditions in a cupboard, they’re usually safe at 72 degrees. That being said, know your product! Refrigerated items will obviously require lower temperature ranges, and some other products don’t need refrigeration but do need more careful heat regulation than simply sitting at room temperature.

Careful Packaging For Safe And Efficient Shipping

One metric defines online seller profitability more than any other: customer lifetime value. With digital advertising becoming increasingly expensive, most sellers lose money on new customers. They’re only able to earn a positive bottom line through long-time repeat customers.

Proper food grade storage is essential before shipping to ensure food safety and compliance with regulations. Unfortunately for online food merchants, it’s more difficult to safely ship fragile foods and glass than it is to ship other goods. Without a food 3PL that knows how to treat such delicate items, your margins will quickly be overwhelmed by unhappy customers demanding refunds for damaged goods.

In addition to limiting damage, a 3PL warehouse that knows food logistics inside and out also knows that orders come in many more shapes and sizes than they often do for other merchants. Grocery orders tend to consist of many different items and many different quantities. This introduces significant packaging uncertainty for untrained order fulfillment personnel, and it can lead to inefficiently packed boxes that inflate shipping costs.

Cahoot uses a combination of intelligent packing software and responsive customer service to get the packaging right for the toughest goods to ship. We optimize for two things: we keep the package as small as possible to minimize shipping cost while also getting damage rates as close to 0% as possible.

Our warehouses that specialize in food have a direct line to discuss tricky packing challenges with our control team, and this leads to a process of continuous improvement. Our software is constantly learning new ways to reduce damage rates and costs. In this way, you save money on shipping while also ensuring that your customers are delighted when they open up their products every time.

Responsive Customer Service

Though responsive customer service is important for all online sellers, it’s especially important for a food 3PL, given the additional attention that is needed. You need to be able to get in touch with your customer service team quickly to feel confident that they know how to excel with your products and troubleshoot solutions for tricky challenges.

You need a 3PL company that offers you a real person to work with your account and multiple ways to get in touch with them. Cahoot clients love our easy-to-reach and proactive customer service team. Our team is based in the USA, and they take the time to get to know your ecommerce business, so you don’t have to start at square one with a new person every time you submit a ticket. The close relationship we forge with our sellers is foundational to our ability to go above and beyond as a food 3PL.

Evaluating a Food Grade Warehouse

When evaluating a food grade warehouse, it’s crucial to assess its ability to meet high standards for cleanliness, sanitation, and safety. Here are key factors to consider:

• Certifications: Look for certifications such as SQF, AIB, and Organic. These certifications indicate that the warehouse adheres to specific standards for food safety and quality.
• Sanitation and Pest Control: Ensure the warehouse has a robust sanitation and pest control program to prevent contamination and infestation. This includes regular cleaning schedules and effective pest management strategies.
• Temperature Control: Verify that the warehouse has adequate temperature control measures to prevent spoilage and damage to food products. This is especially important for perishable and temperature-sensitive items.
• Inventory Management: Assess the warehouse’s inventory management system to ensure it can effectively track and manage food products. Efficient inventory management helps in maintaining product quality and reducing waste.
• Staff Training: Ensure that warehouse staff are well-trained in food safety and handling procedures. Proper training minimizes the risk of contamination and damage to food products.
• Regulatory Compliance: Verify that the warehouse complies with relevant regulations and standards, such as the Food Safety Modernization Act (FSMA). Compliance ensures that the warehouse operates within legal and safety guidelines.

By thoroughly evaluating these factors, you can ensure that a food grade warehouse meets the necessary standards for safely and efficiently storing and handling food products. This not only protects consumer health but also enhances the reliability and efficiency of the entire supply chain.

Cahoot: Experienced Food Grade Warehouses

Cahoot is different from other 3PLs. Our innovative peer-to-peer model sets us apart by enabling us to offer low-cost, fast order fulfillment by design for a huge variety of specialized industries.

So, how do peer-to-peer ecommerce services work better than old order fulfillment networks?

We recruit top-tier ecommerce merchants with their own warehouses to join our network as fulfillment partners, and then our intelligent shipping software and control team keeps the whole system connected and running efficiently. Since we’re unlocking excess order fulfillment capacity that was lying idle, we’re able to offer lower costs. And crucially for online grocers, we’re able to recruit merchant-operated warehouses that already specialize in fulfilling their own food – and thus are already up to speed as food grade warehouses.

Unlike other 3PL warehouses that are building cookie-cutter warehouses designed to store easy-to-fulfill goods, we have specialists in temperature-controlled fulfillment, hazmat, and more. Our flexibility is part of what distinguishes us and makes us the best choice for sellers seeking a reliable food-quality 3PL partner.

Our technology further improves our ability to power food-grade logistics by constantly optimizing how we pack orders. The shipping software partners with human judgment to learn the best packing combinations for tricky food orders, so we’re able to minimize damage rates and use small packages to limit shipping costs. And, of course, since our merchant-operated warehouses know how important special handling is for food products, they take extra pride in ensuring that your products are safely stored and moved.

If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We’ll design a custom order fulfillment service for you that will meet your exact food-grade needs.

Frequently Asked Questions

What is 3PL cold storage?

3PL cold storage refers to temperature-controlled warehousing and distribution services for perishable goods offered by many 3PLs. These facilities specialize in storing and handling products that require refrigeration or freezing, such as dairy, meat, seafood, frozen meals, pharmaceuticals, and certain chemicals.

What regulations must a food-grade 3PL provider follow?

Food-grade third-party logistics (3PL) providers must comply with several regulations to ensure food products are stored and handled safely. Key requirements include:

• FDA Registration: All food-grade warehouses must be registered with the FDA and undergo regular inspections.
• FSMA Compliance: Facilities must implement a comprehensive Food Safety Plan managed by a Preventative Controls Qualified Individual (PCQI).
• GMPs & HACCP Plans: Good Manufacturing Practices (GMPs) and Hazard Analysis Critical Control Points (HACCP) ensure food safety and risk mitigation.
• Third-Party Audits: Many food-grade warehouses are subject to independent audits by organizations such as ASI Food Safety or the Safe Quality Food Institute (SQFI).
• Pest Control & Sanitation: Strict pest control, sanitation, and hygiene protocols must be followed to prevent contamination.

What factors should businesses consider when choosing a food-grade 3PL provider?

When selecting a food-grade 3PL provider, businesses should consider several factors to ensure compliance and efficiency, including experience & certifications, temperature integrity, lot traceability, prevention of cross-contamination, and GMP audit readiness.

What can disqualify a warehouse from being considered food-grade?

