Podcast: Maximizing Ecommerce Merchant Fulfilled Prime (FBA Alternatives)
Cahoot is a network of order fulfillment centers and warehouses belonging to other sellers who have very efficient operations of their own and high performance metrics. Cahoot offers sellers an opportunity to make money by monetising unused space in their warehouses. Cahoot offers an Amazon FBA-like service where they distribute inventory throughout the country for sellers to achieve one-day delivery, two-day delivery, cost-effectively and affordably.
Cahoot is channel agnostic and supports whatever is most beneficial for the client, including sending inventory to Amazon FBA, utilizing Cahoot’s warehouse network to fulfill other orders, and achieving two-day delivery across the USA. Cahoot is a great backup option for every seller, even if they are using Amazon FBA. Cahoot supports what is best for the client, not just Amazon, and offers a lower order fulfillment cost structure by design, providing high levels of service at an affordable price.
Kevin Sanderson: You are listening to The Maximizing E-commerce podcast, helping you build an ecommerce business you can be proud of. And now your host, Kevin Sanderson.
Kevin Sanderson: All right. So, it’s super important that we are as profitable as possible, get our goods from point A to point B to our customers, because if we don’t get them fulfilled, there is really no sales, and we don’t want that because we want things to get to the customers, so they come back to Amazon or wherever it is they’re buying. So, I’m excited because we have someone on today who we shared the stage with at the recent Surge Summit in Tampa. we have Manish Chowdhary from Cahoot who’s joining us. So Manish, thank you for joining us on Maximizing E-commerce.
Manish Chowdhary: Thanks for having me, Kevin. I’m really excited to be here.
Kevin Sanderson: Yeah, I’m excited to have this conversation too, because I’m trying to think of how to articulate what I’m literally feeling right now, and that is, I came to the realization, which maybe some people already realized this, that Amazon switched fairly recently from purely weight based order fulfillment fees to now… What’s the word I’m looking for? Volumetric. And volumetric could be you have it in a poly bag and there’s space in the poly bag, and so, instead of the product being maybe X size, if it goes a little bit beyond that, even if it’s just a poly bag that’s going to bend and fold and whatever, they’re charging you for that. So now it’s increased the order fulfillment fees on just about everything that I have. And I’ve started noticing this in forums and Facebook groups too, people complaining about this. So total side notes, I’m excited to talk about alternate solutions here.
Manish Chowdhary: Yeah, I mean there were, actually, believe it or not, Amazon went through four pricing changes this year alone.
Kevin Sanderson: Oh, wow. I didn’t realize it was that many.
Manish Chowdhary: That we are aware of. In fact, probably five.
Kevin Sanderson: Well, they could have snuck one somewhere and nobody noticed.
Manish Chowdhary: No, no, actually, I will give you the timeline. February 1, 2022, Amazon announced the previously increased price changes to Fulfillment By Amazon (FBA). They do that every year. And so that went into effect, what carriers call GRI, which is general rate increase. You probably heard FedEx raising their rates by 6.8%. So Amazon FBA is no exception to the rule, so they raised their rates on February 1st, 2022. Then they claimed inflation as… They had the lowest profit or a really bad quarter for Q1, and they came back with a 5% increase, what they called the inflation surcharge on April 28th, 2022.
Manish Chowdhary: And then, as we all know, Kevin, that October one, which is Q4, storage fee at Amazon FBA triples, so from 83 cents to $2.40 cents per cubic foot per month is not an increase, but it is certainly an increase over last year. And then, more recently, just a couple of weeks ago, Amazon came up with the first ever peak order fulfillment surcharge, which is six to 8%, which will go into effect on October 15. So, the thing that Amazon FBA is the cheapest solution is sellers got to take a look at their books very closely. And by the way, in addition to these four, earlier this year, this was I think January or February, what you were talking about, is Amazon made changes to a small and light program, which used to be primarily based on weight and now it’s called dimensional weight. And they implemented that, so that had a massive impact in terms of fee increases for a number of small and light shipments.
