Peer-to-Peer Order Fulfillment for Efficient and Affordable Shipping

Podcast: ProShip ParcelCast Episode 23: What is a Peer-to-Peer Order Fulfillment Network?

Cahoot AI founder Manish Chowdhary discusses the need for distributed order fulfillment and the benefits of a peer-to-peer order fulfillment services network on a podcast. The network is a platform where eommerce brands and retailers collaborate to speed up order fulfillment and distribute inventory closer to the customer. The objective is to reduce shipping costs and improve customer experience with better and faster shipping. Distributed order fulfillment is the process of making free and fast shipping feasible and affordable for the retailer by placing inventory closer to the customer so that items can be shipped using affordable and inexpensive ground services rather than long-distance air that can be two to four times more expensive. An ecommerce brand or a retailer just needs four to five strategically located warehouses throughout the US to achieve two-day nationwide delivery guaranteed and nine warehouses to achieve one-day delivery like Amazon. Retailers have the option to build their own warehouses, lease them, sign up with multiple third party logistics (3PL) companies, or join an order fulfillment services network like Cahoot.

Justin Kramer:

Welcome to the 23rd episode of ParcelCast, what is a peer-to-peer order fulfillment services network. I’m your host, Justin Kramer, co-founder of ProShip. And with me is my special guest, Manish Chowdhary, founder of Cahoot AI, a distributed shipping software and peer-to-peer order fulfillment services network. Manish, could you take a second to introduce yourself and your company?

Manish Chowdhary:

Absolutely, Justin. Thank you for having me. First of all, my name is Manish Chowdhary, I’m the founder and CEO of Cahoot. Cahoot is the world’s first peer-to-peer order fulfillment services network. In simple words, it’s a collaboration platform where brands and retailers collaborate to speed up fulfillment and distribute inventory closer to the customer so that we reduce the shipping cost and also improve the customer experience with regards to better and faster shipping for the end consumer.

Justin Kramer:

You know what, let’s take that further. Let’s go ahead and talk about the need for distributed order fulfillment. We hear about it a lot. Can you explain to us what it is, and what our retailers’ options are nowadays?

Manish Chowdhary:

That’s a great question, Justin. Distributed order fulfillment is nothing but a methodology on making the free and fast shipping feasible and affordable for the retailer. When the consumers order stuff online, especially on sites like Amazon, they are conditioned now to expect free two-day delivery. In fact, Amazon has raised the bar on making it free one day delivery with Prime. Almost one-third of all Amazon Prime items get delivered in one business day, which is astounding. And for Amazon, business day is Monday through Sunday, so it’s not even business day anymore. And that’s the expectation that the consumers have with every ecommerce brand, every retailer. And for the brand or the retailer to make that affordably happen is bring the inventory closer to where the consumer is located so that item can be shipped using affordable, inexpensive ground service. As opposed to the long distance air, which is in on average two to four times more expensive than the economy ground shipping. So distributed order fulfillment is basically placing your inventory smartly closer to your customer so you can achieve one-day, two-day delivery without breaking the bank.

Justin Kramer:

Awesome, awesome. What kind of tools, technologies, and SLAs should we expect from something like this if I’m a mid-size retailer looking to get into something like this?

Manish Chowdhary:

You essentially have three options. One, you can go and build additional warehouses, and these are warehouses that need to exist at strategic locations. Meaning, having a warehouse in Wisconsin, for example, is not going to be very effective because that’s not where the large population lives. Of course, tri-state area, New York, New Jersey, closer to the port, that’s where a lot of the inventory from overseas come in. But also it’s a very densely populated region. And so is Southern California like Los Angeles, Long Beach, Orange County. And then of course the upper Midwest like Chicago and so on. In order to achieve two-day nationwide delivery guaranteed, a brand or a retailer needs four to five strategic warehouses throughout the nation. And if you wish to achieve one-day delivery like Amazon, you need nine warehouses strategically located in the US. And I mean strategic.

If you had a warehouse that is not in a strategic location, you’ll need many more. And so you have options. Your options are you’re going to go build these warehouses, which is very capital intensive, and you don’t know what the market is going to look like. And then also it’s getting the permits, getting all of this takes a very long time. Second option is to lease it. Again, same problem, you’ll need to enter into long-term leases because warehouse spaces in such short supply, which also is a pretty large commitment and investment. The third option is you have to go and sign up with multiple 3PLs. Because two-thirds of the 3PL, or third party logistics companies, the companies that professionally provide order fulfillment services to brands of retailers in the US are mom and pop, two-thirds. The remaining one-third are the largest of the world.

Those are the people that become the landlord to Amazon and Macy’s and others, which are largely out of reach for most mid-sized sellers. So now you need to go and negotiate and acquire these multiple 3PL with different agreements, different contracts, and then you need the technology to glue it all together because there is no [inaudible 00:05:05] to choke, so as to speak, if there’s a problem. And so all of this creates a huge burden, a huge investment for the brand or the retailer to achieve. Or the fourth option, which is really a more newer and emerging option, is to join a contract with an order fulfillment services network such as Cahoot. And there are a few others that has nationwide footprint, that has multi dozen warehouses that can achieve that delivery target, that SLA seamlessly. So that’s another option.

Justin Kramer:

You talk a lot about Amazon. Is Amazon Prime a distributed order fulfillment services network? Is that something that people are looking at at the… Or should I say, is that something that is the high end of what we’re talking about?

Manish Chowdhary:

Amazon FBA, which powers the Amazon Prime program, fulfillment by Amazon, is by far the largest distributed order fulfillment services network in the world. Not only the US. They have over 120 warehouses, not to count the sortation facilities and other cross stock facilities in the US. Amazon invested more during the pandemic in building out their fulfillment services network than they had invested in the previous 18 years. So the amount of money and resources that Amazon poured in 2020 and 2021, and also part of 2022, dwarfs the investment… Almost, they increased their footprint three times, and that’s why we heard some headlines about Amazon over building and they needed to rent out. Those were some headlines. And then trying to optimize their cost, laying off workers, closing down facilities. Amazon, like many of the other brands and retailers had overbuilt. But Amazon is by far the largest distributed order fulfillment services network in the world.

Justin Kramer:

If I’m a growing retailer and I’m looking to get into something, how is all this power that Amazon has, how does that impact me?

Manish Chowdhary:

Absolutely. Suffice to say that nearly every brand, every retailer should have an Amazon strategy. It’s hard to ignore Amazon is a sales channel when 60% of all e-commerce searches begin on Amazon, not on Google. Even whether you like Amazon or you don’t like Amazon, the reality is millions and millions of consumers go to Amazon every single day. And if they can’t find your products there, then that’s a problem, because you may be missing out on a big opportunity. A big, large segment of your target audience and population. Amazon does many things really, really well. And Amazon being the largest order fulfillment services network, but also Amazon Prime is the largest loyalty program in the world. By a long shot, you’ve got over 130 million, I don’t even have the real numbers as of now, but over 100 million subscribers that pay $120 a year to Amazon, and they get a whole host of benefits.

And the biggest benefit of it all is the free one-day, two-day delivery with no minimum. So you could literally order paperclips on Amazon, have it delivered the next day, and not pay anything for delivery because you’ve already paid into the membership program. So that is what consumers love. And while Amazon FBA is great at many things, and I can cover this if you like, I can elaborate on it. It’s not the be all and end all. It is good for many times, however, it has its own set of challenges that the retailers and ecommerce brands must be aware of.

Justin Kramer:

Let’s go ahead and ask one last question. Let’s talk about Buy With Prime. Can you tell me what the larger impact is of this program on e-commerce as a whole?

Manish Chowdhary:

That’s an excellent question, Justin. Buy With Prime launched in April of this year, this is something that has been a long time coming. As you and others listening may be familiar with, Amazon does everything at very large scale. They perfect a service first for themselves, and then they look to monetize that across the entire business ecosystem. And that’s exactly what Buy With Prime is. Buy With Prime is Amazon’s initiative to become even larger third party logistics company where Amazon will extend its Prime membership to other channels other than Amazon. Let’s say you have a website that is hosted on Shopify or on Magenta, or any website, you could install a Buy With Prime logo, a button, and you can send that inventory to Amazon FBA, and the consumer can now check out using the familiar Amazon account and get that product in one or two days.

Buy With Prime essentially extends all of the Prime benefits to websites other than Amazon. And we already seeing many, many sites that have adopted and embraced this because Amazon makes it so easy for the brands and retailers to fulfill their orders. And if brands and retailers that are heavy into FBA that sell a lot on Amazon for them, it’s a no-brainer. And so what the term or the phrase that I like to use here is, gradually and then suddenly. Up until now, consumers have been expecting the Prime benefits or one-day two-day delivery only on Amazon. But now let’s take an example. If you are a shoe retailer, and there are two of them, Acme Inc and ABC Inc. Acme Inc starts providing Buy With Prime on their website, and ABC Inc does not. Now as a consumer, I’m more likely to go check out from here, if all things being equal. So this is going to lead to this massive adoption and even acceleration of delivery expectation among consumers, because they now expect that same Prime-like experience on every channel they shop on.

Justin Kramer:

Interesting, interesting. Okay, let’s go ahead and switch topics here. Let’s talk about this new fulfillment economy and the workshare model. To the average logistics persons, companies like Gap, American Eagle, Quiet Logistics, Airterra, they were offering something very similar to what it sounds like the Cahoot network is offering. Can you talk to us a little bit about the similarities and the differences?

Manish Chowdhary:

Yeah, this is a new development that’s happening in the e-commerce and retail logistics space. Cahoot was of course the pioneer in peer-to-peer collaboration. And essentially, Cahoot acts as a neutral third party where there are plenty of merchants. There are about three million online merchants in the US compared to about 20,000 3PL companies. So these are third party logistics companies that will provide fulfillment as a service. By sheer comparison, and the analogy I’d like to make is Airbnb versus Hilton. There are many more homes with spare bedroom and a spare wing than there are hotel rooms in the US. Rather than building more warehouses where rooms are going empty, or the space is going empty in these millions of warehouses. Cahoot is aiming to bring these surplus capacity into the market so as to reduce the cost and improve utilization. This goes hand in hand with trying to make the most or more of what resources we already have, as opposed to trying to spend more capital expense, which essentially increases the cost one way or the other for the brand or the retailer.

What Cahoot has done is created a network of very highly qualified, highly vetted brands and retailers that do a spectacular job of order fulfillment for themselves, but that have extra capacity, let’s say 5, 10, 50, 20, 100,000 square feet of excess capacity. For the very first time, they can join the Cahoot network and monetize that excess capacity by fulfilling orders for other brands. And Cahoot acts as the independent governing body with the technology, the software, so that it is not a distraction for them. It is simple, it’s easy, and it’s effective. And it also gives the seller, the brand, our customer, the assurance that we are holding everybody accountable. And there is harmony and there’s SLA being delivered. And so it’s very exciting to see other retailers like Gap and American Eagle finally come to embrace the model that we’ve been preaching for a long time.

And the one difference, there’s not a lot we know about these models because there’s not a lot published on them because it’s still a closed system. But one thing, suffice to say that most brands, most retailers would prefer an independent body to audit the service provider. And that’s the advantage that Cahoot provides, because Cahoot is not representing just the buyer or just the warehouse. Cahoot is the independent body that keeps everybody organized and creates a common rule and level playing field for all the participants, and provides the visibility. That’s the one thing that I personally believe that having that independent body is a very crucial, it provides trust, it provides visibility, and it provides the assurance and it provides accountability. We would very much welcome Gap and American Eagle to join Cahoot so that we can give that assurance to small and large size retailers.

Justin Kramer:

And it also sounds like if I’m a Cahoot member I can now more easily expand to those five to nine distribution points so I can have two-day or next day delivery for most of the country.

Manish Chowdhary:

Absolutely. The whole idea is, how do we create a Prime-like network and Amazon FBA-like network without the challenges that FBA faces? FBA is great at many things, but it does not… Even to this day, many, many sellers could not get their inventory into FBA on time for the holidays. They had limits placed on their account that they could only send so many units, and they rely on other networks like Cahoot to fulfill even their orders on Amazon. While Amazon is growing, they’re launching all these services, it has its own set of challenges. Amazon is not geared for all things to everyone at all time because Amazon only wants fast moving inventory. But from a retailer’s perspective, they also need to fulfill their wholesale orders, they need to fulfill orders from Walmart. Which, you cannot use FBA to fulfill, it’s against Walmart’s rules and policies that you cannot have a Amazon branded box being delivered to the Walmart customer that bought the item on the Walmart marketplace. And rightfully so.

Justin Kramer:

Let’s switch over to some other networks that sound like they’re similar. I know that the carriers, some of the airlines, and other particular merchant groups have some stuff similar to this. Can you talk about that and compare and contrast a little bit for us?

Manish Chowdhary:

Absolutely, Justin. The idea of coopetition has existed for a long time, where seemingly retailers may consider themselves to be competitors, but not necessarily. Because a retailer who has a warehouse in New York is really not competing with the retailer of a different product with a warehouse in California. It is in their interest to collaborate so that both of them win because they are not competing. And so we know of many, many very successful networks of this kind, going back to the, let’s take airline co-share. Not every airline flies to Maui, Hawaii. But if you want to get from Chicago to Maui, you might have to go from Chicago to Dallas, or Chicago to LA, and then LA to Maui, for example. For example, Delta, as part of the Sky team has many other airlines that share the code and so on.

So this is very, very common. It makes the airlines be profitable and able to service the needs of the customer. Because ultimately about getting to Maui, not about how many websites and tickets you need to buy separately. Likewise, we also know for examples in the flower delivery space, the FTD. Which is if I want to send flowers, I’m in New York and I need to send flowers to my sister-in-law in Palo Alto in California. Of course the local florist is not going to be the one delivering, but as part of the network, they can easily arrange for someone locally to deliver. And we’ve always known about the workshare model in the carrier space, which we know that USPS has long had workshare programs with UPS, FedEx. Programs like UPS Mail Innovation, FedEx Smart Post. Cahoot is simply extending the same concept to the world of order fulfillment and warehouses. Because ultimately, when there is greater utilization of resources that we have, that leads to a better experience and lower cost for all the participants involved.