A warehouse may lose its food-grade status if it fails to maintain sanitation, temperature control, and compliance with regulatory standards. Common disqualifications include:

• Structural Issues
• Poor Sanitation Practices
• Improper Storage
• Lack of Temperature Control
• Regulatory Non-Compliance

Have you ever wondered how Amazon merchants selling $2 items can possibly make a profit? The truth is that they are not.

Amazon SFP Fulfillment

Amazon FBA Alternative

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3PL RFP Template

In fact, most Sellers fail to calculate all of the fees associated with selling on Amazon and end up losing money as a result. To make matters worse, Amazon doesn’t exactly make it easy for merchants to tabulate all of the costs associated with selling on its marketplace and there are many hidden costs that Amazon doesn’t tell you about.

This guide will walk you through everything you need to know about FBA, including how it works, the full breakdown of Amazon fees, hidden costs that Sellers often overlook, and comparisons with alternative fulfillment options like FBM (Fulfilled by Merchant), SFP (Seller Fulfilled Prime), and third-party logistics (3PL) providers.

What Is Amazon FBA?

FBA is a fulfillment service where Amazon stores, picks, packs, and ships products on behalf of its third-party (3P) Sellers. Additionally, it manages customer service and returns, making it an attractive option for businesses that want to scale without handling logistics themselves.

For Sellers looking to maximize their business potential, Amazon offers a professional selling plan that includes additional tools, services, and reporting features.

How FBA Works: Step-by-Step

1. Send Inventory to Amazon – Sellers ship products to Amazon’s fulfillment centers. They can choose to split inbound inventory and ship to the addresses Amazon provides, or Amazon will charge an inbound placement fee for distributing inventory on their behalf. This fee varies based on the product’s size and shipping weight.
2. Storage – Amazon stores the inventory until an order is placed.
3. Order Processing & Shipping – Once a customer makes a purchase, Amazon picks, packs, and ships the order.
4. Customer Service & Returns – Amazon manages inquiries, returns, and refunds for FBA orders.

Benefits of Using Amazon FBA

• Prime Eligibility – Products are automatically eligible for Amazon Prime’s fast, free shipping, making them more attractive to buyers.
• Hands-Free Logistics – Amazon handles storage, shipping, customer service, and returns.
• Scalability – Sellers can scale their business without worrying about fulfillment logistics or hiring staff.
• Better Buy Box Placement – FBA products often have an edge in winning the Buy Box, increasing sales potential.
• Revenue Calculator – A tool that helps Sellers estimate referral fees and potential profits, assisting in making informed decisions about their fulfillment methods.

However, these benefits come with a cost. Let’s break down the fees involved.

Comprehensive Breakdown of FBA Fees

Amazon FBA fees vary based on product size, weight, and storage duration. Understanding the various selling fees is crucial for accurately calculating total selling costs and maintaining profitability. Below is a detailed breakdown.

1. Fulfillment Fees (Per Unit)

FBA fulfillment fees cover picking, packing, and shipping and are determined by the size and weight of the item, and it’s important to understand these fees for effective pricing strategies.

2. Monthly Storage Fees

Amazon charges Sellers a monthly fee for storing inventory in its fulfillment centers. The following are the 2025 base monthly rates and they increase as Storage Utilization Surcharges are applied after 22 weeks in storage. For standard-size products in non-peak season, these surcharges increase the total storage cost by more than 56% after week 22, and nearly double after 28 weeks in storage, etc. This assumes products are not classified as ‘dangerous’:

3. Long-Term Storage Fees

If inventory is stored for over 365 days, Amazon applies long-term storage fees (called the Aged Inventory Surcharge):

• $6.90 per cubic foot OR
• $0.15 per unit (whichever is greater)

Sellers need to closely monitor inventory levels to avoid these charges.

4. Referral Fees

Referral fees are percentage-based fees on each sale, varying by category. It’s the base fee that’s paid by all Amazon Sellers for the privilege of selling on the Amazon marketplace, whether orders are Seller-fulfilled (a.k.a. FBM) or fulfilled by Amazon (FBA). Most categories are charged between 8-15%.

5. Removal & Disposal Fees

If a Seller wants to remove inventory from Amazon warehouses, they pay:

• Standard-size items: $0.52 – $1.51 per unit
• Oversized items: $1.51 – $4.10 per unit

Disposal fees are slightly lower but still add up over time.

6. Returns Processing Fees

For certain categories like apparel, shoes, and jewelry, Amazon charges the Seller for returns, equivalent to the fulfillment fee for that product.

7. Refund Administration Fees

Refund administration fees are an essential aspect of Amazon FBA fees that Sellers need to be aware of. When a customer requests a refund, Amazon charges a refund administration fee to process it. This fee is either $5.00 or 20% of the refunded charge, whichever is less.

These fees are deducted from the Seller’s Amazon account balance. If the account balance is insufficient, the refund administration fees are charged to the Seller’s credit card. It’s crucial for Sellers to monitor these fees closely, as they can add up quickly, especially in categories with high return rates. Keeping an eye on refund administration fees and understanding their impact on your overall profitability is vital for effective financial management.

8. Low-Inventory-Level Fee and Aged Inventory Surcharge

Amazon imposes a Low-Inventory-Level Fee (in addition to other storage fee types) to encourage Sellers to manage their inventory efficiently and maintain sufficient inventory to fulfill new orders. This fee applies to standard-size products with consistently low inventory relative to customer demand. It starts at $0.32 per cubic foot and reaches $1.11 per cubic foot, based on a “historical days of supply” metric.

In addition to the Low-Inventory-Level Fee, Amazon also charges an Aged Inventory Surcharge for items stored for more than 365 days. This surcharge is $6.90 per cubic foot per month. To avoid these fees, Sellers should regularly review their inventory levels and remove slow-moving or obsolete items. Effective inventory management can help minimize these additional costs and improve overall profitability.

Hidden or Lesser-Known Amazon FBA Seller Fees

Sellers often overlook these extra costs:

• Unplanned Services Fees – Charged when inventory arrives without proper labeling or packaging.
• Inbound Shipping Costs – Amazon doesn’t cover shipping to their warehouses, Sellers must pay for it.
• Selling Plan Fees – Costs associated with the Individual or Professional selling plans, providing access to various tools and services.

Amazon SIPP Program: What It Is & How It Saves You Money

The Ships in Product Packaging (SIPP) program lets Sellers send products in their own packaging (or native retail packaging), eliminating Amazon’s additional packing materials.