Kevin Sanderson: And mine’s not even small and light. It’s never been small and light. So maybe they’ve expanded that program. So side note, when this is all over, I’ll have to go back and find… Because I’m sure there was an announcement, and I’ll be honest, I don’t read all the announcements from them. Sorry, Amazon. But at the end of the day, they probably gave me the information, but I just didn’t check it. Well, let’s go back in time. You and I were chatting on a bus because we were going out from the hotel where the Surge Summit was. The night before, you and I were on a panel together about shipping logistics, and we were chatting about your ecommerce business model, which I thought was pretty unique and interesting. And you were telling me a little bit about your background. So before we get into your current business model, let’s go back in time and just describe how you got into the whole ecommerce logistics, shipping, order fulfillment world, because it wasn’t the same path that I usually hear with people.
Manish Chowdhary: Well, thank you, Kevin. Yeah, I’ve been involved with ecommerce since 1999. I was a student at the University of Bridgeport, Connecticut back then, and that’s when I started my first business out of my dorm room at the University of Bridgeport. And somehow we got involved with ecommerce and I loved it. And we were building a custom ecommerce website, and then we built one of the first turnkey ecommerce platforms.
Kevin Sanderson: Oh wow. Just so everybody understands, this is years before there was ever a Shopify, WooCommerce, BigCommerce. There was nothing, right? There was no out of the box ecommerce platform other than you wanted to hire a developer.
Manish Chowdhary: Right. There was Yahoo. Yahoo was what Shopify is today or what Salesforce cloud would be. All the top ecommerce brands, the Adidas of the world, I think were on Yahoo ecommerce platform. Yahoo was the Google of the day, if you remember.
Kevin Sanderson Okay, yeah, yeah. Back when people would go to Yahoo to look for things. And who’s Google? Yeah. Yeah.
Manish Chowdhary: Yeah. So I started building an ecommerce website. My background is computer science and got involved helping someone who… This was the first ecommerce platform. Before the word ecommerce platform existed we used to call it shopping cart software. Turnkey shopping cart software that you could do it yourself. Super easy. This is long before Shopify and so on. So, that’s where I got my start in ecommerce. Since then, I’ve been speaking with merchants, to the same kind of merchants, more or less. Of course, everybody’s GMV has ballooned 10 times, a hundred times in the last-
Kevin Sanderson: Just for the audience who’s not familiar, GMV means what?
Manish Chowdhary: Gross merchandise value, meaning the amount of sales on the internet.
Kevin Sanderson: Oh, okay. Yeah. Yeah.
Manish Chowdhary:
Yeah. It used to be a time when people were, they would check their email once every two days and if they got the sale… And now of course we have emails on our phone, which wasn’t the case back then.
Kevin Sanderson:
Oh yeah, yeah. Your phone literally was for calling.
Manish Chowdhary: That’s right.
Kevin Sanderson: Back in the day, there wasn’t even text messages on it. It was kind of a novelty that you didn’t have to be connected to a cord in your house or within 20 feet of the cordless phone receiver in your house. So you could go somewhere else and call other people. And that was still fairly novel in the late 90s, early 2000s.
Manish Chowdhary: Yeah.
Kevin Sanderson: So, speaking of this journey you were pretty early on in some of this, which is kind of fascinating to me. Not kind of, it is fascinating to me. You shared a story with me when we were on the bus going back to the hotel from this… We had gone on a cruise that they had us go on that evening, which was really fun. Total side note there. But you were telling me the story of you were starting to notice some patterns in where stuff was shipping from that maybe there was some inefficiencies in the system.
Manish Chowdhary: Yes.
Kevin Sanderson: Can you describe that?
Manish Chowdhary: Yes.
Kevin Sanderson: If I remember correctly?
Manish Chowdhary: Great memory, Kevin.
Kevin Sanderson: I try. I try. Yeah.
Manish Chowdhary: So yes, this was during that time we actually plotted sales data from camera sellers in the US. So I remember vaguely there were about 70 camera sellers and we plotted the sales data on the map of the US. And of course, products like digital cameras or… The world was moving from film like Kodak films to digital. And I remember Canon and Nikon were at the top of the game. I remember some products like Canon, Elf, Nikon, CoolPix, these two products that stuck with me, they used to be the best-sellers, the top sellers. And when we plotted that sales data, there was a fascinating observation that the same item, the same product was traveling from a seller, say in New York to a customer in California at the same exact time the product was traveling from a seller in California to a customer say in New Jersey. And that was happening 40% of the time, if I remember correctly.
Kevin Sanderson: Got it. So sometimes they’re literally, the trucks could be crossing each other going across the country, because there’s no Amazon FBA fulfillment algorithms.