Justin Kramer:

Very interesting, very interesting. Manish, can you tell our audience, what is a peer-to-peer order fulfillment services network?

Manish Chowdhary:

A peer-to-peer order fulfillment services network is a large scale nationwide network of warehouses that allows a ecommerce brand or retailer to compete at the level of Amazon Prime, which is one-day, two-day free delivery. Every brand, every retailer should be offering the service on all channels that they serve. And they can easily achieve that by joining Cahoot, because Cahoot has the number of locations and the diversity to place the inventory closer to the customer so that the items can be delivered inexpensively and fast without incurring additional cost. And on the fulfillment provider side, if you are a brand or retailer that has, owns, or operates a warehouse and has spare capacity, be it 5,000 square feet or 50,000 square feet, and you would like to monetize that excess capacity, excess space, please come check out Cahoot.ai and fill out a contact us form so you can apply to become a Cahoot fulfillment partner.

And we would love to speak with you, because we would love to add more warehouses to our network. So you benefit not just by providing faster and cheaper delivery to your customers, but also by monetizing your spare capacity so you make more out of your existing fixed investments.

Justin Kramer:

Excellent. Let’s go ahead and let’s move on to the changing base of reverse logistics. Let’s face it, over the last several years we’ve seen companies try to return everything. We’ve seen companies try to return nothing, just ask the customer to throw it away. But one way or another, we all know that reverse logistics is a huge part of the customer satisfaction story when it comes to e-commerce. Can you tell us a little bit more about it?

Manish Chowdhary:

Yes, Justin, this is of course when e-commerce was only 1% of total retail. Brands and retailers were motivating customers to shop online because it was, so-called it was a channel shift. It was giving customers more self-service option. It is akin to motivating customers in the grocery stores to do self-checkout now, you try to encourage them. And of course consumers got very, very much used to… And in order to do that, they offered free shipping on the way in, and they also offered free returns. Because it was one of those taking away the friction in online shopping that if you didn’t like something you could return it for free and no questions asked. Of course, that was intended to be simply an encouragement for the consumers to shop online, and which quickly changed into the concept of showrooming. It’s essentially consumers, especially in the apparel space, buying three items with the intention of only keeping one.

And because items are free to return, you could simply return it back. This went on for over a decade now, and sites like Amazon, or when the products are rather inexpensive, it costs more to ship them back and process that item that is returned than to let the customer keep the item. However, we are entering a new phase and we can see that with the brands like Zara and Gap and others that are cramping down and they’re saying enough is enough. There have been chronic people that constantly return items that is playing a havoc on the profitability of these companies. Essentially, the movement has already started, and some of the top brands and retailers have taken a lead that now if you want to return the item back to Zara, you’re going to have to pay a return fee, or you have to pay cover the cost of shipping. I think they’re going through a natural leveling of consumer expectations. And I don’t expect free returns to loss for most items in the next couple of years, that’s going to change quite dramatically.

Justin Kramer:

That will be very interesting, no more free returns. I know companies like Zappos, that’s exactly how they made their name in the market was you could bracket, by the size above, the size below, and get to choose what you wanted. Very interesting. Are you seeing this anywhere yet, or is this an expected 2023 trend?

Manish Chowdhary:

No, we heard from folks like Zara and others that they are already beginning to charge for returns. This is already in play now. It’s just not an idea or a thought. And of course, it takes a little bit of the top leaders to take a position and then others will follow. I expect of course, Amazon being the big bellwether, it remains to be seen what Amazon Prime is going to do because I think they constantly set the bar, so we’ll see. But also from a sustainability standpoint, Justin, this is not just about the cost. But if we encourage people to return, we are adding more carbon emissions. I think there will be brands that would take a stance that it is not just good for e-commerce, but it’s good for the planet. I do expect that the scales to be tilting in this direction not too long from now.

Justin Kramer:

Yeah. And I have to say, I think you’re right. Because you do see even Amazon in their partnership with stores like Kohl’s wanting you to just take it to that store where you’re already going to be, rather than putting it in its own, usually oversized box, sticking a label on it, and having it take up space on a truck or a trailer somewhere. All right, let’s move on to final thoughts. Question for you, is there any takeaways you want to make sure that our listeners have heard today and that they action against?

Manish Chowdhary:

My recommendation to all the listeners is that free and fast delivery, free one-day, two-day delivery is here to stay. And it’s not just on Amazon. Any channel that you’re selling on, you’ve got to embrace distributed order fulfillment. How you do it, there are four options as we covered earlier in the podcast. It is crucial in order to maintain your competitive positioning and also maintaining the consumer expectation, which is changing very rapidly. And especially with Buy With Prime program, which is going to launch, or rather, get rolled out quite aggressively in 2023. You want to get ahead of that. I would very strongly encourage to get a head start in 2023 and test this out, and make sure you have this systems and technology and your fulfillment and your providers figured out. And if you have spare capacity, why not put that to good use? Energy costs are all time high. So if you can make an extra income from your existing investments, that’s good for you, but it’s also good for the planet.

Justin Kramer:

Agreed. The one thing I took away from this, I’m going to try to narrow it down to a sentence. In the past we’ve always had buy, lease, or outsource. Right? But with a peer-to-peer network, we now have a fourth option. We can buy, we can lease, we can outsource two or 3PL, or we can collaborate with other like retailers. Is that correct?

Manish Chowdhary:

That is absolutely correct, Justin. I think we are all in this together, and that’s why our tagline, Cahoot’s tagline is Power of Many. It’s brands of retailers helping each other.

Justin Kramer:

All right. If you’d like to learn more, please visit us at proship.com or cahoot.ai. Thank you for joining us today. If you have any questions, just a reminder, you can reach ProShip at sales@proshipinc.com, or (800)-353-7774. We hope you join us for our next ParcelCast. Thank you for tuning in.

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Ecommerce Fulfillment with Buy With Prime

Consumer expectations today are higher than they’ve ever been before. Many observers might put this down to rising incomes or things that shoppers visibly see every day, such as great marketing campaigns, innovative products, or competitive pricing. However, sellers have a secret weapon in the competition to acquire happy, loyal customers – fast, free shipping and order fulfillment.

The elevated customer expectations that online retailers face due to fast shipping times have been created by the “Amazon Prime Effect”. What is this effect, and what implications does it have for merchants selling online?

Constantly Increasing Consumer Expectations

Let’s go back to 2005, when Amazon introduced free two-day shipping on orders over $35, a move that many found puzzling – even illogical – at the time. Later in the same year, they introduced Prime, with its annual fee that allowed customers to get as many items as they wanted, with no shipping fees.

By the time of the Covid-19 pandemic, same-day shipping arrived on Prime. While Amazon continuing to raise the fulfillment bar has been great for them and their customers, competitors large and small have been scrambling to catch up. For example, it took Walmart 12 years to catch up and offer free 2-day shipping! As Amazon has gotten faster and faster at shipping, even their biggest competitors have taken a long time to reach the elevated shipping standards that Amazon makes table stakes.

On every channel today, the sellers winning are those offering shipping that can compete with Amazon. For example, Walmart listings (inspired by Amazon’s approach) offering 2-day delivery rank higher in search results, win the buy box more often, and see conversion lifts as high as 50%.

Timeline of Free Shipping Offerings from Major Ecommerce Sellers

While pressures to provide ever-faster free shipping continue to increase, the pressures of intensifying competition are making it harder than ever for sellers to win. Costs at each step of the fulfillment chain (shipping, warehousing, and labor) are on the rise:

Shipping: General Rate Increases have surged upward, remaining significantly higher than the prevailing inflation rate, making it harder and harder for merchants to absorb the last-mile costs involved in meeting the expectations of free same-day shipping.

Graph of US inflation rates and UPS/FedEx general rate increases from 2020 to the present

Warehousing: To get orders fulfilled faster, you need to distribute your inventory in warehouses closer to the customer. But online merchants face the challenge of dealing with both elevated rent costs and limited vacant space in warehouses.
Labor: As they continue to face significant staff turnover at fulfillment centers, Amazon has had to increase the wage they pay their workers several times in recent years. Most recently in 2024, they announced a new 7% increase in base pay for warehouse workers, bringing average base pay for such workers above $22/hr.

With shipping companies raising prices, warehouses becoming tougher to rent, and people becoming more expensive to hire, merchants face the daunting task of overcoming these challenges and meeting customer expectations.

What is Buy with Prime?

In 2022, Amazon raised the stakes yet again, making fast, free shipping available standard for every e-commerce brand and retailer through their Buy with Prime (BWP) program. This program allows any online merchant – not only those with Amazon stores – to offer order fulfillment using the elevated standard set by Prime. The program has already made a splash in a short time, with support from major brands such as Adidas and Fossil.

Amazon Buy with Prime is a program that allows third-party merchants to offer Prime shopping benefits—like fast, free shipping, a seamless checkout experience, and easy returns—on their own e-commerce websites. It integrates with a merchant’s online store, enabling Amazon Prime members to shop with confidence outside of Amazon.com while still receiving the perks they expect.

Any merchant with a Direct-to-Consumer (DTC) website and an Amazon Seller Central or Amazon Supply Chain account can apply for the Buy with Prime program. Merchants simply add the “Buy with Prime” button to their product pages on their own website, and customers then check out using their Amazon credentials, making the process faster and more convenient.

Amazon handles fulfillment and shipping, ensuring fast delivery through its logistics network, and also manages customer service and returns, simplifying post-purchase interactions.

Benefits of Buy With Prime

Amazon’s Buy with Prime program offers significant advantages for sellers looking to boost sales and improve their customer experience. By enabling merchants to offer the Prime shopping experience directly on their own websites, the program increases trust and boosts consumer spending – by 16% on average according to Amazon! With fast, free shipping and a seamless checkout experience backed by Amazon’s fulfillment network, sellers can attract high-value Prime members who are accustomed to quick delivery and hassle-free returns.

Additionally, Buy with Prime helps sellers leverage Amazon’s logistics expertise without being limited to selling only on Amazon’s marketplace. They maintain control over their branding and customer relationships while benefiting from Amazon’s fulfillment and payment processing capabilities. Merchants can feature reviews from Amazon on their website and place ads on the Amazon Marketplace which link to their own website and drive traffic. The program can also reduce cart abandonment rates, as shoppers are more likely to complete a purchase when they recognize the reliability of Prime.

Limitations and Problems of Buy With Prime

Only SKUs that are fulfilled using FBA (Amazon’s in-house fulfillment) are Buy with Prime eligible. While FBA works well, the Buy with Prime button disappears from the product listing on your website if there is no more inventory available in Amazon warehouses, and standard FBA fees and regulations apply to all inventory in an Amazon fulfillment center. FBA is not ideal for SKUs that do not move quickly – the costs associated with stocking inventory with Amazon that does not turn over frequently can become very large.

The most imposing drawback to the Buy with Prime program, however, is the significant payment processing fees, representing 2.4% of the cart value + $0.30, as well as an additional 3% Prime service fee (min $1.00). Shopify stores can avoid much of the pain associated with these fees, as their payment processing fees are waived and only standard Shopify fees (and the Prime service fee) apply. That being said, sellers should remember that other applicable FBA fees (storage, etc.) will also apply to orders fulfilled from Shopify stores.

Alternatives to Buy with Prime

For sellers seeking to aggressively minimize the costs associated with fulfillment, Amazon’s FBA and Multi-Channel Fulfillment (MCF) programs are, on average, cheaper than utilizing Buy with Prime (although there are specific product types for which Buy with Prime may be more efficient than MCF). But what about merchants who want to meet the modern standard for fast, cost-effective shipping without losing control of their fulfillment processes or submitting to the rigid requirements for which Amazon has become infamous?

Usually, merchants look to 3rd Party Logistics Providers (3PLs) for solutions. However, 3PLs can often come with significant costs and limitations, as fulfillment is their primary revenue stream.

That’s where a solution like Cahoot comes in – we’re unlocking the potential of over 2 million e-commerce retailers in the US that have their own warehouse space, who perform complete order fulfillment.

For the first time ever, merchants, brands, and e-commerce retailers will be able to monetize excess capacity available in their warehouses through Cahoot’s peer-to-peer order fulfillment network, which delivers fast, free 1-2 day shipping while also lowering costs. We offer the industry’s leading Service Level Agreement (SLA) and we help our Amazon sellers by offering Seller Fulfilled Prime (SFP) services. If you’d like us to take over all aspects of order fulfillment, we can do that too!

Conclusion

In an era where fast, free shipping is no longer a luxury but an expectation, sellers must carefully weigh their fulfillment options. Buy with Prime offers a compelling way to boost conversion rates and leverage Amazon’s logistics, but it comes with added costs and limitations that may not work for every merchant. While some sellers may find Amazon’s fulfillment solutions ideal, others may prefer alternative strategies that provide more control over operations and costs.

As competition intensifies and fulfillment challenges grow, innovative solutions like Cahoot’s peer-to-peer fulfillment network are emerging as viable alternatives. By leveraging existing warehouse capacity and a decentralized fulfillment model, sellers can meet the demand for fast, cost-effective shipping without the constraints of Amazon’s ecosystem. The key to success in today’s e-commerce landscape lies in choosing the right fulfillment strategy—one that balances speed, cost, and control to drive long-term growth.

Frequently Asked Questions

How does Buy with Prime benefit merchants?

Buy with Prime helps sellers leverage Amazon’s logistics expertise without being limited to selling only on Amazon’s marketplace. They maintain control over their branding and customer relationships while benefiting from Amazon’s fulfillment and payment processing capabilities. Merchants can feature reviews from Amazon on their website and place ads on the Amazon Marketplace which link to their own website and drive traffic.

What are the limitations of Buy with Prime?