SIPP Fee Discounts

By participating in SIPP, Sellers receive discounts on fulfillment fees ranging from $0.04 to $1.32 per unit, depending on size and weight. Compared to standard FBA fees, SIPP reduces costs while supporting sustainability.

Calculating Amazon FBA Seller Fees

Calculating Amazon FBA Seller fees can be complex, but understanding the various fees involved is crucial for maintaining profitability. Here’s a step-by-step guide to help you navigate the process:

1. Determine Your Selling Plan Fee: Choose between the Individual plan, which costs $0.99 per item sold, or the Professional plan, which has a monthly subscription fee of $39.99.
2. Calculate Your Referral Fee: This fee is a percentage of the total sales price and varies by product category, typically ranging from 5% to 15%.
3. Calculate Your Fulfillment Fee: This is a flat fee per unit, determined by the product’s size and weight, ranging from $3.06 to $6.62 for standard-size items under 3 pounds (excluding apparel which commands slightly higher fees).
4. Calculate Your Shipping Cost: This is the cost of shipping the item to the customer, which can vary depending on the shipping carrier and method.
5. Add Any Additional Fees: These may include high-volume listing fees, rental book service fees, or refund administration fees.

By following these steps, you can get a clear picture of your Amazon FBA Seller fees and ensure that your pricing strategy covers all costs, helping you maintain profitability.

FBA vs FBM vs SFP: Which Fulfillment Model Is Best?

Which One Should You Choose?

• FBA: Best for Sellers who prioritize Prime eligibility and hands-off logistics.
• FBM: Ideal for low-margin products or Sellers that either have their own fulfillment infrastructure or partner with a modern and high-quality 3PL.
• SFP: Works well for brands who want Prime benefits and either have established fulfillment capabilities or outsource fulfillment to a 3PL that supports SFP.

FBA vs 3PL: Which Is More Cost-Effective?

A third-party logistics provider (3PL) can be an alternative to FBA. Here’s how they compare:

3PLs are best for Sellers who need lower storage fees, more branding control, and multi-channel fulfillment. FBA is best for Sellers looking for speed, Prime access, and hands-free logistics.

Is Amazon FBA Right for You?

Amazon FBA is a powerful fulfillment option, but understanding the full cost structure is key to maintaining profitability. While FBA provides logistical ease, Prime access, and customer service, it also comes with various fees that can quickly destroy margins, making a business unprofitable if they’re unable to actively manage the program.

To maximize profits:

1. Track your FBA fees regularly using the reports available in the Professional Selling plan and optimize inventory to avoid long-term storage charges.
2. Consider SIPP if your products qualify for reduced fulfillment fees.
3. Compare FBA with FBM, SFP, and 3PLs to find the best fulfillment model for your business.

With the right strategy, Amazon FBA can be a game-changer for your ecommerce success! It just takes work and reliable monitoring to make adjustments before fees get out of control.

Frequently Asked Questions

What is Amazon FBA?

Amazon FBA is a fulfillment service offered by Amazon that allows Sellers to store their products in Amazon’s fulfillment centers. Amazon handles the packaging, shipping, and customer service for these products.

How much does Amazon FBA cost?

Amazon FBA costs vary depending on the product size, weight, and shipping method. Sellers can expect to pay a flat fulfillment fee per unit, ranging from $3.06 to $6.62 for standard-size items under 3 pounds. Larger and heavier items can expect to pay between $9.61 and $194.95, or more if a product is more than 150 pounds.

What is the difference between Amazon FBA and FBM?

Amazon FBA is a fulfillment service where Amazon handles the logistics, while FBM (Fulfillment by Merchant) is a fulfillment method where the Seller manages the packaging, shipping, and customer service themselves.

How do I calculate my Amazon FBA Seller fees?

To calculate your Amazon FBA Seller fees, you need to determine your selling plan fee, referral fee, fulfillment fee, shipping cost, and any additional fees. Understanding these components will help you price your products effectively and maintain profitability.

Building an eCommerce business can be an exhilarating and lucrative journey. You’ve likely poured your heart and soul into growing your brand, meticulously selecting products, and building an efficient supply chain.

However, when it comes to putting a price tag on your business, it’s not just about the sweat and toil you’ve invested. There are many other factors that come into play. 

Whether you’re thinking about selling soon or simply want an accurate gauge of your business’s performance, understanding how to value your business is crucial.

We’ve sold hundreds of eCommerce businesses on our marketplace, so we know a thing or two about accurate valuations. 

In this article, we’ll share some of that knowledge with you, taking a closer look at the factors that play a pivotal role in the valuation process. 

So, let’s explore the ins and outs of valuing your eCommerce business.

How to Value an E-Commerce Business

While you likely already have a figure in mind when it comes to how much your business is worth, accurately valuing an eCommerce business hinges on important, measurable factors instead of gut feel.

While many factors play a role in valuations, the actual valuation formula is surprisingly simple.

Average Net Profit X Multiple = Valuation

As you can see, your net profit plays an important role in your valuation. This is because, for the most part, the more money a business makes, the more it is worth. 

When calculating your net profit, it’s best to use a rolling 12-month average to account for any fluctuations in earnings or any seasonality the business experiences.

There’s more that goes into a valuation that we’ll discuss later on, but first, let’s take a closer look at the two most common methods used to calculate net profit.

SDE

The first and most commonly used method is called seller discretionary earnings (SDE).

The idea here is to level the playing field by removing the current owner of the business from the equation. This allows for easier comparisons between different businesses, as it standardizes the earnings calculation by eliminating owner-specific variables.

To figure out SDE, you start with the business’s profit. Then, you add back the money the owner pays themselves, as well as any special benefits they get from the business (like health insurance). 

One-time or non-recurring expenses are added back too, as they won’t affect a new owner. Non-cash expenses like interest, taxes, and depreciation are also added back, along with any other discretionary expenses.

SDE is the most common valuation method and most suitable for businesses up to around $5 million in annual revenue.

When businesses earn over this amount, they usually have a more complex structure in terms of a hierarchy of staff, as well as multiple stakeholders. This is where the EBITDA model comes in.

EBITDA

The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) method uses a similar approach to SDE but acknowledges that larger businesses aren’t owner-operated in the same way. 

When businesses scale up and get more complex, they often have a whole hierarchy of staff and multiple stakeholders. Therefore, unlike SDE, EBITDA won’t add back salaries for managers and employees, considering them necessary operational costs. 

While EBITDA is a powerful tool, we won’t dive too deeply into it here, as it’s typically more relevant to larger enterprises and is unlikely to apply to many business owners reading this.