Manish Chowdhary: Well, even if there was Amazon FBA fulfillment, even Amazon FBA hasn’t solved this problem because if you are a seller X, selling-
Kevin Sanderson: Oh, that’s true.
Manish Chowdhary: And then seller Y in California. But the fundamental macro issue was why this inefficiency? Why should the same item travel 7,000 miles cross-country in two opposite directions? Both sellers lose because they’re paying for exorbitant shipping cross-country, both customers lose because they’re paying for that. Those were the days, there was no such thing as free shipping, customers were paying, and both the customers were waiting eight to 10 days to get their items. And the environment was suffering at the same time because of so much carbon emission. So, this was not helping anyone.
Kevin Sanderson: Nobody was winning.
Manish Chowdhary: Except UPS, FedEx… And I don’t know if that’s called winning, but nonetheless, that’s when I applied for my first US patent and said, “This should not be,” because if you think from a macro perspective, that level of inefficiency should not exist regardless of who sold what to whom. And that is where I built the intellectual property and said, “Hey, I’m going to create an exchange and optimize ecommerce regardless of who sold what to whom we will… And the way we’re going to do it is we are going to reduce the miles that our product travels so that it’s cheaper and faster. That was the vision. And that is what translated into Cahoot many years later. And this is long before Amazon Prime. Amazon Prime didn’t even exist. In fact, the Amazon Marketplace did not exist. So I had seen that trend that at some point, what’s good at the macro level from first principles is always good and your time will come when the economic incentives align, when this would make sense. So that is the genesis of Cahoot.
Kevin Sanderson: Got it. So Cahoot, just so folks who are not familiar, you basically offer something… Forgive me, this could be a horrible analogy, but something if you took Fulfillment By Amazon (FBA), how they’ve got order fulfillment centers all over and you mixed it with a third party logistics (3PL) company, which most 3PLs have a location. Maybe they have a location in Miami or they’re located in California, opposite sides of the country. Or sometimes there’s one that maybe has a location in Miami, one in Oklahoma, and one in Portland. And so, they have three locations across the country, so to speak. You’re kind of mixing them together to make an Amazon FBA out of multiple third party logistics (3PL) companies. Am I understanding this correctly?
Manish Chowdhary: Yeah. So Cahoot is a network of order fulfillment centers and fulfillment warehouses belonging to other sellers who have very efficient operations of their own and high performance metrics. So a seller, let’s say a seller who has 50,000 square feet warehouse and has 10, 20, 30,000 square feet of unused space that they’re not utilizing, they can come join Cahoot as an order fulfillment partner. And for the very first time they have an opportunity to make money, with the space that’s going idle, your rent doesn’t change whether you use half the warehouse or use the full warehouse, your utilities don’t change. So this is such a, I think a wonderful idea and option for merchants who have their warehouse to participate in the order fulfillment economy and Cahoot stitches that altogether, makes it super-duper simple for fulfillment partners to operate.
Manish Chowdhary: And what’s the net benefit to our clients? Our clients are sellers. They get an Amazon FBA like service. For them, all of this is behind the scenes. They’re looking for distributed order fulfillment so that they can achieve one day delivery, two-day delivery, cost effectively, affordably, and without any penalties for, “I will only fulfill this channel and my pricing is this for this channel.” No, an order is an order is an order, and we need to help that customer meet their expectations wherever they sell, wherever they want the inventory to be, and Cahoot intelligently distributes the inventory. And the benefit is it’s a lower cost structure by design. And that’s where our clients win because they get a high level of service at an affordable price.
Kevin Sanderson: Got it. So basically, if I’m understanding correctly, what you’re doing is there’s warehouses throughout the country that are already operating, they already have space. In most cases, they’re not necessarily filling to the exact brim, so to speak. There’s other space they might have and you’re giving them a way to monetize that space, which creates efficiency from a macro perspective. And then at the same time too, being able to distribute inventory throughout the country for sellers so that they can get it relatively quickly to their customers as opposed to if they’re only in Miami. Sure, the East coast is great if they’re only in California, the West coast is great, but either way, what about the people in the middle of the country where it might take longer?
Kevin Sanderson: So you’re helping to solve some of that problem, which is a unique thing there. So help me understand, one of the things I think people might be thinking in their heads is, okay, but if I had something like that, Amazon likes FBA inventory and the customer likes Prime. So what would be the benefit to the customer or to the seller to be involved either 100% or probably better said to mix it up a little bit, because I know people look for backup plans, especially around the holidays coming up.