Only SKUs that are fulfilled using FBA (Amazon’s in-house fulfillment) are Buy with Prime eligible. The Buy with Prime button disappears from the product listing on your website if there is no more inventory available in Amazon warehouses, and standard FBA fees and regulations apply to all inventory in an Amazon fulfillment center. Additionally, significant payment processing fees often apply.

This is why it’s important for sellers seeking to aggressively reduce the costs associated with fulfillment, to research alternatives to Buy with Prime.

Written By:

Manish Chowdhary

Turn Returns Into New Revenue

Convert returns into second-chance sales and new customers, right from your store.

3PL Fulfillment: Amazon’s Inventory Limitations & Impact on Ecommerce Sellers

In a conversation between Manish Chowdhary, founder and CEO of Cahoot and Neil Twa, host of the High Voltage Business Builders podcast, the two discuss Amazon’s inventory limitations and the impact it has on ecommerce sellers. Amazon has different teams with different priorities, causing confusion among sellers who cannot rely on any one order fulfillment solution. The company has cut down on inventory shelving space for some ecommerce sellers while launching new services, such as Buy with Prime, which could pose a threat to marketplace delivery services like Shopify. Shopify recently banned Buy with Prime, which Manish argues cuts into the heart of revenue. To avoid being beholden to any order fulfillment service, sellers must have a backup that is not Amazon. The experts caution against putting all your eggs in one basket and encourage ecommerce sellers to move beyond Amazon if they want to grow their ecommerce brand.

Below is the transcript of their conversation, edited for clarity:

Neil Twa:

Welcome to the High Voltage Business Builders, a show where we interview entrepreneurs growing and scaling their income through e-Commerce and showing you the path to make your first or next million.

All right, Manish, thanks for joining the call, my friend, from Connecticut today. How is things out there on the East Coast for you?

Manish Chowdhary:

Things are a bit cloudy here, but it’s still a great day, and thank you for having me, Neil.

Neil Twa:

Yeah, it’s great to have you here, man. So, we’re talking a little bit about things that are obviously relevant to E-comm, but in different channels, not just Amazon. I know you handle multi-channel fulfillment.

Let’s talk a little bit about that, because I know it’s a big piece of what you do in your business model. Tell us what are you seeing, what’s most relevant right now. If someone’s listening to this and they’ve got a Dropshipping or an Amazon store or some other thing else, what’s something they should know right now that you feel is important for them to hear?

Manish Chowdhary:

Well, one of the things that… I just got back from Search Summit last week, you hear conflicting sets of information, right? I mean, Amazon is rolling out new services. You brought up a little while earlier, Amazon warehouse and distribution. So they’re ready to take on everything. Then I hear from a very large seller, very successful seller, just two days ago that their inventory limit has been cut to 1/3rd (of what it is presently).

Yeah, one side, Amazon is ready to take on everything you’ve got, and the second side is the people that are in need of that inventory today don’t have that. So Amazon has different teams working. You really can’t believe one thing or the other, because they’re all just simply trying to get in the limelight. So, it’s a lot of confusion out there for sellers.

Neil Twa:

Yeah, there is definitely, because they said, “We’re going to do 5% of you only (whom they said they would reduce inventory for). We’re going to have to make some holiday changes, we got inventory issue.” Now if I just look at our group, our businesses and we come back, there was more than 5% of the people in our group who got that notification just within our group. So I’m like, “Well, I don’t think that was quite 5%.” I think they kind of just placated those numbers just a little bit.

So they killed it on one end by halving down the shelving space we had on one side of the house, and then they’d say, “Hey, well, we got this new Amazon warehouse distribution (AWD) thing, and you could have unlimited storage over here all of a sudden.” It’s kind of like, “Well, I mean, were you playing the shifting shelves game here?” What do you think is going on?

Manish Chowdhary:

Well, I mean, again, Amazon is a very large company. There are different product owners, each one has their own agenda, so they may have gotten certain amount of space allocated. There’s also Amazon launched Buy with Prime service that is probably also run by a separate group, that they’re ready to take on order fulfillment for Shopify merchants or just about anyone.

So, it is very unnerving if you are a seller like yourself or people in your group, that if you see your inventory limits cut down, what confidence, what trust would you have in other services? So one thing that we at Cahoot like to educate our sellers or give them advice on is that you’ve got to have a backup, and it cannot be Amazon.

Amazon cannot be Amazon’s backup. You’ve got to have an independent third party that has your interest in mind, that is going to help you navigate the turbulent Amazon waters, and that’s not going to end anytime soon. It’s not a Q4 issue, it’s not a Q1 issue.

As long as you play in the Amazon ecosystem, that will continue to remain a challenge no matter how large, how many services they roll out.

Neil Twa:

Yeah, it’s a very valid point, and I love the way you speak Manish, because you’re a very pragmatic guy. I can tell in the way you look at these things. Because obviously with adding the Buy with Prime button, it’s added on a whole additional line of sellers from Shopify and other stuff, which I don’t know if they were aware maybe of what that would do. I know a lot of people have suddenly implemented that. I know for sure they’re going to take over a lot of Shopify’s opportunity for marketplace delivery they were trying to bring up.

Manish Chowdhary:

Well, but Shopify just came out last week I think, and banned it. So Shopify has publicly gone on record to say that installing the Buy with Prime button is against Shopify’s terms of service. So there you have it. Shopify wants to ban Buy with Prime, Buy with Prime wants to get on Shopify. Nobody wants to take FBA forwarding. It’s a big challenge if you’re a seller, you just cannot be beholden to any platform centric order fulfillment option.

Neil Twa:

And there it is. So we talk about pros and cons, and we’re very open about both of those things with Amazon, we don’t want people to be Amazon channel locked. So you need to move a brand beyond Amazon if you start there and incubate it or if you’re off Amazon, obviously you need the combination of the multi-channel aspect really for E-comm today. But like you said, you can’t put all your eggs in one basket, and as soon as you have the opportunity to split out profits, you should move another channel, another opportunity. I didn’t actually hear that update on Shopify, so that’s interesting news. I can see why they would do it. The marketplace is getting extremely competitive, and that opportunity was going to cut into their delivery systems, they were trying to ramp up.

Manish Chowdhary:

Well, it’s not even delivery system. It cuts into the heart of their revenue.

Neil Twa:

Well, for sure, for sure. I mean, you can see why we do these kinds of things and have these kind of conversations. If you’re out here just trying to flounder around on your own. For us, having the experience levels we do, and you too it’s even confusing at times to try to rationalize this stuff in the middle of all the experience we have versus people who are just trying to get going. So if you’re new and you’re just like, “Okay, I got an Amazon channel, I don’t necessarily have a 3PL yet, or I’m looking to get one.” What are the top three things you want people to know when they’re looking for a 3PL company that they should consider? What are the things they should know about it?

Manish Chowdhary:

First and foremost, I think it’s very important to make data-driven decisions. A lot of sellers just simply reach out to 3PLs and we get many of those inquiries. “Give me a price rate card.” Most 3PLs specialize in something. Not everyone specializes in everything. There’s micro – What we call mom-and-pop 3PLs. These are one location, two location, 3PLs, and then there are chains, and then you have networks like Cahoot. So it’s very important for the 3PLs to understand what kind of products are they going to deal with, what’s the inbound and outbound frequency, what kind of services you’re expecting, what is most important to you if you’re simply looking for an FBA forwarding service, or are you looking for DTC fulfillment? What kind of products, because there’s the shipping cost.

I’ll give you a very simple example. You can get dirt cheap order fulfillment, let’s just say even in the hottest market, Southern California, let’s say dirt cheap storage. But if most of your orders are going to New York or the East Coast, you are going to pay Zone 8 shipping prices for moving that item from California to New York on an individual basis. So net net, you actually will lose money even though you thought you got a great deal. Those things are very important. If this 3PL is going to take one or two days extra to ship from a lead time or if they’re going to use downgraded services, that will take longer for the consumer to receive. All of those things are very important to understand upfront as to what are you trying to solve for. And that is one thing that is very important. At least at Cahoot, we don’t blindly hand our pricing because we don’t know if we are going to be the best fit and only information and data tells us whether we are going to be the right fit.

So I would encourage sellers to really think about – how many SKUs? What kind of orders are you fulfilling? The count of orders? Let’s do averages over the last six to 12 months to make sure what’s the typical inventory storage requirement? How long do you store that inventory for? And having all that information and what the shipping cost is going to be, because many 3PLs do not do that. They charge the shipping cost, so you could lose a lot of money on that front. And how does it compare to FBA trying to make any comparison with FBA? So you know exactly for what products you’re going to come out ahead, what products are going to cost more. Because we going to admit FBA is very competitive for Small and Light, very attractive. So anybody who tells you they’re going to beat FBA prices across the board, they’re most likely lying.

Neil Twa:

Yeah. Because of this infrastructure, their multi-channel services usually can win to some degree. You just have to look at it from a strategic perspective and not the lowest race to the bottom pricing. Because I know that’s what happens to a lot of those people with rate cards is they’re selling $10, $12 products and they’ve got razor thin margins and it’s hard to beat Amazon’s FBA pricing at that level because they’re already at razor thin and Amazon’s trying to beat all the competition for pricing. So you got to be smart about your numbers. And usually people who are just asking for rate cards don’t really know what their numbers are. And they may not even know what Zone 8 means if they’re listening to this. But guys by the way, that’s the farthest distance from one location to another at shipping costs.

If you’ve ever tried to ship something and like US Postal Service go down and look, they have a Zone card and you’ll notice some of the locations are some of the farthest away, and you got to be smart about where your sales are coming from. If you’re on DTC, it’s a little easier. You can do a quick analysis and see where’s the majority of my orders going to from people who are buying. On Amazon, you got to wait a little bit and figure out where Amazon’s distribution is sending all your products into which areas you’re getting the most sales from, which may take a little bit of time from the system. But obviously, Manish, you know your stuff. I mean, just listening to you for the last five minutes. You clearly understand this. What is your background in this business model?

Manish Chowdhary:

So I was involved with building the e-commerce platform before the word e-commerce platform was invented. This is going back to early 2000. I was involved with building one of the first Turnkey Shopping Cart Software long before Shopify existed. Magento wasn’t on the market at that time. So built a very successful Shopping Cart Software, Turnkey e-commerce platform as we see now. So I’ve seen e-commerce evolve from its infancy. And then went on to build another similar product, but it’s a full service mid market e-commerce order management system, inventory management system. So I’ve been dealing with online retailers, technologies God, for 22 plus years. So I’ve seen everything and just about anything. I’ve got deep experience with now logistics. I’ve got 10 US patents on business process, orchestration and collaboration. So a lot of experience in anything and everything to do with e-commerce and operations.

Neil Twa:

Yeah, no, that’s a very historic background. I mean, back to 2000, is post dot-com bubble. Did you get out of the bubble somehow into this or did you ride that out okay or what happened there?

Manish Chowdhary:

Yeah, I mean, I think we did phenomenally well because that was the time when e-commerce was just taking off. And I think some of the large, the eToys of the world, they pretty much laid the foundation for the SMBs. SMBs were getting on for the very first time, just like the pandemic did, brought in a ton of people who started to sell online. But in this case, there were businesses that were offline, the brick-and-mortar that suddenly saw themselves as an opportunity to sell online. And this is actually, I think this was before Amazon opened itself up as a marketplace. Amazon marketplace did not exist. Yahoo Shopping used to be the marketplace. May or may not remember that.

Neil Twa:

No, I do. But the eToys thing is taking me back in my brain for a second. I haven’t heard eToys in a long time.

Manish Chowdhary:

Yeah, so those were the early days. So I’ve seen the evolution of that. So I mean every time there’s a crisis as they say, or there’s a challenge, there’s an opportunity. I mean, right now we are going through some historic black swan event with the pandemic and so on, but I think there’s some great businesses that are going to emerge out of this. I mean, yes, for my own business, which is Cahoot, it’s an innovative peer-to-peer order fulfillment services network. For the very first time, if you are a merchant who has a warehouse, you have an opportunity to make money if you have excess space in your warehouse. This is something that did not exist. Similar to what Uber and Airbnb did in 2008 when the financial crisis hit. All of a sudden people were without jobs. So they were going and signing up to become drivers for Uber, which allowed Uber to offer low prices for short-term transportation, which really helped them take off.

Similarly, Airbnb also emerged during that time when people were trying to save on short-term stays. They don’t want to pay large, heavy amounts to the Hiltons and the Marriott’s of the world, and there was a great opportunity for them to monetize their spare bedroom. And so Cahoot is doing something very similar in the order fulfillment and logistics space. So if you have a warehouse and you have your act together and you’ve got spare capacity, for the very first time you can come to Cahoot, join our network and apply to become an order fulfillment partner and make some money.

Neil Twa:

So peer-to-peer order fulfillment services network, that’s new, that’s very innovative.

Manish Chowdhary:

Thank you. Thank you.

Neil Twa:

Yeah. Obviously your innovations and patents and other things have led you to some really new concepts. Where do you see that moving in the next year with some of the challenges around order fulfillment, longer shipping times? Where do you see that going?

Manish Chowdhary:

Yeah, I mean, I think that the order fulfillment companies should be embracing what I call merchant inclusive fulfillment. If you think about a merchant’s needs, a merchant wants to bring in inventory, whether it’s domestically or international. The inventory is going to come into one of the bigger ports. There are some of the less popular ports that I recommend right now. If you’re having trouble getting inventory to Long Beach or Oakland at New York, New Jersey, you can look into Charleston, you can look into Miami, you can look into some of the other ports that are less congested. I mean, I think merchants want a single provider that can handle their B2B, that they can stage their inventory and then drip it to FBA as needed for the items that make sense. They can do the order fulfillment for other channels, Shopify, Walmart, others, I know Walmart launched its Walmart fulfillment services.