Nevertheless, understanding these two methods allows you to choose the right tool for the right job when it comes to assessing the value of your business. So whether you’re running a small Amazon FBA business or a bustling eCommerce empire, there’s a valuation method tailored to your unique circumstances.

What are Add-Backs?

Add-backs are costs that a new owner doesn’t need to incur to keep the business running. These expenses can also include one-time costs that won’t recur.

For instance, if you run an Amazon FBA business, the associated Amazon fees are considered a necessary operating expense. On the other hand, expenses related to a home office are not essential because eCommerce businesses can typically be managed remotely. 

Therefore, a new owner wouldn’t need to continue the home office expense. This is why a home office is considered an acceptable add-back, while Amazon fees are not.

Some other examples of add-backs may include:

• Trademark expenses
• Personal travel costs
• A one-time website redesign
• Co-working space fees
• Subscription fees to industry newsletters and communities

It’s important to note that there can be some ambiguity regarding what qualifies as an add-back, and there might be disagreements between the broker, buyer, and seller.

Generally, eCommerce store add-backs tend to be relatively small compared to the overall earnings of the business. Therefore, if certain costs are not added back in, they usually won’t have a significant impact on the final valuation.

In case there’s uncertainty or disagreement about an add-back, it’s crucial to ensure that it’s clearly documented in the profit and loss (P&L) statement. This transparency allows potential buyers to analyze the add-back as part of their due diligence process, helping them make informed decisions about the business.

What About Inventory?

When it comes to determining the value of an eCommerce business, inventory is normally excluded from the calculation.

Inventory only becomes significant when your store has recently faced stock shortages or foresees upcoming supply chain or manufacturing difficulties.

The reason behind this exclusion is that if the buyer can’t sell the inventory, it loses its value. Moreover, perishable goods may, well, perish if they can’t be sold quickly. 

For these reasons, inventory is typically treated as an additional cost for the buyer, based on the product’s landed cost. This approach ensures fairness for both the seller and the buyer.

At Empire Flippers, we don’t charge a commission on the inventory’s cost, but it’s worth noting that some business brokers do. It’s crucial to consider what happens to inventory when selecting a broker for selling your business.

Pricing Windows

Referring back to the valuation formula, we mentioned that it’s best to use a rolling 12-month average in your calculation. This is known as a pricing window. 

It’s essentially the length of time we calculate the profits over. The length of the pricing window can fluctuate to best reflect the current state of the business. 

A 12-month pricing window is the most desirable option as it presents the most accurate representation of the business as a whole, rather than only capturing a sharp period of growth or decline. 

For example, if you sell jet skis, you likely experience a slump in sales over the winter months, and then an increase in summer, with a larger boost over the summer holidays. A 12-month pricing window will accurately reflect these ups and downs. 

Since a 12-month window gives the most accurate reflection of the business’s health, it makes the business more desirable to buyers.

That said, there are some instances where you may want to use a shorter pricing window. 

This is most common in businesses that have experienced rapid growth or steep decline. It may have taken a hit from a Google algorithm update and declined as a result, or it could be experiencing an acceleration of demand. In these cases, the current state of the business may be drastically different compared to 6 months ago. 

A shorter pricing window can also benefit fledgling businesses where the initial months were primarily about getting the business off the ground. During this early phase, revenue tends to surge, and the most recent six months better depict the business’s present state.

A shorter pricing window reflects a level of uncertainty and instability and therefore results in a lower multiple and smaller pool of buyers. 

Speaking of multiples, let’s take a closer look at what goes into this crucial part of the valuation formula.

What Goes Into a Multiple?

The multiple is essentially a representation of the strength, stability, and potential of your business. In other words, all of the other things buyers care about over and above profitability. 

Almost all aspects of your business will be considered when determining a multiple. 

Here are some of the main considerations that will be taken into account when valuing an eCommerce business.

Growth Trends

The direction your business is heading is one of the first things buyers scrutinize when assessing whether your business is the right fit for them.

Clearly, upward growth is more enticing than the opposite, and it often leads to a higher valuation for your store. 

Yet, it’s not just about whether you’re growing; the rate of growth matters too. 

While hyper-growth is exciting, most buyers prefer a sustainable eCommerce store. Rapid expansion can be unpredictable, leaving buyers wondering where it will plateau. Scaling aggressively can also come with inefficiencies, which buyers will investigate during due diligence.

At the end of the day, businesses that can demonstrate stable, healthy growth trends will attract the largest pool of buyers. 

But if your business doesn’t fall into this category, don’t let that deter you from putting your business on the market. While most buyers look for growing businesses, others seek businesses with untapped potential in processes or marketing channels, recognizing room for improvement.

Even declining businesses can find buyers, though the severity of the decline will affect the valuation. These businesses generally command lower multiples due to the reduced buyer interest.

Business Age

A business is typically judged on its track record, with buyers assessing the consistency of its profitability and performance over time. 

While many businesses experience rapid or gradual growth over a short period, one that consistently earns over several years proves its stability.

It also takes time for a business to establish itself within a niche. A long-standing business showing steady growth has likely secured a position as a leader in its specific market segment.

Therefore, businesses with a longer track record typically receive higher valuations. 

A business with less than a year of profitability is considered young, lacking sufficient data to demonstrate market staying power.

Once a business crosses the two-year mark, it likely finds its footing, catching the attention of more buyers. For those with three or more years of profitability, they’ve not only proved their worth but can often command a higher multiple.

Owner Involvement

For the most part, buyers are looking for an investment, an opportunity that will get them one step closer to financial freedom. They are not looking for a full-time job that requires them to work tirelessly after investing thousands of dollars. 

While it can be challenging to entrust others with your hard-built store, excessive owner involvement can deter potential buyers.

Ideally, spending around five to ten hours a week on your business is acceptable, but beyond that, it may adversely impact the valuation multiple.

Fortunately, many eCommerce tasks can be outsourced, such as order fulfillment and customer service, often without the need for full-time employees. Implementing standard operating procedures (SOPs) simplifies task delegation and can be valuable during the sale process, helping buyers understand your operations.

Before selling, communicate with freelancers you’ve employed to ensure their willingness to collaborate with the new owner. Transferring your team streamlines the transition and enhances your business’s appeal.

Put simply, the key to making your business more marketable and scalable is to make yourself redundant. 

Stability of Earnings

Buyers are on the hunt for a healthy business that promises a solid return on their investment. This makes the stability of your earnings a key concern. 

Steady earnings indicate that your business operates on optimized processes, you have a reliable supply chain, and an established customer base.

Unstable earnings, on the other hand, may point to underlying issues within the business, such as inventory mismanagement or a lack of product-market fit.