Manish Chowdhary: Yeah, that’s a great question, Kevin. Cahoot is channel agnostic. We are the most merchant centric order fulfillment services network on the market because we support whatever is most beneficial for the client. If a client wants to send some of the inventory to FBA, then Cahoot would gladly support that. In addition to, utilizing our network to fulfill other orders. If you think from a seller’s perspective, the seller does not differentiate that, “Oh, I need a warehouse for FBA. I need a separate warehouse that’s going to send my inventory to Walmart fulfillment services. I need a third warehouse to send my wholesale orders, and then I need to now contract with three, four different 3PLs to achieve two-day delivery across the US. So from a seller’s perspective, FBA is not the solution to all their problems because if you’re selling on Shopify, you don’t want to pay multi-channel fulfillment rates.
Manish Chowdhary: I mean, FBA on one hand, we just heard that FBA is rolling out some new services like Amazon warehouse and distribution, and they want to offer long-term storage. And on the very same day, we heard on the Surge Summit from the stage from one of the largest sellers that their inventory limits have been slashed to a very, very low number. So, Amazon is a great service, but sellers have to recognize that Amazon does what’s best for Amazon and the sellers need to have a backup option. It’s like a backup hard drive on your computer. You’re not going to go around with no backup because things can fail and things do fail, and we’ve learned repeatedly that Amazon will cut your inventory without limits, and what are you going to do? So, Cahoot is a great option to have for every seller, even if they’re using FBA. And Cahoot’s position is we will support what’s best for the merchant, B2B, B2C, and Seller Fulfilled Prime (SFP). And those are all two opposite ends of the spectrum. And I’m sure you may have questions on Seller Fulfilled Prime (SFP), which I can tackle.
Kevin Sanderson: Yeah. Okay. So yeah, Seller Fulfilled Prime (SFP). That’s the part that I think probably just got some people really thinking there like, okay, you can still get the Prime badge but be seller fulfilled. Now, the part that’s scary for a lot of people is if Amazon screws up order fulfillment, it’s their problem. If you take that on as the merchant, regardless of you physically putting the boxes as the seller and putting labels on them and putting them into the post office, or you hire someone; you as the seller in your account are responsible for it. And then Seller Fulfilled Prime (SFP) is another level because you can’t just say, “Oh yeah, we’ll ship it in seven to 10 days like you could with other merchant fulfilled options.” So what are the requirements for Seller Fulfilled Prime (SFP)?
Manish Chowdhary: Yeah, Seller Fulfilled Prime (SFP) is the gold standard of fulfillment. And Cahoot is one of the very, very few networks that can handle Seller Fulfilled Prime (SFP) confidently. In fact, if you went and spoke with the traditional third party logistics (3PL) company, they’ll flat out tell you no, and you definitely don’t want to take a chance because as you said, the risk is so high, the standards are so high, unforgiving… And I’ll explain what that means.
Kevin Sanderson: Yes, please explain the unforgiving standard.
Manish Chowdhary: Seller Fulfilled Prime (SFP)’s standard is you need to have 99.5% on time shipping. You need to have 2:00 PM-
Kevin Sanderson: Okay, hold on. So that means, you can only make a mistake one out of 200 times.
Manish Chowdhary: That’s right.
Kevin Sanderson: Right? Did I get the math right?
Manish Chowdhary: Yes, you got the math right. Yeah. One mistake out of every 200 orders you need to deliver… You need to ship six days a week, which means you have to pick Saturday or Sunday to also ship on. You need to have a cutoff time of 2:00 PM, same day cut off time. Means if an order comes in by 2:00 PM you must ship it the same day. Then you need to use Amazon Buy shipping to purchase all shipping labels. So even if you have the best fulfillment operations, if your technology is not rock solid, you’ll get screwed up there. You don’t want to email your shipping labels to your order fulfillment partner. That is a bad idea. And now, on top of that, where things get really tricky is what Amazon defines as page view metrics. So, in order to qualify and remain in good standing for the Seller Fulfilled Prime (SFP) program, every seller must meet one day, two-day delivery page view metrics. And I’ll break that down for you.
Kevin Sanderson: Okay, yeah. Help me understand what that means.