Lot of sellers are not super excited about that. They still find that to be in early stages and infancy in its technology evolution. People are going and rushing to build new warehouses. But we believe that there are 2 million merchants in the US. Many of them do order fulfillment on their own, that there’s plenty of capacity available, just like how Airbnb helped unlock millions of rooms as opposed to going out and building new hotels in an already crowded space. When somebody builds a very expensive warehouse, they’re going to charge you something very expensive for their services because they got to recover their expenses. So Cahoot is very unique in that way to leverage existing assets so that we can get higher utilization for what already exists.

Neil Twa:

Fantastic man. And if I’m not wrong, it’s cahoot.ai, is that correct?

Manish Chowdhary:

Cahoot.ai, yes.

Neil Twa:

Okay. And when they show up, what should they expect to give you to get the right information necessary? And we’re talking about sellers who are already in the marketplace in one capacity channel or another, but we’re also talking about those who have additional warehouse space, maybe even other 3PLs who might want to utilize that space, if I’m hearing you correctly, can connect with you as well. Is that right?

Manish Chowdhary:

That’s right. We have two parts of our network. The sellers that are looking to outsource order fulfillment, they can come to Cahoot. If you have a great deal, come out to Cahoot, let us reconfirm that you still have a great deal, no harm done. It’s something to be aware of. Or if you have one location, you want to add a second location because you’re getting orders from nationwide. We have the technology, the software that can make that happen seamlessly. And if you’re super happy with your existing provider, we are not looking to replace them or displace them. That’s just not the way how Cahoot operates. We would invite them to come join the Cahoot network so they can participate and they can stay part of it. Because if you have got a good thing going, we know we have the technology to glue it all together.

And on the supply side, if you are a warehouse that has excess capacity that you want to monetize, then you come join and apply to become an order fulfillment partner. And we invite 3PLs as well to come join as a fulfillment partner. Because let’s face it, let’s say you are an East Coast based 3PL, your customers, your merchants are demanding a location on the West coast. So rather than losing that client entirely, you can come and partner with somebody so you can keep that client and meet that client’s needs. Because if you choose to ignore that client’s needs, because to your point, Neil, Zone 8 shipping from New York to California Zone 8, that’s very expensive however you slice it. And even if your fulfillment providers rates are the cheapest, you are still going to come out in the red because shipping orders cross-country has two problems, higher shipping cost, and longer transit time.

It takes five days for the item to be delivered, sometimes could be up to six, seven days. So we invite both 3PLs and warehouses of capacity to come check us out, apply to become an order fulfillment partner, and for the sellers to look out and find a merchant inclusive fulfillment solution. You got to have a backup. And I’m talking about the seller, Neil, that I spoke with last week. Sellers in the Amazon space – they are plugged in, they’re super smart, you would know them, even they don’t have a backup. And it’s appalling to me that how can you put all the eggs in one basket?

Neil Twa:

Once you get to be a certain size – Risk management needs to be a big part of your operational component. I would be surprised that they didn’t have some of that in place, but I’m sure they could help you. You’re obviously got an innovative, unique idea for both seller and 3PL. And folks, if you’re listening to this, I would encourage you to check it out. The link will be in the show notes, go to cahoot.ai, check out what Manish is doing. Obviously, you can hear he’s a super smart guy who’s figured something out that’s really cool. It will benefit both you and the 3PL provider you might be using at this point. Guys, I would encourage you to go check it out and take a look at that if both, again, you’re a seller and a 3PL. Manish, any other final words of wisdom you want to leave on us today?

Manish Chowdhary:

Thank you, Neil. I mean, there’s one more thing in the words of Steve Jobs.

Cahoot has the industry-leading shipping software. So if you are not ready to outsource fulfillment and you have a warehouse, you do order fulfillment or shipping yourself, Cahoot can save you a lot of time in rate shopping. We did a side-by-side comparison between ShipStation and Cahoot, which is a leading product on the market. And of course, as they say, Cahoot came out 21 times faster, that’s just the technology that Cahoot has built that reduces human error. It reduces a human trying to compare UPS, FedEx, USPS rates, figuring out which one to pick. And rather than doing it one order at a time or applying any kind of crude rules, Cahoot’s technology automates all of it. So if you want many hours back in your day, and I kid you not, we have a client that was spending four hours on a Sunday away from their family printing labels so that they could ship those orders out on Monday and they could not fulfill Monday’s orders until Tuesday because they just did not have the capacity.

And so there’s some unique technology even on the shipping software front. If you can save three hours, four hours of labor a day that’s money back in your pocket to do some other things that are more revenue producing.

Neil Twa:

Very smart and interesting angle on that. Definitely. So a shipping station comparison is a very good analogy for what your software does and obviously it’s very powerful. We may have to check that out ourselves, for some of the projects we’re working on. Thanks for bringing that up, man. I appreciate your time today, sir.

Manish Chowdhary:

Thank you. Neil, anything else you’d like to cover?

Neil Twa:

Look, that’s good for me at this point, unless you have something else you would like us to know.

Manish Chowdhary:

No, I mean, I think just merchants should be aware that Amazon FBA has added peak fulfillment surcharge of 6 to 8% for the very first time. That’s I think getting rolled out on October 15th. That’s a fourth increase in FBA fees this year. I think in the first quarter they revamped the Small and Light pricing. April 28th they added 5% inflation surcharge. And then of course the storage triples in Q4, as you know. So I would encourage sellers to go check out their bills and to make sure that nothing in the Amazon FBA world remains as is. So be mindful of that as you’re calculating your profitability, how much you’re allocating to your advertising, return on advertising spend and all that good stuff. And some other big news, I mean, Pharmapacks the number one Amazon seller going out of business –

Neil Twa:

Yeah. Their margins were too thin. And I was just going to cover a little bit of that actually, because on the antithesis side of that, one of the third largest native acquisitions just occurred for a cosmetics company in a $630 million acquisition. So on the other side, you got to look at the differences between the two. Why did one go out of business, and why did one have such a tremendous exit? And then how to deal with the rising costs of obviously inflation or fees, obviously, as you mentioned are going up.

And that’s a good topic because I mean, you got to look at the value of the brand and the value of the products you’re putting into it. That’s one of the things we always drive out here. If you’re going to sell something for $30 or less on Amazon, you better have a very high margin on it or not sell anything less than $30, or you’re going to run into these kinds of really razor thinned margins where you might be making it great or it cost is good, and the product is growing, but all of a sudden that 5% surcharge or changes at this fourth quarter of the year slice your margins down to a dollar in profit, which is really no for a business model.

So we want to encourage everybody on the back of that to remember, keep your product profitability above $10, if not higher to $15 in that profit per unit for your products. If you can’t achieve that on your products currently, you need to get products in the market that will do that. That will raise with price, can raise retail price against inflation and market hedges or of course increasing costs and operations and logistics as we just spoke about, won’t impact you as greatly. Yes, they’ll impact you, but it won’t be devastating. And I know there’s a lot of sellers in the market right now that are going to face that coming into fourth quarter.

As you mentioned earlier, there’s opportunity in everything. For some of us, there’s going to be great opportunity priced correctly and in the profit margins we need, whose fourth quarter this year is going to be great. But I think there’re going to be a lot of sellers who are coming off of a COVID bump who still haven’t right sized their metrics or expectations and rising cost of inflations are going to hurt them in this coming quarter. And many of them may not be able to make it through the end of the fourth quarter, even though they should be doing really well.

Manish Chowdhary:

Right. And business metrics have changed. I mean, if you’re looking to get acquired, that brings massive challenges of its own. Profitability is going to be key. The other advice that we are giving sellers is don’t wait for the last minute. Holiday shopping is going to happen earlier. There’s of course, a lot of talk about a second Prime Day. I mean, just think about it, why is Amazon considering a second Prime Day? It is because they want to push holiday forward. They want to push spending forward because they’ve got tons of excess inventory. We’ve heard from Walmart, lots of inventory challenges, aggressive discounting happening at Target. Their profit plummeted 89.9% year on year.

Neil Twa:

Yeah. Target is taking big hit, no doubt.

Yeah. And you mentioned Walmart – literally yesterday, I saw an article that said Walmart removed some of the major restrictions. It was making it very difficult for third party sellers to get approved on their platform. And in one day they had the largest spike in signups they’ve had to date since they opened the Walmart ecommerce platform. Because now you can actually get over there and open up your business, which is your name and your business in a few other details now. Whereas before it was highly restrictive. So there may be some additional opportunity for folks looking at Walmart because it has a market potential opportunity.

But you’re right, there are others that they’re suffering for a lot of different reasons. You bring up Target, but Target’s isn’t just operational or profitability. They’ve got other geo and political problems hitting them due to some policies and stuff that affected them, I believe. Just look at the market and the trends, and you can see what I’m talking about. But in terms of market share and stuff, the latest studies show that the even Walmart and Target combined still don’t make up Amazon’s 38% of market share. So if you’re going to play in the market, go with the juggernaut. Right?

Manish Chowdhary:

Certainly, certainly, but also diversify because if you’re successful at one marketplace, you want to dip your toe in the other.

Neil Twa:

Yeah, hints the Walmart point. You can get into Walmart a lot easier now due to those restrictions being lifted. Yep. So you should definitely consider it.

Manish Chowdhary:

That’s right. That’s right.

Neil Twa:

Yeah. Manish, thank you so much for your time, sir.

Manish Chowdhary:

Neil, thank you again for having me and pleasure speaking to your audience and if I can be of any help, please go check us out at www.cahoot.ai.

Neil Twa:

If you like this episode, please share it with people you think will enjoy it as well. Thank you for listening and be sure to tune in next week for a brand new episode of High Voltage Business Builders.

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Beauty Fulfillment & Cosmetics Services 3PL

Despite difficulties for brick-and-mortar retailers during the height of the Covid-19 pandemic, the industry is thriving online. According to a McKinsey report, the market for beauty products is expected to reach $580 billion in 2027, up from $430 billion in 2022, with that growth coming almost entirely from the online market. In fact, it’s growing more quickly than the overall ecommerce market, showing great promise as a place where sellers can earn big returns if they get things right.

That being said, getting things right in beauty products fulfillment is no easy task. From climate controls to hazardous goods to high damage rates, cosmetics (and other beauty products) present significant challenges.

In this article, we’ll provide an inside look into what you need to look for in a 3PL warehouse that will support your profitable growth as a Health & Beauty seller.

What is Cosmetics Fulfillment?

Cosmetics fulfillment refers to the process of storing, managing, and shipping beauty and cosmetics products to customers. This critical aspect of the beauty industry encompasses a range of services, including receiving and storing inventory, processing orders, picking and packing products, and shipping them to customers. Effective cosmetics fulfillment is essential for maintaining customer satisfaction and fostering brand loyalty. In an industry where product quality and timely delivery are paramount, a well-executed fulfillment process ensures that beauty and cosmetics products reach customers in perfect condition, enhancing their overall experience and trust in the brand.

Definition of Cosmetics Fulfillment Services

Cosmetics fulfillment services are specialized logistics solutions tailored to meet the unique needs of beauty and cosmetics products. These services typically include:

Climate-Controlled Storage: Ensuring that products are stored in optimal conditions to maintain their quality and freshness.
Secure Packaging: Using robust packaging methods to prevent damage and leakage during transit.
Expedited Shipping: Offering fast shipping options to meet customer expectations for timely delivery.
Inventory Management: Implementing precise tracking and timely restocking to ensure product availability.
Order Fulfillment: Efficiently processing and shipping orders to customers.

These services are designed to handle the specific requirements of beauty and cosmetics products, ensuring that they arrive in perfect condition and delight customers.

Importance of Efficient Fulfillment in the Beauty Industry

Efficient fulfillment is crucial in the beauty industry, as it directly impacts customer satisfaction and brand loyalty. Beauty brands that can deliver high-quality products quickly and efficiently are more likely to build trust and loyalty with their customers. In contrast, delayed or damaged shipments can lead to negative reviews and lost sales. By prioritizing efficient fulfillment, beauty brands can enhance their reputation, increase customer satisfaction, and foster long-term brand loyalty.

Benefits of Outsourcing Cosmetics Fulfillment

Outsourcing cosmetics fulfillment can bring numerous benefits to beauty brands, including:

Cost Savings: Outsourcing fulfillment can help reduce labor and overhead costs associated with managing inventory and shipping products.
Increased Efficiency: Specialized fulfillment providers can process orders and ship products more quickly and accurately than in-house teams.
Scalability: Outsourcing fulfillment allows beauty brands to scale their business more easily, without having to invest in additional infrastructure and personnel.

By leveraging the expertise of specialized fulfillment providers, beauty brands can focus on their core business activities, such as product development and marketing, while ensuring that their logistics operations are handled efficiently and cost-effectively.

Scalable Services to Support Business Growth

Scalable fulfillment services are designed to support business growth by providing flexible and adaptable solutions that can adjust to changing demands. These services typically include:

Flexible Inventory Management: Accommodating fluctuating demand to ensure product availability.
Adjustable Shipping Options: Meeting changing customer expectations with a variety of shipping choices.
Real-Time Tracking and Reporting: Monitoring inventory levels and shipping status to maintain transparency and control.
Customized Packaging and Labeling: Enhancing brand image and customer experience with tailored packaging solutions.
Reverse Logistics Handling: Facilitating a seamless returns process to minimize waste and optimize the consumer experience.

By outsourcing cosmetics fulfillment to a specialized provider, beauty brands can focus on their core business and leave the logistics to the experts. This can help improve customer satisfaction, increase brand loyalty, and drive business growth.

What You Need From Your Cosmetics 3PL

While there are many similarities between fulfilling online orders for Health & Beauty products and general consumer packaged goods, beauty products have special needs that many 3PL warehouses aren’t equipped to handle.

In this section, we’ll break down the added requirements that 3PLs need to excel in providing excellent beauty product order fulfillment.

Climate Controls For Beauty Product Fulfillment

One of the most important considerations when choosing an order fulfillment company is the type of climate conditions that your products will require. Certain types of cosmetics become damaged when they are stored in conditions that are too hot, cold, wet, or dry. Lipstick, some blushes, mascaras, cream-based shadows, and more can all melt when exposed to warm temperatures. Once these products reach a certain temperature, their consistency begins to change and may render the products unusable altogether.