Stability in your earnings also indicates that your business has built-in defensibility to help it ride out natural fluctuation in the market.

At the end of the day, buyers are looking for an income they can rely on, regardless of changing trends or economic conditions. 

Strength of your Supply Chain

Your supply chain forms the very backbone of your eCommerce store, with the success of your business hinging on how products are manufactured and delivered to your customers.

To fortify your supply chain, consider sourcing from at least two different manufacturers, ideally from different countries. This strategic move provides flexibility, allowing you to pivot quickly to avoid unexpected delays, as demonstrated during the global pandemic’s restrictions.

Outsourcing fulfillment is equally crucial. Handling inventory in-house can complicate the sale of your business. Remember, the majority of buyers are looking for a streamlined, turnkey business. They don’t want the complication of managing fulfillment and storage over and above running the business.

Consider hiring a third-party logistics (3PL) provider. These specialists manage inventory and ensure timely customer delivery. 

Formalize agreements with manufacturers and fulfillment providers whenever possible. Buyers will value transferable deals, especially if you’ve negotiated advantageous rates. Contracts can serve as valuable assets for your business.

Diversity of SKUs

Buyers will also pay close attention to the diversity of your product offerings.

Having a variety of different products prevents the business from relying solely on one item. You’re essentially ensuring that all your eggs aren’t in one basket.

If one product faces a drop in popularity, gets delisted on platforms like Amazon, or falls out of favor due to new laws or regulations, your business can still thrive thanks to the revenue generated by your other products. 

All of this works towards protecting the buyer’s return on investment once they take over the business. 

Stability and Diversity of Traffic

Much like with your earnings, buyers are looking for stability when it comes to traffic growth. Buyers will want to dig deeper into any sudden spikes or dips in traffic to understand the underlying reasons behind these fluctuations.

Buyers and business brokers will also need an easy way to view your traffic data, so it’s a good idea to have an analytics platform like Google Analytics or Clicky installed on your website. To protect any sensitive data, make sure you give buyers read-only access.

This will allow buyers to look at data like:

• The geographic sources of your traffic
• Top-performing website pages by traffic percentage
• The bounce rate. 

These details provide valuable insights into what’s working effectively and where potential opportunities lie.

Traffic channels that drive revenue are another area where diversification is key. While most eCommerce businesses use paid advertising to attract customers, pairing this with organic traffic from search engine optimization (SEO) is particularly attractive. 

Unlike paid ads, SEO requires minimal ongoing investment once it’s established. Having a strong social media following and a robust email list are also great ways to diversify your traffic.

Protecting Your Products

Trademarks are another factor that speaks to the longevity of your business.

A buyer doesn’t want to purchase the business only to have a competitor undercut the business by selling the same products.

Trademarking your products shields your brand identity and reputation from copycats and counterfeit products, reassuring buyers and reducing the risk of competition dilution. 

If you sell on Amazon, registering your brand as part of Amazon’s Brand Registry adds yet another layer of defensibility to your business. 

Reap the Rewards of Your Hard Work through an Accurate Valuation

Knowledge really is power. When it comes to making a life-changing decision like selling your eCommerce business, you’ll want all the power you can get. 

Knowing how to value your business empowers you to make informed choices. 

This knowledge means you won’t go into a sale blind. You’ll be armed with the information you need to confidently negotiate with buyers and avoid falling for lowball offers.

Understanding the metrics and factors that play a role in valuations also gives you a checklist to work from in order to increase the value of your business and make it more attractive to buyers.

As you can see from this article, valuing an eCommerce business is a complex and nuanced process. But don’t let that stop you. If you’re not a numbers person or simply don’t have the time to do in-depth calculations, you can use our free valuation tool to get an idea of how much your business is worth. 

Discovering the true value of your eCommerce business gets you one step closer to a profitable exit!

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Podcast: Ecommerce Wizards Podcast – What is Amazon’s Buy With Prime Button?

Guillaume Le Tual, host of the E-Commerce Wizards Podcast, interviews Manish Chowdhary, CEO of Cahoot, about Amazon Buy With Prime. The service allows merchants to install the Amazon Prime button on their product page, shopping cart, and checkout. Customers can then log in to their Amazon Prime account to check out and receive one or two-day free shipping, free returns, and no minimums. For customers, it’s 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, which also collects data about the customer and charges the seller for order fulfillment. While Amazon FBA can be a benefit for merchants who lack a strong shipping distribution system, there’s also a cost of 15% that some merchants say is too high to make a profit. Amazon Prime service is a big deal for merchants because it can replace their whole checkout experience and be a disadvantage for them.

Guillaume:

Hello, everyone. Guillaume Le Tual here, host of the E-Commerce Wizards Podcast, where I feature leaders in e-commerce and business.

Today, for a second time, our guest is Manish Chowdhary, who’s the CEO of Cahoot. And we’re going to have a chat together about what is Amazon Buy With Prime.

Speaker 3:

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Here’s the catch. We’re specialized and only work on the Adobe Magento e-commerce platform, also known as Adobe Commerce. We’re among only a handful of certified companies in Canada. We do everything Magento-related.

If you know someone who needs design, support, training, maintenance, or a new e-commerce website, email our team at support@magemontreal.com, or go to magemontreal.com. That’s M-A-G-E montreal.com.

Guillaume:

So Manish, thanks for being here for a second recording.

Manish:

Thank you for having me, Guillaume. Thank you very much.

Guillaume:

All right, can you enlighten us? What is, first of all, Amazon Buy With Prime?

Manish:

Amazon Buy With Prime is the Amazon’s mission to dominate the world, as it always does. But let’s break it down.

What Amazon Buy With Prime is, it’s essentially an option for websites outside of Amazon to install the familiar Amazon Prime button on the product page, in their shopping cart and checkout. So the user, instead of checking out through your native platform’s shopping cart and checkout, you can check out by logging into your Amazon Prime account, as you would on your Amazon.com website.

And as a result of that, you will get all the benefits of Amazon Prime, which is one or two-day free shipping, free returns, and also there’s no minimum and so on. So you log in, and you check out using Amazon, and then Amazon will ship the item to you from its FBA, Fulfillment by Amazon Warehouse, and you’ll get it in one or two days.

So great service for the consumer, but of course, not so great for the sellers, which I can talk about further.

Guillaume:

Yes, exactly. From an entrepreneurship and business point of view, it’s like, oh, big red flags here showing up. So, okay, what do you see as a red flag for merchants here?

Manish:

Right. So for the merchants, for the sellers, I call Amazon Buy With Prime a Trojan Horse. It’s essentially, what Amazon did with its AWS, the web services or the hosting division, they started using the web hosting for themselves. And then they converted that into a mass service that we all, many of us use, Amazon’s Web Hosting Services.