Manish Chowdhary: Meaning, Amazon Prime have moved Seller Fulfilled Prime (SFP) away from two day delivery. Two-day delivery is yesterday’s news. In fact, day before yesterday. For Seller Fulfilled Prime (SFP), for standard size items, you need to have at least 20% of page views to the consumers on amazon.com that promise one day delivery. In addition to-
Kevin Sanderson: Okay. So time out.
Manish Chowdhary: Yeah.
Kevin Sanderson: How does the page view know whether it’s one or two days? You have to be communicating that to Amazon? That if a customer lives in Tennessee, it’s going to be X number of days versus if they live in Utah?
Manish Chowdhary: So essentially that’s the reason why you need at least four to five warehouses. You cannot achieve Seller Fulfilled Prime (SFP) using a single warehouse if you are shipping using economical ground shipping. So these are all managed through the shipping templates in Amazon Seller Central. So if you go on Amazon Seller Central, you can go create all your warehouses and then you create shipping templates. And shipping templates are what informs Amazon and thereby the consumers what to promise to the shopper on amazon.com. So Amazon, of course, as you know, is fanatical about customer experience, so they want 20% of the page views to promise one day delivery.
Kevin Sanderson: Got it. So 20% of the time someone lands on that page, they’re promised one day delivery.
Manish Chowdhary: Right.
Kevin Sanderson: Now, theoretically more people are probably in population centers. That probably helps you a little bit, but you have to make sure that you can do one day delivery to a lot of the population centers and things of that nature.
Manish Chowdhary: Yeah, it gets tricky.
Kevin Sanderson: It does. It sounds like, oh, that’s easy enough, but there probably is some threading of the needle there.
Manish Chowdhary: It’s far from easy.
Kevin Sanderson: Yes.
Manish Chowdhary: I’ll give you an example.
Kevin Sanderson: Okay.
Manish Chowdhary: If you have a 2:00 PM cutoff in New York, which is where a lot of people live, right? Meaning that’s the same day promise, a customer that’s visiting your webpage, let’s say at 7:00 PM, you can’t ship that product today. So, that automatically means if you’re going to ship tomorrow, it’ll be delivered the day after tomorrow. One day became two days.
Kevin Sanderson: Got it, got it. Okay.
Manish Chowdhary: So you need to have 40%… And this is accrued math, of course. At least 40% of the US population covered within one day radius in order to scrape by the Seller Fulfilled Prime (SFP) account help metrics for standard sized items.
Kevin Sanderson: Got it. So they’re not saying by 2:00 PM you must have 20%. It’s total. So if most of your shoppers are shopping at night, you better hope that you have a better chunk of the pre 2:00 PM crowd covered.
Manish Chowdhary: Yeah, this is what makes it… And this is where the world is going. If you are sending your other orders from other channels and taking three days, I mean, you’re doing massive disservice. Why is Amazon growing so fast? Why do customers come to Cahoot is of course, not only for programs like Seller Fulfilled Prime (SFP), but once your inventory is distributed in the Cahoot network, then you can offer the same Prime like shipping promise on your website. Imagine not having to pay 15%, 20% in commission and you’re building a brand and because your inventory is already there, and that’s where the scales begin to tilt. And by the way, we covered one day metric, but there’s also two day metrics for the rest. And as I said, six-day shipping, late cutoff, all of these make things very complicated. And that’s the reason why traditional players cannot affordably offer the service without… For example, if you have to rush the order using next day air, that will erode all your margins for the next hundred orders possibly.
Kevin Sanderson: Yeah, that would be crazy. Okay. All right, so let’s get into this now. So how did you go from back when either Clinton was still the president or maybe Bush’s first term, basically a long time ago, realizing there was inefficiencies of cameras crossing over each other, going from one end of the country to another, just based on where the seller was to coming up with this idea of a fulfillment services network?
Manish Chowdhary: Yeah, essentially the idea was to create a network that would enable people to collaborate. And in order for merchants to collaborate in some fashion, you need an independent body that’s a governing body. Without governance, nothing works, you need to have the rules, you need to provide the decorum. It’s no different than a marketplace like Uber or Airbnb for the drivers and the riders to collaborate. Essentially, they’re collaborating. On Airbnb, the renters and the hosts are collaborating. It’s a different service. With Cahoot, it’s merchants who are collaborating with other merchants under the Cahoot umbrella who sets the rules and holds people accountable and so on. And that’s what we built the Cahoot network to essentially, one, enable sellers who have warehouses. There are about 2 million sellers in the US and if any of the listeners have a warehouse and have spare capacity and they have excellent metrics, I invite them to come check out Cahoot. Fill out the Contact Us form, and we can get in touch with you if you want to join as an order fulfillment partner and make some money.