Unfortunately, many 3PLs maintain warehouses at warmer temperatures in order to save money on air conditioning – which makes them too warm for cosmetics. And product loss in the warehouse isn’t even your biggest concern (though it’s enough to destroy an ecommerce business on its own). Even worse, your outsourced warehouse team likely won’t realize that products are damaged before they ship them out. 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 any 3PL warehouse that you choose is equipped to handle, store, and ship cosmetics 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 company whether they guarantee their warehouses at or close to room temperature. Since most cosmetics are designed to be stored in cool, dry conditions in a user’s vanity, they’re usually safe at 72 degrees. That being said, know your product! If it requires more precise heat regulation, then you need to be even more careful up-front with your 3PL.

Cahoot has a wide variety of temperature-controlled warehouses, perfect for storing sensitive goods such as cosmetics.

Hazardous Goods Storage & Handling

Certain beauty products also have special requirements when it comes to safety and proper handling. In particular, many fragrances can create unsafe conditions and require specific treatment in storage. Many contain ethyl alcohol, which is flammable and puts them in hazard class 3.

Many 3PL warehouses avoid goods in hazard categories, as they either don’t want to take on extra risk or don’t have proper certifications for handling dangerous goods. Make sure that you’re up-front with the order fulfillment partners about the hazard classes that your goods fall into, or you risk wasting precious time and money sending them inventory that they legally can’t take.

We know that it can be hard to find a warehouse that not only accepts hazard class goods, but is built specifically for them. Cahoot ecommerce order fulfillment has intentionally curated warehouses with different specialties, including handling dangerous goods. We can go above and beyond to enable sellers with goods that have special handling needs.

Careful Packaging for Safe 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.

In Health & Beauty – perhaps more so than in any other industry – a fantastic post-purchase customer experience is critical to building repeat rates. Unfortunately, it’s more difficult to safely ship glass and fragile bottles than it is to ship other goods. So, the industry that most needs to minimize damage rates often has the hardest time doing so.

Unfortunately, many 3PLs that claim they can handle cosmetics and other beauty products treat them like any other good when it comes time to package them for shipping. This is insufficient: fragile items need extra time and care during packing.

Cahoot uses a combination of intelligent packing software and responsive customer service to get 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. 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 cosmetics 3PL given the above additional needs. As we’ve seen, Beauty & Health products have more unique shipping and handling needs, so you need to be able to get in touch with your 3PL’s customer service team quickly to feel confident that they know how to excel with your products.

Look for a 3PL company that offers you a real person to work with your account and multiple ways to get in touch with them. If it’s a small issue, live chat will do. Thornier challenges, on the other hand, should be governed by a detailed ticket system. And, of course, you need a phone line for critical issues.

Cahoot clients 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 cosmetics 3PL.

Cahoot: The Best Cosmetics 3PL

Cahoot’s order fulfillment service network is built for the rigors of modern ecommerce. We’ll help you level the playing field with marketplaces and delight your customers with a stellar, Amazon-like delivery experience – no matter where you sell. We have pre-built integrations with major marketplaces, shopping carts, and ecommerce platforms to fuel your multi-channel growth.

Our innovative peer-to-peer model sets us apart by enabling us to offer low-cost, fast fulfillment by design. We recruit top-tier ecommerce merchants with their own warehouses to join our network as order fulfillment partners, and then our intelligent shipping software and control team keeps the whole system connected and running efficiently. Since we’re unlocking excess fulfillment capacity that was lying idle, we’re able to offer lower costs.

Critically for Health & Beauty sellers with the special handling needs we outlined above, we have a wide variety of merchants fulfilling for others as part of our network. Unlike other 3PLs 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 cosmetics 3PL.

If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We can’t wait to show you how beauty products order fulfillment was meant to be.

Frequently Asked Questions

How much do cosmetics and beauty fulfillment services cost?

Costs for cosmetics fulfillment vary, and depend on a number of factors. Package size and the specific packaging and storage requirements of a given product will influence fulfillment costs, whether fulfillment is handled in-house or utilizing 3PL services. Pricing for 3PLs will also depend on factors like order volume and the capacity and policies of the 3PL in question. For detailed, custom pricing options, it is best to engage directly with 3PLs to determine what solutions and savings they can provide.

What kinds of regulations govern cosmetics products in the United States?

While cosmetics products do not require approval from the Food and Drug Administration (FDA), they are regulated by that body. Ingredients, labeling, effective dates, and product warning labels are all regulated by the FDA. For information about regulations that may impact your products, consult the FDA website.

What factors should I consider when picking a 3PL partner for my cosmetics fulfillment?

Finding the best fulfillment partner for you requires balancing general and cosmetic-specific needs for your product. Pricing, specialized storage and packaging solutions, order volume, and available locations for fulfillment centers are all important considerations. To find out if Cahoot can help you optimize your fulfillment strategy, speak to a representative about our custom fulfillment solutions.

Written By:

Indy Pereira

Turn Returns Into New Revenue

Convert returns into second-chance sales and new customers, right from your store.

Top 3 Alternatives to Amazon FBA

It’s a great deal for those that can get it, but sellers need to be aware of rising FBA fees. It’s also limited in two key ways: 1) it’s an inflexible point solution and 2) Amazon simply doesn’t have enough space. And no wonder; Amazon adds about 3,700 new 3rd-party sellers a day, so FBA can’t keep up with demand. Amazon’s response is to limit FBA to work well only for the SKUs that maximize their profit (not the sellers’) and to impose restrictive inventory limits.

Sellers that want to grow both on and outside of Amazon will need an alternative to FBA to keep their growth engine humming. Read on to learn more about what to watch out for with Amazon FBA and your options for other ecommerce order fulfillment solutions.

Why You Can’t Rely on Just Amazon FBA

Amazon FBA will do a great job of fulfilling a portion of the volume of your small SKUs sold on Amazon, but it falls short otherwise.

Comparison between shipping items using FBA and ground shipping

image courtesy: Amazon FBA Revenue Calculator, DIY Shipping estimated using discounted shipping rates for Zone 4 Residential shipping

The above example is typical of Amazon FBA fees: their price for small and standard items beats other options, but even slightly oversized products like the example 5lb dog bed ends up costing almost double a merchant’s price shipping it on their own. The reason is simple – they’ve optimized their network for small, easy, and efficient products.

As a result, Amazon sellers that use FBA for their shipping are boxed in when it comes to growth, and they all compete with one another to sell the same small, cheaper items. If FBA is your only good option, you can’t profitably expand your product line to larger, less competitive options because fulfillment fees will eat up your margins, making a 3PL a necessary consideration. If you raise price to compensate, then you’ll lose to the savvy merchants who have diversified their fulfillment strategies and can get the product to the customer at half the price.

The challenges don’t end there for Amazon FBA. ecommerce’s year over year unprecedented boom in growth has delivered massive returns to Amazon and Amazon sellers, but it’s also left FBA bursting at the seams. To compensate, Amazon switched from ASIN-level inventory limits to product type inventory limits and overnight sellers saw their inventory limits cut by up to 65%.

The popularity of FBA leads to restrictions and limitations to the service

image courtesy: US Census Bureau, Marketplace Pulse, Cahoot interviews with merchants

On top of the lower limits, Amazon FBA is also experiencing receiving delays of up to three weeks. This creates a huge window of time in which a seller can run out of stock on a key item: even if the seller sent a timely replenishment, receiving delays can create the issue. In the peak selling season, this is an even bigger problem. Demand surges can easily run an item out of stock in a matter of days or even hours, triggering a death spiral in which a product loses its search rank, which lowers impressions and conversions, which in turn lowers inventory limit again.

It’s clear that Amazon FBA is no longer an all-in-one solution for Amazon sellers. It’s a point solution that can be an important part of a fulfillment strategy but needs to be augmented to cover for its flaws.

Evaluating Amazon FBA Order Fulfillment Alternatives

Amazon FBA’s structure tells a valuable, if simple lesson: the most cost-effective way to offer nationwide 1-day and 2-day delivery is to create a distributed fulfillment network that always has inventory near the end customer. This setup enables 1- and 2-day delivery with economic ground shipping; the best of both worlds.

To enjoy the same benefits of Amazon FBA’s network without the same drawbacks, sellers’ options generally fall into three main categories:

1. Open Multiple Fulfillment Centers Yourself

Merchants can take it upon themselves to open multiple US fulfillment centers, but today’s environment is extremely challenging. Warehouse space has never been more limited or expensive, and there are an incredible 400,000 open job positions for frontline ecommerce order fulfillment workers. On top of that, opening one’s own centers ties up significant capital and is risky – if a seller picks a sub-optimal location, or a location becomes sub-optimal as consumer preferences change, they’re stuck footing the bill.

2. Third-Party Logistics Companies (3PLs)

Another option is to outsource fulfillment to multiple 3PLs. These are generally smaller, independent companies not connected to any specific marketplace but 3PLs can offer comprehensive supply chain solutions. You will have to contract numerous 3PLs to get nationwide 1-day and 2-day coverage. Order routing across disparate 3PLs is complex and labor-intensive, so you may need to invest in expensive fulfillment software to make it more efficient. Fulfillment costs will vary between 3PLs, and not all of them can meet the strict SLAs needed to win the Buy Box on every marketplace, so be sure to use something like a 3PL request for proposal (RFP) template to get an apples to apples comparison.

3. Tech-enabled Fulfillment Network

A modern and affordable alternative to working with 3PLs is to use an ecommerce order fulfillment network. A tech-enabled fulfillment network upgrades the traditional 3PL model to cover the whole country. Merchants will send their inventory to multiple nodes in the network, and then the network’s software will automatically send parcels from the optimal location to the end customer, saving on shipping costs. In essence, these networks are “FBA-lite” – they have the same core functionality as FBA.

Definition of a Fulfillment Company

A fulfillment company is a third-party logistics (3PL) provider that specializes in managing the entire order fulfillment process for ecommerce businesses. They handle tasks such as inventory management, warehousing, order processing, packaging, and shipping. By outsourcing these logistics services, commerce businesses can focus on their core operations, such as marketing and product development, while the fulfillment company ensures that orders are processed efficiently and accurately.

Benefits of a Fulfillment Company in Ecommerce

In the ecommerce landscape, a fulfillment company plays a crucial role in providing efficient and cost-effective order fulfillment services to sellers. Acting as an extension of the ecommerce business, these companies manage logistics and supply chain operations, ensuring that customers receive their orders quickly and accurately. This allows ecommerce businesses to scale their operations without the burden of managing warehousing, packing, and shipping, ultimately enhancing customer satisfaction and operational efficiency.

Cahoot: Alternative to Amazon FBA

Cahoot is a robust FBA alternative, and it works just as well as a backup or enhancement of FBA as it does as a full replacement. And Cahoot’s much more than that; it’s the most flexible solution in the marketplace and can ship orders for every ecommerce sales channel.

Cahoot is the next generation of tech-enabled fulfillment networks. Unlike other networks that are collections of 3PLs, Cahoot’s innovative approach unlocks and empowers merchants across the country to fulfill orders for one another. Our peer-to-peer network is a collective of highly vetted ecommerce retailers who offer up excess warehouse space and resources to provide high-quality order fulfillment to other merchants.

As a result, costs are lower than what you get with a traditional 3PL fulfillment company, and service levels are higher. With a P2P network, multi-channel fulfillment with nationwide 1-day and 2-day delivery is the norm. Merchants can use the network solely for outsourced fulfillment, similar to FBA, or they can choose to fulfill orders for other merchants and offset some of their own outsourced fulfillment costs.

Frequently Asked Questions

What are the costs for FBA?

The main costs associated with Amazon FBA are fulfillment fees, storage fees (including aged inventory surcharges), and any extra charges for removal or disposal of inventory, inventory prep such as barcoding, placement fees, inbound defect fees, and possibly others. Make sure to factor these into your pricing strategy!

What is a 3PL?

A third-party logistics company (3PL) is a service provider that either arranges or handles a variety of supply chain functions for a business. These functions can include brokering, shipping, storing, or packing a company’s freight, as well as supply chain strategy and access to technology.

Is 3PL pricing more transparent?

3PL providers ensure transparent pricing by offering customizable logistics solutions and engaging in contract negotiations, which allows for clear and flexible pricing options. This way, you know exactly what you’re paying for and can budget accordingly.

Written By:

Indy Pereira

Turn Returns Into New Revenue

Convert returns into second-chance sales and new customers, right from your store.

How To Choose The Best Macy’s 3PL For Your Orders

Understanding 3PL and Macy’s Fulfillment Needs
Why is The Macy’s Vendor Direct Program Great For Sellers
What Should You Look For in Macy’s Fulfillment Services
Experience Working With Macy’s Sellers
The Role of Logistics in Customer Satisfaction
Top Macy’s 3PL Companies
Cahoot: The Best Macy’s 3PL
Summary
Frequently Asked Questions

The best ecommerce brands and Sellers are constantly looking for new sales channels to expand their footprint. Most people think of Macy’s and its sister brand Bloomingdale’s as retailers that are heavily focused on their brick-and-mortar stores and trail well behind the likes of Amazon in ecommerce. Therefore, they are likely not the first names that come to a merchant’s mind when they consider expanding beyond Amazon. However, in recent years, Macy’s has begun to catch on to the surge in ecommerce and realizes that it represents an opportunity through which it can boost sales and revive stalling growth.

In 2022, Macy’s reported it had around 45 million active shoppers, of which 29.1 million were Star Rewards members – a sizable audience for an online seller to target. In a bid to increase the product mix that it offers, the company launched its online third-party marketplace in late 2022. Unlike Amazon’s marketplace, where nearly anyone can start selling, Macy’s platform is curated. Macy’s platform facilitates ecommerce opportunities for vendors by allowing them to manage their inventory effectively and optimize their fulfillment processes. This could be done to ensure they serve their customers with the brands and products they think will most appeal to them. If you’re reading this, it probably means you’ve been selected by them to feature your assortment – congratulations!