So this is Amazon’s attempt to basically get into the 3PL, the order fulfillment world. They built the Amazon FBA for themselves, for products that are sold on Amazon, and now they’re opening this up to the larger internet. So if you are selling on your own website, how can Amazon participate and get a share of that wallet from your website, because they have 150 million subscribers? But essentially, what Buy With Prime is doing is essentially encapsulating three different Amazon services into one, which is Amazon Advertising, Amazon FBA, Fulfillment by Amazon, and Amazon Payment.

So essentially, when the user checks out using the Buy With Prime, it completely circumvents the entire checkout process from the platform, and it basically puts payment processing with Amazon. And then, of course, Amazon collects all the rich data about the customer. What are you buying? When are you buying? And also, Amazon gets to charge the sellers for order fulfillment.

And so, this is a very, very attractive service for the consumer. But of course, for the seller, it creates a lot of challenges. And I can continue to elaborate, but basically, it’s a Trojan Horse and there are lots of disadvantages for the sellers, and there are some advantages as well, to be fair.

Guillaume:

Yeah. I like your term, Trojan Horse, and it is a powerful move from Amazon. You can see, for example, Shopify CEO, that will slip up about this at first and say, “Yeah, yeah, we’ll do it.” And then they will backtrack on this, and say, “No way,” because it would replace Shop Pay, which is one of the competitive advantage of Shopify.

So, it is a big deal for a merchant to have your whole checkout experience totally replaced by Amazon. So yes, on the positive side, if you don’t have a strong distribution system already in place, having Amazon FBA, Fulfilled by Amazon, can be a strong benefit. But also, there’s a cost to this, and the cost is not always the best.

I know some merchants that say, “If I sell myself and I fulfill myself, I make money. If I use FBA, well, it’s not worth the trouble anymore. I don’t make much money anymore.” You know? So there’s that aspect, about the extra 15%, it can make a difference. For the merchant, cost will not be zero to fulfill themself, obviously. But that 15% sometimes is too much for merchant, that it doesn’t make it worth it for them to run the business if all the sales will come into that channel, with FBA.

Also, you give up a lot of your control. That order is going to go into Amazon. How much control do you retain personally as a merchant over this transaction? How much information do you have about the customer? How much customer service do you need to do? And so on. Perhaps you can elaborate a little bit on that aspect.

Manish:

Absolutely. All good points, Guillaume. But even beyond that, Buy With Prime infiltrates the entire customer journey from discovery, conversion, post purchase, which includes fulfillment as you said, and the repeat purchase. And I’ll give you some example for each one.

Discovery is essentially, Amazon, you would install a familiar Buy With Prime, the blue Amazon Prime, with the swoosh, the very familiar icon that we know. So now, that will get installed, say, right below your Add to Cart button, if you’re on a Magento site, for example. And so, just imagine the button itself on your site is a reminder for the customer to go check out Amazon, because you’re putting Amazon branding on your product details page and so on. So the Amazon, even if you acquired this traffic and brought it to your website, now the customer is being potentially invited to go, reminded of their Prime membership, so that they can possibly go on Amazon and compare prices and so on. So that could lead to siphoning of traffic. That’s one.

On the conversion side, most ecommerce brands, most websites, retailers, like to encourage larger shopping carts. We know that on your DTC website, most brands have free shipping on orders over, say, $49. So, it’s not free-free for buying a toothpick or buying a toothbrush, but that’s what you get with Amazon Prime.

Amazon Prime does not have those limits. So if you’re a Prime member, the people could actually, this could lead to lower cart size on your DTC site, as opposed to encouraging a larger cart. That’s the conversion part.

And then, let’s say you add the item to the shopping cart and you abandon the cart. We know that 85% of the Amazon Prime members visit Amazon.com at least once a week, and 45% of them make a purchase, a transaction, once a week. That’s a very high repeat loyalty that these Amazon Prime subscribers have to Amazon. And part of it is because they’ve paid $139, $140 annual membership, so they want to exploit that.

But imagine somebody added the item to the shopping cart and they didn’t check out. Now, it’ll be very difficult for the brand to re-market to this customer. And if they hop over to Amazon once a week, they might be targeted with the ads of another product that competes with this product. And you are the one who helped add that item to the cart in the first place.

So, those are some of the challenges on the order fulfillment side to continue with that school of thought. The product is going to come in an Amazon branded box. We’ve all seen the familiar Prime tape that goes on the brown box, with Amazon advertising. So, you bought the item from this DTC brand that’s looking to promote its ecommerce brand, its value proposition to the customer. But the customer is being reminded of Amazon every step of the way. And so, that is not very good.

And then finally, on the repeat purchase, the customers are more likely to go back to Amazon. And if you are selling on Amazon, you’ll have to not pay anywhere between that eight to 20% commission. So there are many aspects of it is not so enticing for the seller. And of course, there are some advantages which I can cover as well, Guillaume, to be fair.

Guillaume:

We’ll cover after. I think we’re not done with the downsides, quite frankly, which to me is way larger than the upside. Because if you want to use Amazon’s email, FBA or whatever, fulfillment services and so on, well, you can just list your product on the marketplace.

Also, Amazon’s fees, the normal fees plus the fees for fulfillment, they are fair when Amazon is bringing you the customer. And it’s the reason why you want to put your products on the marketplace in the first place, because Amazon is going to bring you traffic, going to bring new customers there.

But if you paid for the customers yourself separately, maybe with your own Google Ads, your own marketing efforts and so on, and then you’re still going to pay all those costs and send over the customer to Amazon, and then you sort of lose traction. And I really like your other point. What if the customer does not buy right away? It happens. You add stuff to cart, you don’t finish, get interrupted, kids calling you, whatever. You come back, and then you’re going to see ads and similar product, maybe cheaper on Amazon. It is really a Trojan Horse. From my point of view, it is a really big mistake from business point of view.

I am all for selling on marketplaces like Amazon. Do it. Go for it if it makes sense for your business. It’s a good idea. But your own website, your own .com or whatever, is a separate thing, is a way to diversify. So, you do not want to tie it even more to Amazon. And Amazon is just trying to take buys more and more into what it currently does not control.

It would prefer that all transaction worldwide goes on Amazon, and they don’t currently control all those independent websites. Now, that’s one way to sort of control them, to a great extent. So, I see more negative than positive. But let’s go with the positive. Let’s be fair. So, what’s the positive?