Kevin Sanderson: Well, let’s get into your current network. We can get into the how someone joins as we get further into this, because I’m just intrigued. So how many warehouses are there currently in the network?
Manish Chowdhary: They’re multi dozen warehouses and that number keeps growing.
Kevin Sanderson: Okay.
Manish Chowdhary: We have a very large network. We cover the entire nation in one day, two day shipping. And so, essentially the clients get an Amazon FBA-like service sellers can deploy their inventory and if they need Amazon FBA assistance… But we are not an Amazon FBA forwarding service. If somebody wants just Amazon FBA forwarding, then that’s not Cahoot. There are a lot of other services that just do Amazon FBA forwarding.
Kevin Sanderson: Got it. Yeah, there’s a lot of warehouses for that, but you’re doing a specific service of basically getting it closer to the customer so that when the customer orders on Amazon, they can still get Prime or they order on Walmart and then get whatever badge it is there or whatever, Shopify stores, whatever. So it doesn’t have to just be Amazon inventory. So this could be either Amazon has become cost prohibitive for the seller for whatever reason, and they need to look into other options. Their inventory was cut back, they just want a second backup just because, like right now, I can ship in 15,000 units and last year at this time, I think I had a thousand units I could send in total.
Manish Chowdhary: But-
Kevin Sanderson: You’re all over the place. up and down.
Manish Chowdhary: When is a thousand going to reduce to 750, you have no idea.
Kevin Sanderson: Yeah, exactly. Exactly. I almost wake up in sweats on Monday mornings… Not wearing sweatpants, but in cold sweats, what is my number going to be this week? Sometimes it goes up by 5,000 and sometimes it goes down by 5,000, and thankfully I’m never right on the edge. So anyone that says to me like, “Oh, should I just send all my stuff on Amazon?” I’m like, “Absolutely not, because they could just cut it.” And they’ve done that before when they get close to the holidays and they’re like, “Oh, we’re filling up more than we thought we would.” So they just cut it off and now all of a sudden you can’t send in the popular stuff that you were hoping to send in, so you have to have something to do. And so hopefully your dining room has a lot of space, but for a lot of people that might not be the case.
Kevin Sanderson: So, for a seller, let’s just say, we can use Amazon as an analogy just because I think most people, probably most of their sales are coming out from Amazon and we’re talking about Seller Fulfilled Prime (SFP) and things of that nature. So Amazon processes, I go into Sellers Central and I say, “Here’s what I’m sending you, Amazon. Here’s the quantities, where do you want me to send it?” And hopefully it all goes to one place. Sometimes they split it up and they say, “Send it here, here, here, here, and here.” Walk me through what does the process look like If I have just for the sake of example, a thousand units I want to send to Cahoot? What happens?
Manish Chowdhary: The process is very similar to Fulfillment By Amazon (FBA). You’ll create an inbound in Cahoot, and Cahoot will guide you through where the inventory needs to be based on your requirements. Some sellers don’t want to distribute. They’re not targeting two-day delivery for whatever reason. Distributed order fulfillment is more expensive than shipping everything from Florida, as you know, because there’s a cost of movement of goods and so on.
Manish Chowdhary: I mean, that’s why Amazon… Even Amazon FBA charges you more to send you inventory to one location versus sending it to all the different locations that Amazon wants. It’s not free even at Amazon FBA. So it’s essentially the same network, similar network, but we charge the same low fees for all channels, whether it’s an Amazon order, it’s a Walmart order, whether it is a Shopify order, eBay, we have all the order fulfillment integrations, so we will connect. We’ll get the order, we will optimize to make sure that the right packaging, you’re paying the lowest shipping cost possible, and we give you all the visibility once the order is shipped and we write the information back to Amazon. So it’s a pretty set and forget, it’s very similar to just managing your inbounds on Amazon and then watching-
Kevin Sanderson: So if I have a thousand units, does Cahoot say X number here, X number here, X number there if I want it distributed? Or does Cahoot distribute around for me as time happens? As one area gets depleted, for example.