One of the key benefits of this 3rd Party Marketplace is its Vendor Direct Program – which allows merchants to receive orders that customers place on Macy’s website, and fulfill those orders on their own. This offers significant advantages for a couple of reasons.

Understanding 3PL and Macy’s Fulfillment Needs

What Is Third-Party Logistics (3PL)?

Third-party logistics (3PL) refers to the outsourcing of various logistics and supply chain functions to an external service provider. This can include services such as warehousing, transportation, inventory management, and order fulfillment. By leveraging the expertise and infrastructure of a 3PL provider, Macy’s vendors can delegate critical components like warehousing and order fulfillment, allowing them to focus on their core business. In essence, third-party logistics providers take on the heavy lifting of logistics, enabling Macy’s vendors to concentrate on what they do best – creating and selling great products.

Benefits of Outsourcing Macy’s Order Fulfillment

Outsourcing Macy’s order fulfillment can bring numerous benefits, including improved operational efficiency, increased customer satisfaction, and cost savings. By partnering with a 3PL provider, Macy’s vendors can tap into their expertise and technology, ensuring seamless integration with the Macy’s platform and efficient order processing. This means that orders are processed quickly and accurately, reducing the likelihood of errors and delays. Additionally, 3PL providers offer flexible and scalable fulfillment services, allowing Macy’s vendors to adapt to changing market demands and customer preferences. This flexibility is crucial in today’s fast-paced retail environment, where customer expectations are constantly shifting. By outsourcing fulfillment services, Macy’s vendors can ensure that they are always ready to meet these expectations, leading to higher customer satisfaction and loyalty.

Why is The Macy’s Vendor Direct Program Great For Sellers?

Simplified Inventory Management

As Macy’s allows Sellers to fulfill their orders independently, you do not need to send some of your inventory to a Macy’s warehouse. This is a welcome relief for Sellers who might already have sent some inventory to Fulfilled By Amazon (FBA) or Walmart Fulfillment Services (WFS), and are overwhelmed by keeping track of all these different marketplace-specific order fulfillment solutions. Macy’s allows you to manage your order fulfillment entirely on your own, just like you might be doing for your Shopify storefront, for example. This ensures that you don’t have to work with another logistics solution that is specific to a single sales channel.

Whatever The Logistics Setup, Everyone Has a Fair Chance

Amazon’s A10 algorithm for search rankings, as well as the Buy Box algorithm, both assign high preference to listings that are fulfilled by the company’s in-house FBA logistics network. Additionally, when delays or issues occur with FBA, Amazon faces no penalties – whereas Sellers fulfilling their own orders face severe penalties if they or the carriers they rely on make a mistake, including having their product listings suspended. With Macy’s, there is no such competing network that stacks the odds against you – everyone competes equally, and the brands with the best products who achieve the highest order fulfillment excellence will win.

While all this offers Sellers and their businesses operational and strategic advantages, the program still has high expectations from participating brands. Your choice of a 3rd Party Logistics Provider is a crucial factor in determining your success, and there are a few key factors to consider.

What Should You Look For in Macy’s Fulfillment Services?

Full Compliance With Macy’s Vendor Direct Fulfillment (VDF) Tech Stack

Macy’s requires that Sellers integrate with their platform via CommerceHub. Within 1 hour of a purchase order being made, Sellers must push acknowledgment to Macy’s via this integration. Also, the order must be shipped within 2 business days, and merchants must push confirmation that the order was fulfilled to Macy’s via this connection (with carrier tracking information). Your Macy’s 3PL fulfillment partner must be able to work with this configuration and ensure your orders are shipped on time. Collaborating with third-party logistics (3PL) providers allows you to streamline operations and improve customer satisfaction for Macy’s orders.

“Cahoot is very responsive and organized in all aspects. Everything is prepared to give anyone the best experience ever. They’re the right partner to help you accomplish your business purpose.”

~ Italian Food Online Store

Speak to a fulfillment expert

Flexibility to Work With Macy’s Carrier Accounts

Macy’s will provide you with a UPS account which must be used exclusively for fulfilling VDF orders. Your 3PL partner must be able to have the flexibility and agility in both their software and operations which supports Sellers bringing their own accounts.

Ultrafast Shipping

Macy’s requires that 98.5% of orders are shipped (leave the warehouse) in under 2 business days. However, the consumer expectation today is for fast, free shipping across every channel. Whether you operate from a single warehouse that you own or lease, or work with a traditional 3PL that only has 1 or 2 fulfillment centers, covering the entire country from a limited number of locations becomes extremely challenging. Additionally, with Macy’s carrier accounts, you can only pick from UPS SurePost or Ground services to fulfill orders. Imagine if your 3PL only has a California fulfillment center, but you have to ship orders to New York – customers will have to wait 4-5 business days to get their order in the era of ultrafast same or next-day delivery. With a platform like Cahoot, you can leverage a network of strategically located warehouses to place your inventory closer to your end customers and shorten delivery speeds.

Adherence to Macy’s Packing Requirements

The little things are often the most important; merchants are required to place a Macy’s branded packing slip inside every carton shipped to customers. You need a fulfillment partner that is fully aware of all these requirements and will sweat the details to ensure you are compliant with all aspects of the VDF program.

Responsive and Reliable Customer Support

As part of the VDF program, Macy’s audits and reviews the performance of Sellers in the program – any mistakes or errors that your 3PL commits directly affect your brand reputation, the Macy’s customer experience, and your ability to remain an approved vendor. It becomes essential to have a customer support team that is responsive and ready to quickly resolve any issues that you may run into.

Experience Working With Macy’s Sellers

As we mentioned before, Macy’s marketplace is curated – meaning that it’s exclusive and there are not a large number of brands or Sellers approved to participate, unlike Amazon. This therefore means there are a limited number of order fulfillment services out there that have experience working with merchants who are part of Macy Vendor Direct. Make sure to identify a company that has demonstrable social proof of its track record supporting Macy’s merchants. Here’s what one of our customers, Glo International, had to say about their experience shipping Macy’s orders with Cahoot:

“Cahoot allowed us to reduce the monthly shipping cost and the support service is really responsive and efficient!”

~ Glo International

Speak to a fulfillment expert

The Role of Logistics in Customer Satisfaction

Effective logistics and fulfillment processes are the central components to achieving success in the Macy’s marketplace. When customers place an order, they expect it to be delivered accurately and on time. Any delays or errors in the fulfillment process can lead to dissatisfaction and potentially harm the brand’s reputation and ability to continue in the VDF program. By working with a reliable 3PL provider, Macy’s vendors can ensure that their warehousing and order fulfillment processes are optimized for speed and accuracy, prioritizing early shipment and delivery wherever possible (what cahoot calls ‘preponing’, the opposite of postponing). A well-executed logistics strategy will not only meet but exceed your customer’s expectations, leading to repeat business and greater lifetime customer value.

Top Macy’s 3PL Companies

Amazon Multi-Channel Fulfillment

Amazon Multi-Channel Fulfillment (MCF) is Amazon’s outsourced fulfillment service for merchants selling on non-Amazon sales channels, such as Macy’s, whereby Amazon handles the picking, packing, and shipping of the orders coming from those sales channels. Ecommerce Sellers can store their inventory at Amazon’s warehouses, and MCF will fulfill the non-Amazon orders from select channels.

Pros:

Large fulfillment network – As of January 2022, Amazon operated over 1000 warehouses, with millions of square feet under its management.

Amazon fulfillment centers are well equipped to handle small, lightweight SKUs – MCF is a good option if your product mix is mostly in these categories.

Cons:

No direct integration with Macy’s / CommerceHub – you have to use an intermediate connector tool (middleware), or build the integration yourself.

For Macy’s, you cannot use Amazon Logistics to ship orders (you must use the UPS account they provide)

More expensive than FBA, despite using the same resources and logistics network. The reason is obvious – Amazon would like to ensure that its own marketplace is the top priority for every brand and seller.

ShipBob

ShipBob is a 3PL that focuses on serving ecommerce merchants. They have a nationwide network of order fulfillment centers that enable fast shipping, but they charge extra for guaranteed 2-day shipping. Built for ecommerce, they have an easy-to-use shipping software platform and a large set of pre-built integrations.

Pros:

Supports EDI integration for Macy’s

Nationwide network of fulfillment centers.

Cons:

Inconsistent customer support can prove to be a major issue as Macy’s penalizes Sellers for mistakes, not the 3PL.

Affordable for small and lightweight products but quickly gets pricey for others

Cahoot: The Best Macy’s 3PL

Cahoot’s order fulfillment network is built for the future of ecommerce. Our network of warehouses is strategically located at different locations in the US, enabling Macy’s merchants to offer ultrafast shipping. Our fulfillment centers are well equipped to handle all types of SKUs (including the ones that the typical Amazon fulfillment center may struggle to process) – small, lightweight, seasonal, slow-moving, heavy, and oversized.

We are also fully compliant with the Macy’s technology and packing requirements – and provide you the flexibility to use the Macy’s UPS account provided to you without any hidden fees. Lastly, our US-based customer service team is always available if something needs to be addressed, ensuring that sales are uninterrupted and that you enjoy a successful partnership with Macy’s.

		Traditional 3PL
Compliant with Macy VDF Tech Stack
Flexibility to use Macy’s UPS account
Ultrafast nationwide shipping
Great Customer Support

Cahoot is committed to helping Macy’s Sellers grow their businesses with fast and affordable ecommerce order fulfillment service.

Summary

Macy’s Vendor Direct (often called Macy’s Marketplace) is Macy’s curated third-party marketplace. Launched in Fall 2022 (powered by Mirakl), it allows external sellers to list on Macy’s website and ship directly to customers. Macy’s has aggressively grown this channel to fill assortment gaps without inventory risk. At launch (Sep 2022), the marketplace gave customers access to 400 brands across 20 categories, many new to Macy’s. A Mirakl case study notes that Macy’s “added 2,000+ brands” via the new marketplace, with digital marketplace sales spiking 145% quarter-over-quarter in FY 2023. By late 2023, Macy’s reported 2,300+ brands active on its platform (the effort continues under its “A Bold New Chapter” strategy). In mid-2023, Macy’s also opened a Bloomingdale’s Marketplace (a circuit of Macy’s higher-end brand), which onboarded ~120 sellers by year-end. The company continues to invest: expanding the marketplace assortment and even integrating some products into stores, demonstrating that its marketplace has become a major growth vector.

Macy’s marketplace is invite-only/approval-only. Sellers must be vetted for brand fit and logistical readiness. The program is similar to Nordstrom’s drop-ship (Macy’s calls it Vendor Direct Fulfillment), but uses a marketplace billing model: Macy’s pays sellers after the sale (minus commission). Notably, Macy’s includes marketplace items in its Star Rewards loyalty program, incentivizing customers to buy. Sellers get access to Macy’s marketing and promotional events once active.

Table 1. Summary of the Macy’s Vendor Direct Program Requirements

Requirement	Details
Fees	No setup or monthly fees. Commission: Varies by category, typically ~15% of the sale price.
Payment Terms	Paid twice-monthly (the 1st and 15th of each month) for approved invoices.
Application	Invite-only (curated). Macy’s onboards sellers through its merchant recruitment team. Prospective sellers must meet strict brand/quality standards; selling unrelated or low-end items is unlikely to be approved.
Integration	Mirakl marketplace platform (via Mirakl Connect or a ChannelEngine-like partner) for catalog, plus EDI (CommerceHub) for orders/invoices. (Macy’s requires an EDI* or CommerceHub connection for order fulfillment.) Sellers must use a U.S. return address and handle all sales tax/W-9 requirements.
Shipping SLA	Ship complete orders within 2 business days of receiving the Macy’s PO. (Vendors must cancel any order not shipped by day 2.) Failing to ship/cancel on time can lead to cancellation. Macy’s provides a prepaid UPS account; vendors must bill all shipments to Macy’s UPS account (Ground Saver). Third-party or incorrect accounts can cause expense offsets.
Return Handling	Vendors accept returns directly from customers. If a customer returns an item (mail or store), the vendor must confirm receipt/return to Macy’s within 2 business days. Macy’s then credits the customer (vendors are debited the order amount). Defective or wrong-item returns may be sent directly back to the vendor (with a charge-back). Vendors must pay for return shipping.
Other Expectations	All shipments must include Macy’s-branded packing lists and reference numbers. Vendors must not substitute items (strict item match). Orders must ship with no aftermarket UPCs and weigh under 150 lbs. Vendors must comply with Macy’s cost-change and invoice protocols (provide Macy’s PO number on invoices). Performance is monitored monthly against on-time shipping and cancellation benchmarks; failing vendors may be suspended.

Invitation and Onboarding Process

Macy’s invites vendors through merchant outreach. There is no public signup form; interested sellers typically contact the Macy’s merchant team or go through a partner (e.g., an ecommerce consultant). Once engaged, Macy’s provides the Vendor Direct Fulfillment (VDF) Agreement and technical specs. Onboarding involves setting up EDI/CommerceHub for receiving orders (Macy’s sends 850 POs) and sending ASNs (856) and invoices (810). Vendors must configure Macy’s UPS account (to bill Macy’s prepaid account) and submit W-9/tax info. Mirakl is used for catalog management; vendors upload product data with Macy’s taxonomy and await SKU approval. Initial authorization is granular by category; most sellers start with a few core categories. In practice, onboarding took a few months for initial sellers: a Deloitte report noted that at launch, Macy’s marketplace offered 400 brands in 20 categories (including eight new-to-Macy’s categories). After system setup and trial orders (Macy’s often does sample orders), the vendor goes live and begins shipping real customer orders.

Common Fulfillment Pitfalls

Even established vendors can struggle with Macy’s strict requirements. Common errors include late shipments and poor PO/invoice handling. For example, if a vendor does not ship (or cancels) within 2 days, Macy’s sends a late notice and may cancel the order if unaddressed. Some vendors incur expense offsets by accidentally using a non-Macy’s UPS account. Another frequent mistake is improper labeling: every carton must contain Macy’s-branded packing slips with both order and shipment numbers; failure to include these details complicates tracking and delays payment. Returns also cause issues: vendors sometimes forget to confirm returns within 2 days, delaying customer refunds.