Manish:

Well, positive is, if you have a website, an ecommerce brand that’s not very well-known, and you don’t have a lot of customer trust, Amazon Prime button can install that trust. It’s sort of like many websites that I don’t want to check out and provide my credit card information to that website, because maybe I don’t have trust.

And that is how PayPal gained prominence in the first place. People love checking out through PayPal. And consumers, of course, we all want that free one-day, two-day delivery. So, if the brand does not have the ability, if the seller’s not utilizing services like Cahoot, it would be very difficult for them to offer that level of service.

So, this would be a great way for them to get traction, if they don’t want to take any hassle with fulfillment, operations and logistics, and even customer care. Because remember, as part of the Prime purchase, you’re also delegating a lot of your customer service to Amazon. So, whether it’s a good thing or a bad thing. But that’s certainly like, I’ll give you an example, and we actually did the study.

So the Skullcandy, you’re probably familiar, it’s a very popular headphones brand, very popular with gamers. And they’re selling a product that, let’s say they’re offering four to seven-day delivery, which is what we found when we checked their website, when we did the study about a few months ago, in the summer.

And then another company called Razer, which is an up and coming brand, and if they installed Buy With Prime, and both the products are priced equally, as a consumer you might be motivated to check out through Buy With Prime on Razer.

So in the absence of date certain shipping, let’s say I have a birthday party, I need to buy a gift and I need to have it arrive by Saturday. Today is Thursday. So, my options are very limited. So it can be quite advantageous in those cases for the people who don’t want to fully outsource fulfillment to FBA.

And just to add to that, by the way, the cost of fulfilling orders with Amazon through Buy With Prime is not the same as if the order arrived on Amazon.com. Because Amazon makes the 15, whatever, 15% commission on those, they will not make that commission on these orders. And therefore, these orders will be classified as multichannel order fulfillment.

And we know that if you try to get a Magento order Fulfilled By Amazon (FBA), you pay more. So it’s not the same low price that if the order originated on Amazon. And we’ve done some calculation, in many cases, it works out to be 51% more expensive to do multichannel fulfillment. And of course, if you want the map, there’s tons of webinars on our Cahoot.ai, on the Resources section. Check out or contact us, we’ll be happy to elaborate on that multichannel fulfillment.

Guillaume:

And just to clarify it, so you’re saying that 51%, just to be sure I understood it well. So 51% more expensive from multichannel fulfillment if you send the order then to Amazon, so if it came from your on e-commerce store, is that what you’re saying?

Manish:

That’s right. Because, let’s say, you’re selling socks. I have black socks and I have red socks. And Amazon FBA, routine FBA will cost you $4 and 22 cents. But if I send Amazon that order from Magento to fulfill, it’ll cost me $6 and 31 cents to ship the same identical item. The only difference is this is a Magento order versus an Amazon.com order.

Now further, let’s say a customer buys a pair of black socks and a pair of red socks. Amazon treats them as two unique items. They don’t put them all together. What’s the composite weight? The weight of the items, the two pairs of socks, is not going to be different. You’ll pay double because you’re paying 4.22 for one pair, you’ll pay $8 and 44 cents for two pairs of socks. And if it was a multichannel, if it was a Magento order, it’ll be $12 and 74 cents. That’s how we arrived at the 51% more expensive amount.

Guillaume:

Okay. So, it is not optimized in the merchant’s favor for cost saving and bundling boxes and so on, because actually Amazon will typically ship to you in all separate boxes as fast as it can. But somebody’s paying for all this, this, quote, unquote, free shipping. The merchant’s paying for it.

Manish:

Well, that is just the way Amazon’s pricing model. So the product may still arrive in the same box, but the way how FBA prices its services, it does not. It simply looks at a price, flat price per item. Per item. Now it does not take the weight into consideration.

So FBA, especially multichannel fulfillment through FBA, becomes quite pricey when you have larger number of units per order. So, if you’re a apparel ecommerce brand, if they try to do multichannel order fulfillment, let’s say you have a Magento store or a Shopify store, and you want to get those orders fulfilled through FBA, the cost will add up and it becomes quite expensive. Because apparel, and certain product categories, lend themselves for larger number of units, average number of units per order.

Guillaume:

Okay. All right. Okay, thanks for that clarification. Is there anything else that people should know about the Amazon Buy With Prime?

Manish:

I think you covered it. Shopify has banned it. Shopify, they’ve openly come out and say that this is against the Terms of Service, and you’ll get a big warning if you’re a Shopify merchant.

It’s still a By-invitation Only program. We know a little about it so far. So, I think merchants should… Essentially, this is a call to action for brands and retailers, that faster shipping, the two-day shipping, it used to be an Amazon thing. Now it’s going to be an internet thing. It is what’s expected from you.

So I would encourage brands and retailers to look at their order fulfillment strategy, their operation strategy. You don’t need to go build tens of warehouses. That’s very expensive. In fact, right now, the warehouse rents are at all-time high, Guillaume, all-time high. And the vacancy is an all-time low. So even if you wanted to go and look for warehouses in California, or the West Coast of the US, you can’t find them.

If you find them, you’re going to have to sign a multi-year lease. You’re going to have to make a very large capital investment. It’s like the days of, you know, we no longer see competitive advantage in owning servers in the age of cloud computing.

So order fulfillment is going through a similar transition, that services like Cahoot are democratizing that service. And in fact, if you have excess capacity in your warehouse, we encourage you to come apply at Cahoot.ai, to join as a fulfillment partner.

So this is my recommendation for brands and retailers, to not take delivery and shipping lightly. In fact, we have a saying internally in our circles, that half your shopping experience is now your shipping experience. So, you got to really think of it from a customer experience standpoint.

Guillaume:

Yes. Okay. And I think this is pretty good coverage for Amazon Buy With Prime. It can be seductive for some consumers to check out at equal price point and so on. I’m going to benefit from that checkout experience. But you can compete with it, no matter the size of the merchant. It’s more a question of, can you deliver quickly? Can you write the date of arrival on your own website?

And of course, inviting Amazon on your own .com is, generally speaking, a very bad idea as a business move. It should be a diversification, unless it’s sort of a mini site that you more or less don’t care about. That is just a marketing site that is there to drive traffic, a bit like some brands have a lot of mini sites, and blogs, and so on that just drive traffic to a store. Then, if that’s the role of your small e-commerce store, that would be perfectly fine.

But if it’s your real, branded e-commerce store that you care to build a brand and brand value, I would not invite Amazon, as much as possible, on that site. I think it’s a bad business move.

So, that’s it. Well, Manish, thank you for this discussion. If people want to get in touch with you, what’s the best way?