Manish Chowdhary: It’s a collaborative process because if you’re doing Seller Fulfilled Prime (SFP), we will provide you with more guidance, but you have more control. With Amazon, you have little to no control. Amazon dictates because Cahoot is doing full service fulfillment, remember Cahoot is not just doing Amazon sales. So, you may have wholesale orders, you may have stuff that needs to go to Amazon FBA. So for us, the problem is a little bit more complicated than just serving the customers on amazon.com.
Kevin Sanderson: Got it. So you have something that’s about a pound on Amazon, and let’s just say that’s four bucks for the fulfillment fee. Is it a similar fulfillment fee? Is it a little bit more, a little bit less on Cahoot? And where does the cost of the actual storage compare?
Manish Chowdhary: Yeah, I mean, Cahoot overall is going to be more cost-efficient because when you look at Fulfillment By Amazon (FBA), you got to look at all the fees, you got to look at the storage fees, you got to look at how long it takes for you to receive your end box. And frankly, Amazon FBA is very attractive for what I call small and light. Amazon FBA fees undoubtedly are very attractive. So Cahoot will be very comparable to Fulfillment By Amazon (FBA), and if you have larger products, if you have slightly what Amazon would call standard oversize or oversize items, and that’s where Cahoot rates are going to be dramatically lower.
Manish Chowdhary: Cahoot overall is very, very affordable on par with Amazon FBA, but there are few pockets where Amazon has its own delivery trucks, whereas Cahoot relies on carriers. Third-party carriers like UPS, FedEx DHL and all that. So, the way we like to educate our clients is to think about all the different channels you want to sell on, all the different things you need to manage and maintain and so on. And we are there not to replace Fulfillment By Amazon (FBA) if that doesn’t make sense. We are there to support whatever order fulfillment strategy that’s best for the seller.
Kevin Sanderson: Okay, interesting. So yeah, this is an interesting network that here you are, you saw an inefficiency in the system, so to speak, and you’ve created a system around it, which helps to essentially give people an alternative to Fulfillment By Amazon (FBA) in general, if maybe their oversized items and the pricing doesn’t make sense with Amazon FBA or they just want an alternative because they can still keep the seller fulfilled badge, knowing that at the holidays you could have stuff in fulfillment center processing for two weeks and it just sucks.
Manish Chowdhary: Every seller, including you, Kevin, should have an Amazon FBA backup because otherwise you’re putting all your eggs in one basket and that’s never a good idea. Certainly not in Amazon’s basket. You want to have a backup so that you can turn it on whenever you think is required, whenever you need it, because you can’t send all your inventory to Fulfillment By Amazon (FBA). There are all kinds of delays getting inventory from overseas if it’s coming. And almost every seller should be selling on multiple channels. Nobody should limit it to one channel only. And we know that MCF, multi-channel order fulfillment, is more expensive, so why should it be more expensive? If the cost of shipping is the same, it’s just… So the way we like to think about it is that Cahoot has created the most merchant friendly order fulfillment solution on the market because we’re agnostic. We are there to support the seller, help them sell more, help them make more profit, and if we can be part of their journey, we’d be great.
Kevin Sanderson: Awesome. Now, one thing I think people would be curious about, who are sellers that are thinking about going onto this… Because Airbnb, I think we’ve all had great experiences, Uber, we’ve all had great experiences, but you always hear the horror stories. Who are these people? And there’s always this bad apple. So what does it take just either if someone’s interested in it potentially because they have a warehouse and may be interested in joining a network like Cahoot? Or they are a seller and they’re just like, who are these people who are going to be storing my inventory? Kind of walk us through what that looks like? How does someone get onboarded? What do you look for in an order fulfillment partner and what are they held to?
Manish Chowdhary: Thank you. That’s a great question, Kevin. Becoming a Cahoot order fulfillment partner is a by invitation only program, so even if you went to our website, you may not find… Because we have to be very selective in who we allow from a fulfillment partner, because as you heard, supporting seller fulfillment Prime is playing with fire. It’s not for the faint of heart. So we need to ensure that we are selecting these partners very carefully. There are two million sellers out there in the US, many million globally. So we invite them to come, submit, contact us, we will get in touch with you. Cahoot does a lot of due diligence to make sure that the program is the right fit for them and they’re the right fit for us.