Support Tip: Use a partner or software with built-in Macy’s compliance, such as Cahoot. A CommerceHub or Mirakl integration will automatically generate correct packing slips and transmit PO/ASN. Establish a daily routine to check Macy’s order portal and email alerts (Macy’s sends automated notices if any EDI response is missing). Maintain inventory accuracy to avoid cancellations, and process returns quickly.

If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We can’t wait to show you how Macy’s order fulfillment was meant to be.

If you are selling on multiple sales channels and are interested in a 3PL that can help you with fulfillment, check out some of our other articles:

Frequently Asked Questions

What carrier does Macy’s use for shipping?

The company uses UPS and the U.S. Postal Service to deliver packages, in addition to DoorDash for same-day delivery.

What is 3PL in retail?

3PL stands for third-party logistics, also known as order fulfillment. A 3PL warehouse provides a full range of ecommerce fulfillment services, including storage, order processing, shipping, and receiving. Many 3PL warehouses provide value-added services such as returns processing, cross docking, or kitting.

How many distribution centers does Macy’s have?

Macy’s currently operates 25 fulfillment centers across the U.S. Most recently, the retailer opened a new 908,000-square-foot distribution center in Tomball, Texas in September 2023, before leasing a 272,000-square-foot facility in Lathrop, Calif. in January 2024.

What is Macy’s biggest competitor?

The main competitors of Macy’s include Dillard’s (DDS), Nordstrom (JWN), Kohl’s (KSS), JC Penney, Burlington Stores (BURL), and Target (TGT).

Written By:

Indy Pereira

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How To Choose The Best Nordstrom 3PL For Your Orders | Cahoot

Why is the Direct Drop Ship Program Great?
Understanding Nordstrom’s Requirements
What Should You Look for in a Nordstrom 3PL?
Benefits of Working with a 3PL
Responsive, Reliable Customer Support
Top Nordstrom 3PL Companies
Cahoot: The Best Nordstrom 3PL
Bringing Cherished Stories to Life
Summary
Frequently Asked Questions

Nordstrom is one of the most iconic department stores in the US. Nordstrom has over 9 million shoppers each year. For most people, the first thing that comes to mind when they think of Nordstrom are its brick and mortar stores. The company serves American customers through its over 350 locations. Most ecommerce sellers might therefore ignore the retailer in pursuit of players with a larger digital presence, such as Amazon or Walmart. However, online is becoming an increasingly important part of Nordstrom’s operations – according to Statista, each year since 2020 over 35%+ of Nordstrom’s annual sales were driven through digital channels.

Nordstrom’s Direct Drop Ship program is a way for sellers to access this large segment of shoppers. Through the program, sellers can feature their product assortment on Nordstrom’s website. When customers place orders on Nordstrom, merchants must pick, pack and ship the products either from their own warehouse, or through a 3rd Party Logistics Provider (3PL) to the customer.

Before we dive into how and why you can find this 3PL partner, it’s worth asking an important question – why is the program worth doing?

Why is the Direct Drop Ship Program Great?

Nordstrom’s Direct Drop Ship Program has several powerful benefits for participating sellers:

Invite-only Marketplace Where You Can Grow Sales

Nordstrom’s Direct Drop Ship program is currently invite only – like the 3rd party marketplaces at Macy’s and Target. Nordstrom may be doing this to simplify the product assortment customers see, making it easier for them to find things they really like. For sellers, this is great because it provides access to Nordstrom customers with much less competition compared to a sales channel like Amazon, where nearly anyone can sell.

Nordstrom Provides Full Assistance With EDI Integration

Nordstrom requires transmission of information between themselves and their sellers through Electronic Data Interchange (EDI). The company does this through a CommerceHub platform called DropShip Commerce (DSCO). Whenever purchase orders are received, Nordstrom will transmit the information via EDI to the seller. Similarly, sellers must pass updates from their side (acknowledgements of Purchase Orders, Advance Shipment Notifications with tracking information etc.) through the DSCO platform.

Some retailers require the seller to take care of configuring this technology on their dropshipping programs. Nordstrom provides both the platform and assistance in integrating it with their systems.

Nordstrom Covers All Shipping Costs

One of the great advantages of the program is that shipping fees are paid for by Nordstrom. While other elements of order fulfillment, such as packaging and storage fees are still the responsibility of the seller, shipping labels are a significant cost that Nordstrom takes off their shoulders.

Sellers must make sure that they use the UPS billing account that Nordstrom provides them – so long as merchants comply with this, they will be reimbursed shipping costs across a variety of services – including Ground, 3 Day Select, 2nd Day Air and Next Day Air Saver.

Understanding Nordstrom’s Requirements

Nordstrom has specific requirements for its trading partners, including EDI compliance, timely order fulfillment, and accurate inventory management. To ensure a smooth partnership, it’s essential to understand these requirements and implement them effectively.

Trading Partner Requirements

As a trading partner with Nordstrom, you’ll need to meet certain requirements, such as:

Timely Order Fulfillment: Nordstrom expects its trading partners to fulfill orders promptly and accurately, ensuring that customers receive their products on time. Meeting these expectations is crucial for maintaining customer satisfaction and upholding Nordstrom’s reputation for reliability.
Accurate Inventory Management: Trading partners must maintain accurate inventory levels to prevent stockouts and overstocking. Proper inventory management helps ensure that products are always available for purchase, which is vital for keeping customers happy and maintaining a smooth supply chain.
EDI Compliance: Nordstrom requires its trading partners to be EDI-capable, which involves exchanging electronic documents, such as purchase orders and invoices, in a standardized format. This ensures seamless communication and data exchange between Nordstrom and its partners, reducing errors and improving efficiency.

Integration Options

To integrate with Nordstrom’s systems, you’ll need to consider the following options:

Integrate with Ecommerce Platforms

Nordstrom requires its trading partners to integrate with its ecommerce platform, which involves connecting your online store to Nordstrom’s system. This integration enables you to:

Receive Purchase Orders Electronically: By integrating with Nordstrom’s ecommerce platform, you can receive purchase orders directly into your system, streamlining the order processing workflow and reducing manual data entry.
Send Shipment Notifications and Tracking Information: Integration allows you to send shipment notifications and tracking information to Nordstrom automatically. This ensures that customers are kept informed about the status of their orders, enhancing their shopping experience.
Update Inventory Levels in Real-Time: Real-time inventory updates help you maintain accurate stock levels, preventing overselling and stockouts. This integration ensures that Nordstrom always has up-to-date information about your inventory, which is crucial for maintaining a smooth supply chain.

By integrating with Nordstrom’s ecommerce platform, you can improve the efficiency of your order fulfillment process and ensure that you meet Nordstrom’s requirements. This seamless connection helps you provide a better customer experience and maintain a strong partnership with Nordstrom.

What Should You Look for in a Nordstrom 3PL?

Due to Nordstrom’s stringent requirements, many sellers find it simpler and more profitable to rely on an established 3PL that is already familiar with and comfortable meeting Nordstrom’s requirements. This way sellers can reap the benefits of participating in Nordstrom’s Direct Drop Ship program without having to completely retool their inventory storage and order workflows.

Maintain a Fulfillment Rate of 98%

Nordstrom requires that sellers keep cancellations extremely low – 98% of orders must be fulfilled before the defined due date on the DSCO system.

Traditional 3PLs that operate with a single warehouse location may not be ideal – in the event of any disruption at that location (extreme weather, carrier services disruption etc.), your ability to ship products on time to customers will be impacted.

Additionally, traditional 3PLs may be limited to basic spreadsheets or worse, manual bookkeeping to keep track of your inventory. If you run out of stock and purchase orders continue flowing in, you will be forced to cancel them, affecting your fulfillment rate metrics. Cahoot’s software intelligently decrements the count of inventory as it leaves our warehouses and provides color-coded alerts to you on a dashboard so that you always replenish products in time to keep your sales going.

Ability to Ship 97% of Orders On-Time

Nordstrom defines its shipping SLAs based on whether the order requires Standard or Expedited Shipping.

Achieving this high level of performance comes down to ensuring that your fulfillment partner has excellent pick/pack and order fulfillment practices to get every order out within time.

Make sure to conduct extensive research into the standards at your 3PL’s warehouse. On Cahoot’s order fulfillment network, warehouses must pass a 44-point checklist to be eligible to fulfill orders for our sellers.

Level of Service	SLA for Shipping
Ground	1 business day
3 Day Select	1 business day
2nd Day Air (PO received before 12 PM PST)	Same Day
2nd Day Air (PO Received after 12 PM PST)	1 business day
Next Day Air Saver (PO received before 12 PM PST)	Same Day
Next Day Air Saver (PO received after 12 PM PST)	1 business day

“The Cahoot team have been great to work with — always trying to provide great service and address any concerns and issues quickly and effectively. We’ve been very impressed with their shipping performance and communication on status of delivery for packages.”

~ Fenix Light Store

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Have an Existing UPS Account, and Experience Working With the Carrier

Nordstrom requires that sellers ship all Nordstrom orders on their own UPS account, which is connected to your, or your 3PL’s UPS account. In order to meet Nordstrom’s fulfillment metrics, your 3PL must have experience working with UPS to ensure that daily pickups and carrier scans are conducted in a timely fashion, thereby streamlining your Nordstrom order fulfillment.

Help You Meet Nordstrom’s Eco-Friendly Packaging Standards

In Nordstrom’s words, they ‘strive to be an environmentally friendly company’. They also encourage sellers to avoid excess packaging.

With many traditional 3PLs, you may find that items often ship in boxes larger than the SKU actually needs. The problem is that most traditional 3PLs have a very limited configuration of boxes of standard sizes. Items are simply thrown into the next available box, without taking care to identify if it is truly the most optimal one.

The problem worsens with Multi-Line, Multi-Quantity (MLMQ) Orders. These orders can often be unnecessarily split into multiple boxes. With Cahoot’s MLMQ automation features, our system learns from SKU and box dimension data, as well as past data to intelligently identify the most optimal box for every order.

This ensures that you save costs across every order, while also meeting Nordstrom’s (and the customer’s) expectation for more environmentally responsible, sustainable packaging.

Fully Compliant With Nordstrom Packing Slip Requirements

Nordstrom requires every shipment sent to customers to have a branded packing slip, as well as a return label (Nordstrom bears all shipping costs).

This is an example of what a Nordstrom packing slip looks like:

This is what a Nordstrom return label looks like:

Your 3PL fulfillment partner must sweat the details and ensure that all of these requirements are complied with – the little things matter enormously toward ensuring both continued enrollment in the Direct Drop Ship program, as well as customer satisfaction.

Fully Compliant with Nordstrom EDI Technology

The 3PL must be able to work with the Direct Drop Ship Program’s tech stack (DSCO platform) and ensure that you comply with all the requirements around data transmission to Nordstrom.

Benefits of Working with a 3PL

Working with a third-party logistics (3PL) provider can help you meet Nordstrom’s requirements and improve your overall business operations. Some benefits of working with a 3PL include:

Improved Order Fulfillment: 3PLs specialize in order fulfillment and can help you meet Nordstrom’s timely fulfillment requirements. Their expertise in logistics ensures that orders are processed and shipped efficiently, reducing the risk of delays and errors.
Enhanced Inventory Management: 3PLs can help you manage your inventory levels more effectively, reducing the risk of stockouts and overstocking. With advanced inventory management systems, 3PLs provide real-time visibility into your stock levels, helping you make informed decisions about replenishment and stock allocation.
Increased Efficiency: 3PLs can streamline your logistics operations, freeing up time and resources for you to focus on growing your business. By outsourcing logistics to a 3PL, you can concentrate on core business activities such as marketing, product development, and customer service.

Responsive, Reliable Customer Support

Order fulfillment is a complex operation, involving multiple, intricate steps in the process from click to delivery. Things don’t always go as planned, but what is crucial is ensuring that your 3PL has a responsive, reliable customer support team whom you can rely on to fix problems fast, with minimal disruption to your business operations.

Experience Working with Nordstrom Sellers

Most traditional 3PLs may not have personnel with the experience and expertise working with Nordstrom to troubleshoot and fix problems fast – costing you precious time and sales. It is important to identify a Nordstrom fulfillment partner with a reliable, responsive customer support team – who will be ready to dive in and solve problems quickly, so that you’re always selling and keeping your customers happy.

Here’s what one of our customers had to say about Cahoot’s Support team:

Cahoot’s support is prompt and personal, not monolithic and apathetic as some large companies tend to be. Cahoot is not only a great 3PL provider but also a strategic partner that goes above and beyond for its clients. They are a 5-star team of people who make it their business to care about yours.”

~ VERSACART

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So now that we’ve taken a look at the important criteria that guide your choice of a 3PL for Nordstrom, let’s look at the options that are actually available to you, and the pros and cons of each of them:

Top Nordstrom 3PL Companies

Amazon Multi-Channel Fulfillment

Amazon Multi-Channel Fulfillment (MCF) is Amazon’s outsourced fulfillment service for merchants selling on non-Amazon sales channels, such as Nordstrom, whereby Amazon handles the picking, packing, and shipping of the orders coming from those sales channels.

Ecommerce sellers can store their inventory at Amazon’s warehouses, and MCF will fulfill the non-Amazon orders from select channels. MCF deploys the same infrastructure and resources that power Amazon’s in-house Fulfilled By Amazon (FBA) logistics network.

Pros:

Huge nationwide network – as of January 2022, Amazon operated just over 1000 warehouses in the US.

Amazon Fulfillment Centers are well equipped to handle small and lightweight SKUs – if the majority of your product catalog falls in that category, MCF may be worth exploring.