Manish:

Well, hop over to www.cahoot.ai. That’s singular. And fill out the Contact Us form. I would love to chat with you.

And you can also find me on LinkedIn. Just Google, well LinkedIn, my name. Search my name on LinkedIn, with Cahoot, and I will personally respond to you.

So I’d love to chat with merchants, brands, retailers. Because there’s much to learn from practitioners, as much as we know about logistics, and share stories and try to find a better way to do business, that puts more money in the pockets of the business owners.

Guillaume:

All right. Well, Manish, thank you for being here today.

Manish:

Thank you for having me.

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Cahoot has just announced a partnership and integration with Sellercloud so that users of the two solutions can enjoy seamless information sharing and complete data visibility across both platforms. Sellercloud and Cahoot together make multichannel selling easier for merchants by helping brands and retailers convert better by enabling Amazon-like free and fast delivery for shoppers across all channels. With the new native integration, sellers will enjoy powerful listing, products, order and inventory management from Sellercloud along with fast, efficient fulfillment and logistics from Cahoot.

Cahoot Founder and CEO, Manish Chowdhary explained the power of the partnership: “Brands and retailers are finding it increasingly hard to compete and grow profitably on marketplaces because consumers want an Amazon-like experience. However, achieving this is really hard for merchants who operate in slim margins. Together, Cahoot and Sellercloud make the task easier for sellers. With our integration, sellers can now optimize their strategy everywhere they sell, from product listings, pricing, inventory to next-level fulfillment and logistics. Sellers now have all of the data and insights they need to make fast and smart data-driven decisions.”

Moving Fulfillment from Cost Center to Profitable Growth Opportunity

Cahoot offers fulfillment services to online sellers who want to turn their operations from a cost center to a profitable growth lever. With its large and rapidly growing network of facilities nationwide, Cahoot is a preferred choice of sellers on marketplaces such as Amazon, Walmart, and eBay and ecommerce platforms such as Shopify, Magento, and BigCommerce. Cahoot transforms ecommerce order fulfillment from a headache into a fast, reliable, and affordable growth lever. Merchants win more customers with fast shipping, all while paying less for fulfillment thanks to Cahoot’s patented business model and innovative technology.

“Sellercloud is always looking for ways to help our sellers improve their customer experience, so we’re excited to partner with Cahoot. Cahoot’s innovative technology and proven ability to power affordable, fast fulfillment across all channels will help our sellers grow faster.” said Shelly Boisvert, VAR Partner Development Manager of Sellercloud

Sellercloud’s mission is to provide merchants with tools that empower them to compete and win in today’s highly competitive landscape. Its products span a comprehensive range of features to help multi-channel sellers manage their ecommerce business in one streamlined and powerful tool. With Sellercloud, merchants can consolidate catalog and inventory management, push changes from one place out to multiple channels, make smarter purchasing decisions, and more.

Growing Fearlessly Without Adding Complexity

Sellers that enjoy success on one channel often find themselves challenged to replicate that success on new ones due to the exponential increase in business complexity. Solutions like Cahoot and Sellercloud are designed to keep the back-office simple so merchants can easily expand and grow on new sales channels.

For most sellers, adding channels increases managerial complexity and puts additional strain on operations. Unlike other fulfillment providers, Cahoot is built specifically to enable sellers to scale fearlessly across channels as diverse as Seller Fulfilled Prime and B2B retail replenishment. No other 3PL can handle such a wide variety of use cases or do so at the high level that Cahoot does.

Sellercloud and Cahoot teamed up to enable a joint customer, Healthyline, to exploit many growth opportunities at once without being overwhelmed.

“We have ambitious growth goals for our own DTC site and in physical retail all at the same time. Using Cahoot and Sellercloud together gives us a powerful solution for managing all our channels” said Kristof Hommonai of Healthyline. He continued, “Before Cahoot, we were considering signing contracts with multiple 3PLs to put together a comprehensive nationwide solution for Amazon SFP. It was extremely complicated, expensive and we would have had to still find new technology to glue them all together. Consolidating with Cahoot helped us grow triple digits last holiday season and they’ve saved us money. We are now ready to offer the same Prime-like guaranteed fast delivery on all our channels.”

Cahoot is available for merchants looking to increase their online sales with affordable, fast delivery services across all popular selling channels, including Amazon, Walmart, eBay, Shopify, BigCommerce, and more.

ABOUT CAHOOT

Cahoot is the world’s first peer-to-peer eCommerce fulfillment network. The innovative Cahoot network enables online merchants to offer nationwide 1-day and 2-day deliveries at costs lower than what they’re paying for standard shipping today. Its best-in-class fulfillment software and highly vetted fulfillment partners combine to offer one of the highest SLAs in the industry, including late order cutoffs, fast receiving, and >99.95% on-time shipping. Through Cahoot, merchants help other merchants grow with the power of Amazon-like fulfillment on all channels.

ABOUT SELLERCLOUD

Sellercloud provides robust tools that can meet all of your operational needs – inventory and warehouse management, publishing listings to marketplaces, order processing, shipping, and even reporting. Sellercloud help e-commerce merchants optimize their operational workflow and focus on efficiency and growth. Founded in 2010, Sellercloud has 600+ clients, 2000+ Amazon and eBay accounts, employs 90 staff and is headquartered in Lakewood, New Jersey.

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Amazon is offering steep discounts of up to 75% on warehouse storage fees to incentivize merchants to store more of their popular products with the company, in an effort to facilitate its transition to a one-day shipping standard for Prime members, according to CNET.

The promotion will begin in June and run through January; to qualify, sellers will need to have sold 60 or more of a product per month or have products specifically selected by Amazon. They’ll also have to keep the level of inventory they supply to Amazon at a certain level. 

Here’s what it means: The push for one-day free shipping can’t be a unilateral move by Amazon: It’ll need sellers to work with it. 

One-day shipping is likely feasible for Amazon, but more than half its sales come from third-party sellers, making them critical to achieving this new goal. Third-party merchants were responsible for 58% of Amazon’s sales in 2018, an enormous jump from 3% in 1999. 

Because of this, if Amazon wants to have any chance of making the lion’s share of the items on its marketplace available for one-day delivery, it’ll need help from those sellers. It shouldn’t be too difficult to get them on board, though, given that one-day shipping is likely to increase consumers’ enthusiasm for Amazon, leading to more sales for the sellers working with it. 

The bigger picture: Amazon’s one-day shipping goal will highlight the importance of its relationship with sellers (both FBA and FBM doing their own ecommerce order fulfillment) as well as the fine-grain control it has over its private-label products. 

Read the full article here.

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