Manish Chowdhary: If they have excess capacity and they’re doing a great job of fulfillment for themselves, they should consider applying because there’s more than one way to make money. One is to sell more goods, and the second is to fulfill. You’re already fulfilling orders, might as well just fulfill a few more. And I think that’s a great way to make extra cash, and it’s super-duper simple. So, from horror stories, it’s really some things that are within Cahoot and our fulfillment partner’s controls. Some are not, like inclement weather. That happens. I live close to New York, we get snow storms here. Just yesterday there was a hurricane in Florida, which-
Kevin Sanderson: Oh, yeah, we’re recording it. Oh no, it hasn’t even made land yet. In fact, last night I was-
Manish Chowdhary: Okay, sorry.
Kevin Sanderson: Dodging tornado. Yeah, I happen to be on the east coast, this is on the west coast, so I’m very familiar with what you’re talking about. So we’re lucky to be even having this conversation that I have internet right now. Anyway, sorry, side note. But yeah, stuff happens.
Manish Chowdhary: So carriers sometimes may have difficulty picking up. When the pandemic hit, carriers were completely blocked. They had no space in their trucks. So if you suddenly ran a special sale and instead of getting 10 orders a day and you got thousand orders, I mean, FedEx, their space doesn’t have elastic capacity that they can elongate by click of a button or manufacture trucks digitally. So, those are real world physical challenges that we deal with. Those are things that planning for capacity… But our order fulfillment partners have been great. They have always stood their ground and they have delivered. So generally speaking, most of the problems that we’ve seen have been outside our control, and we speak with our fulfillment partners regularly. So it’s not just a digital platform that you have no connection with, human connection, whether it is staffing.
Manish Chowdhary: People do fall sick. During the pandemic we had people in the warehouse that had COVID, they had to be isolated. These are… Amazon shutdown several warehouses during that time, so all the same challenges. It is about great governance, clear expectations, good communication, and great technology and system. From a technology standpoint, we often encounter bugs or issues with buy shipping, but we have to use buy shipping for Prime orders to get the label. So our technology has to be resilient to deal with those challenges. Sometimes it’s an inconvenience. Let’s say buy shipping is not returning the economy ground shipping method because it’s only returning expensive two day air label, so that costs our sellers money, and we are very sensitive to that. However, it’s also important to protect the account, those metrics, because in order to save 20 bucks, if the account is endangered of the health of the account, that is going to be a far more expensive problem than 20 bucks.
Kevin Sanderson: True. Because if you get one out of 200 that you get a grace on.
Manish Chowdhary: So those are the problems that we’ve seen, but our technology is resilient, our fulfillment partners are awesome, and we’ve been very fortunate that way, and we want to keep it that way.
Kevin Sanderson: Awesome. So for somebody who wanted to learn more, either as a seller or potentially if they had a warehouse, where would they go?
Manish Chowdhary: Go to www.cahoot.ai. If you’re interested in availing yourself of Cahoot’s, affordable fulfillment services, just fill out the Contact Us form. There’s also a live chat option. If you’re looking to join as a fulfillment partner, we are glad to have you. We’d love to invite you. Just fill out the Contact Us form, and then a representative, a fulfillment expert, will be in touch and we will determine if we are the right fit. But we are here to help our customers. If we can add value, that’s what we like to see.
Kevin Sanderson: Awesome. And spell Cahoot, just for folks who are not familiar.
Manish Chowdhary: Yeah, Cahoot is a play… You know how Slack, when you are using Slack at work, you are in cahoots. So C-A-H-O-O-T.ai. It’s singular. Cahoot.ai is the URL. You can check us out. And yeah, if there’s any questions we can answer for them, we’ll be happy to.
Kevin Sanderson: Awesome. If you’re listening to the audio podcast, that’ll be in the show notes. And if you’re listening or watching on YouTube, it’ll be in the description down below. So Manish, this is an interesting conversation and I am fascinated with what you’ve built here. So, thank you so much for coming on.
Manish Chowdhary: Kevin, thank you so much for having me. And thank you to all your listeners for listening to me. And if Cahoot can be of help, please just check us out and we’d love to chat and share notes, and we learn as much from sellers as much as we have to share our expertise with them. So I always enjoy those conversations.
Kevin Sanderson: Awesome. Thanks so much.
Manish Chowdhary: Thank you. Bye.
Speaker 1: Thank you for listening to the Maximizing E-Commerce Podcast. If you found this episode helpful, you can get more episodes by subscribing on iTunes or wherever you enjoy listening to podcasts.