Cons:

Despite deploying the same logistics infrastructure powering FBA, the fees for MCF can be significantly higher (the reason is obvious – Amazon would like to ensure that its own marketplace takes top priority for merchants and sellers).

FBA’s pricing is not well suited for heavier, larger-sized, seasonal or slow moving SKUs – if your product mix falls into these categories, FBA can become prohibitively expensive.

ShipBob

Pros:

Supports EDI integration with Nordstrom.

Nationwide network of fulfillment centers.

Cons:

Inconsistent customer support can prove to be a major issue as Nordstrom penalizes Sellers for mistakes, not the 3PL.

Affordable for small and lightweight products but quickly gets pricey for others: ShipBob customers have complained in the past about inefficient packaging choices – for example, using a larger sized box than may be necessary or sending a shipment in multiple boxes when a single one can be used.

Cahoot: The Best Nordstrom 3PL

Cahoot is committed to helping Nordstrom sellers grow their businesses with fast and affordable ecommerce order fulfillment services.

Cahoot’s peer-to-peer order fulfillment network is built for the future of ecommerce. Our network of warehouses is located at strategic locations across the US, enabling Nordstrom Direct Drop Ship merchants to offer their customers ultrafast shipping. Our fulfillment centers are well equipped to handle all types of SKUs (including the ones that the typical Amazon Fulfillment Center may struggle to process) – small, lightweight, seasonal, slow-moving, heavy, and oversized.

We are compliant with all aspects of the Nordstrom Direct Drop Ship program – and provide you the flexibility to use the Nordstrom UPS account provided to you without any hidden fees. Our US-based customer service team is always available if something needs to be addressed, ensuring that sales are uninterrupted and that you enjoy a successful partnership with Nordstrom.

Bringing Cherished Stories to Life

Growth is a good problem to have – but how do you make sure it doesn’t bury you?

Cali’s Books creates and sells innovative children’s books that bring stories to life with interactive sounds and songs. What started as a dedicated mom working out of her garage has grown to an organization of colleagues around the world producing hundreds of unique books and fulfilling tens of thousands of orders each month.

Cali’s growth has taken off in diverse channels: Amazon, their Shopify store, and retailers like Nordstrom. Before Cahoot, they relied on a complex fulfillment strategy with multiple different partners to try to fulfill orders across their different channels.

Summary

Nordstrom’s Direct Drop Ship program is an invite-only channel that lets select vendors list products on Nordstrom.com and ship directly to customers. It is highly curated and supported; vendors need strong brand fit and logistics to qualify.

Table 1. Summary of the Nordstrom Drop Ship Program Requirements

Requirement	Details
Fees & Commissions	No setup, listing or transaction fees. Vendors sell to Nordstrom at wholesale cost (Nordstrom retains retail margin), so there is no marketplace commission per se.
Application	Invite-only – Nordstrom buyers hand-pick brands and expand the assortment carefully. There is no open signup; sellers typically enter via buyer relationships or referrals. (Historical notes suggest Nordstrom holds kickoff calls once invited.)
Technical Integration	Mandatory EDI/API via Dsco (e.g., CommerceHub DropShip Commerce). Nordstrom provides the DSCO platform and assists with setup. Vendors must connect inventory and orders via EDI/CSV/XML through DSCO. (No published public API.)
Order SLAs	Ship within 1 business day of order (orders placed by noon PST should ship same day; others by next day). Vendors must confirm shipment and invoice (via DSCO) on the ship date (within 1 day). Nordstrom pays UPS Ground/2nd Day Air; use Nordstrom’s UPS account. Nordstrom imposes no late-shipment or cancellation fees provided the vendor cancels in time.
Return Handling	All customer returns go to Nordstrom’s fulfillment center (Cedar Rapids) and are processed by Nordstrom. Vendors must accept returns of resalable and defective merchandise and issue credit invoices to Nordstrom. Vendors may apply a restocking fee (up to ~$2.50 per item) for resalable returns. Defects are handled per Nordstrom agreements (or case-by-case).
Other Ops Expectations	Unbranded packaging/labels only; no marketing inserts. Vendors must have a dedicated customer support line during North American business hours (Nordstrom Drop Ship Ops, M–F 9 am–5 pm PST). Gift-wrap or Nordstrom-branded packaging is optional (Nordstrom pays only carrier shipping).

Invitation and Onboarding Process

Nordstrom does not accept unsolicited sign-ups: new sellers join only by invitation from the Nordstrom buying team or merchant development group. Ideal candidates have strong brand recognition or a unique assortment that fits Nordstrom’s curation. In practice, Nordstrom will meet with a vendor (or 3PL) to review operations and the catalog. Once invited, the vendor signs a drop-ship agreement, provides required documents (U.S. business tax ID, W-9, etc.), and connects via the provided DSCO (CommerceHub) account. Nordstrom supports vendors through the EDI onboarding (often via a 3PL or system integrator). After DSCO integration, vendors load item data (UPC-based inventory), learn Nordstrom’s fulfillment requirements, and gradually activate SKUs on the site. The approval timeline is vendor-specific, but DSCO integration and system validation typically take 4–12 weeks for a completed setup.

Public accounts are scarce, but industry reports highlight Nordstrom’s emphasis on quality and its flexible integration. For example, Nordstrom adopted the Dsco/CommerceHub platform to streamline onboarding – one case study noted an onboarding rate of ~40 vendors/month (a 4× productivity increase) once DSCO was in place. Retail sources confirm Nordstrom covers all shipping fees (so sellers ship via Nordstrom’s UPS account) and imposes no late-shipment penalties.

Growth (2022–2025)

Nordstrom’s drop-ship channel remains much smaller than Amazon’s or Walmart’s. The company does not publicly report vendor counts. However, insiders note steady growth: by using DSCO, Nordstrom accelerated onboarding (one report cited a 4× increase in speed). Nordstrom executives have said drop-ship suppliers tend to increase overall buying from vendors rather than cannibalize sales. In practice, Nordstrom carefully adds only dozens of new vendors per year to keep the assortment curated. In summary, while Nordstrom’s digital sales are growing (>35% of sales online), the invite-only drop-ship program has expanded cautiously, focusing on apparel, shoes, and home categories without rampant expansion.

Common Fulfillment Pitfalls

New Nordstrom drop-shippers often falter on timeliness and compliance. Failing to ship within 1 day or to cancel unshippable orders promptly will lead to order cancellations (Nordstrom will cancel and not pay for late shipments). Other common issues include using the wrong shipping account (vendors must use Nordstrom’s UPS account to get paid), submitting invoices late, or incorrectly mapping items (SKU mismatches lead to payment delays). Vendors must carefully follow Nordstrom’s SKU/UPC data requirements and DSCO transaction formats. Return handling can also trip up sellers as Nordstrom only provides a single Return Authorization (RA) number for drop-ship returns, so vendors should have processes to handle returns without individual RAs.

Support Tip: Integrate with Nordstrom’s DSCO early and engage Nordstrom Drop Ship Operations if any order goes awry. Confirm all POs via DSCO (997 EDI) and ship notices quickly. Keep a live point of contact with Nordstrom’s team during onboarding. Some sellers have found that working through Nordstrom-approved 3PL partners (like Cahoot) simplifies DSCO integration and ensures compliance with Nordstrom’s gift-wrap and packing requirements. If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We can’t wait to show you how Nordstrom order fulfillment was meant to be.

If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We can’t wait to show you how Nordstrom order fulfillment was meant to be.

5-star Cahoot Order Fulfillment services

If you are selling on multiple sales channels and are interested in 3PLs that can help you with fulfillment, you can read our other articles:

Frequently Asked Questions

What is Nordstrom’s Direct Drop Ship Program?

Nordstrom’s Direct Drop Ship Program allows vendors to ship products directly to Nordstrom customers, bypassing Nordstrom’s warehouses. This program enables Nordstrom to expand its product offerings without holding inventory, while vendors like you manage fulfillment and shipping while meeting Nordstrom’s strict compliance standards.

What carrier does Nordstrom use for shipping?

Nordstrom requires sellers to use their own UPS account for all Nordstrom orders.

What is a 3PL?

How many distribution centers does Nordstrom have?

Nordstrom currently operates over 350 stores across the U.S. These stores also fulfill online orders and act as shipping locations. In addition, each seller participating in Nordstrom’s Drop Ship Program also can act as a distributor for orders placed on Nordstrom.

What is Nordstrom’s biggest competitor?

The main competitors of Nordstrom (JWN) include Dillard’s (DDS), Macy’s (M), Neiman Marcus (private), and Saks Fifth Avenue (SKS).

Written By:

Jeremy Stewart

Jeremy Stewart leads customer success at Cahoot, helping merchants achieve high-performance logistics through smart technology and process optimization. With a background in both ecommerce operations and client services, Jeremy ensures that every merchant using Cahoot gets measurable results—whether they’re scaling from one warehouse to many or managing complex returns.

Turn Returns Into New Revenue

Convert returns into second-chance sales and new customers, right from your store.

How to Choose the Best 3PL for Wayfair

Wayfair is commonly referred to as the “Amazon of the Furniture and Home Goods” industry. Wayfair has over 22 million active customers; while this may seem a small number compared to the number of people shopping at the likes of Amazon and Walmart, Wayfair is focused on a specific niche. Wayfair has managed to retain its dominance in the Furniture and Home Goods category despite these massive competitors. Wayfair brings in $2.9+ billion in revenues each quarter.

Wayfair’s business model is similarly unique. While Amazon has invested heavily in building its inhouse logistics network and Walmart and Target are slowly growing ecommerce in addition to the brick and mortar channel that fueled their growth, Wayfair is different. Wayfair relies heavily on a dropshipping model. In this model, when Wayfair customers place orders, the orders are sent directly to sellers to be picked, packed, and shipped. According to estimates, Wayfair dropships as much as 95% of the products that it sells to customers. This reliance on dropshipping makes efficient fulfillment services essential for Sellers working with Wayfair to ensure timely delivery and customer satisfaction.

Why Selling on Wayfair is Great for Ecommerce Merchants

Wayfair offers unique selling opportunities for sellers that other marketplaces don’t.

Lesser Competition Than on Other Marketplaces

As of 2023, Wayfair has only 11,000 3rd party sellers, which is miniscule compared to the 2.5 million 3rd party sellers on Amazon’s marketplace and still very low compared to the 150,000 on Walmart. This allows brands to be much more prominently featured and visible to customers, enabling increased sales and profitability.

No Marketplace Referral Fees

Wayfair buys products from its suppliers at wholesale prices and then charges retail prices to its end customers. This can be a more attractive model to sellers, compared to the referral fee based model that Amazon operates on.

Wayfair Covers Shipping Fees

Like other marketplaces, Wayfair covers the cost of shipping for its sellers: all shipments are billed to Wayfair’s Small Parcel (FedEx), LTL or White Glove shipping accounts. Merchants can either choose to use prepaid shipping labels from Wayfair or print their own shipping labels and then bill Wayfair for the associated charges.

“Cahoot has a great app and tech platform for e-commerce and has been a great partner. I evaluated numerous competitors and they provided by far the most compelling combination of good pricing and service. Their people are top-notch and there to help you succeed as a partner.”

~ VENTAPAK

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Issues and Problems with Selling on Wayfair

Selling on Wayfair can be lucrative but there are challenges and downsides sellers must navigate. Here are some of the most common issues and problems sellers face:

1. Wayfair Controls Final Pricing

Unlike other marketplaces where sellers set their own prices, Wayfair includes the shipping cost in the customer facing price meaning they control the final retail price.

2. Automated Pricing Algorithm

Wayfair uses an automated algorithm to adjust listing prices dynamically. This can lead to unpredictable price changes and lower margins without seller consent.

3. Price Competition

Large brands and established manufacturers dominate product categories, along with many sellers adopting a low price, high volume strategy, making it difficult for new sellers to gain visibility.

4. Listing Visibility

Wayfair’s search algorithm prioritizes best-selling products and established sellers. Wayfair does not allow SEO or paid ads to boost visibility. As a result, newer sellers often struggle to get noticed.

5. No Branded Storefronts

Unlike on Amazon and Walmart, Wayfair does not allow sellers to create branded storefronts. This limits a seller’s ability to build brand recognition and customer loyalty, as all products are displayed under Wayfair’s branding rather than the seller’s business identity.

6. Strict Policy Compliance

Sellers must adhere to Wayfair’s stringent policies regarding product quality, shipping times, and return policies. Failing to comply with these regulations can result in penalties, product delistings, or even account suspension.

7. Customer Service

Wayfair requires sellers to provide rapid responses to customer inquiries. Delays in communication or failure to resolve customer issues promptly can negatively impact a seller’s standing on the platform.

8. Strict Listing Requirements

Wayfair has rigid listing guidelines that sellers must follow. These include detailed product descriptions, high-quality images, and accurate specifications. Listings that do not meet Wayfair’s standards may be rejected or removed from the platform.

9. High Return Rates

Wayfair has a customer-friendly return policy, which often translates into higher return rates for sellers. Since sellers are responsible for handling returns and associated costs, frequent returns can erode profit margins and create logistical challenges.

10. Large Item Shipping Challenges

Wayfair specializes in home goods, furniture, and large items, which can present shipping challenges. Sellers must ensure proper packaging, coordinate with freight carriers, and manage potential damages during transit. Shipping delays or damage claims can lead to customer dissatisfaction and financial losses.

11. Market Fluctuations

The home goods and furniture industry is highly susceptible to market fluctuations, seasonal demand shifts, and economic downturns. The US housing market also impacts customer demand for furniture and home goods. These factors can affect sales volume, pricing stability, and overall profitability for sellers on Wayfair.

What to Look for in a Wayfair 3PL?

Sellers participating in Wayfair can be profitable, but requires careful planning. Sellers must manage logistics, pricing, and meet Wayfair’s standards and regulations. This can be overwhelming and partnering with an experienced 3PL can ensure participation with Wayfair is profitable and stress-free. Here are some of the features a 3PL provides:

Automated Inventory Level Monitoring

Sellers on Wayfair are encouraged to send Inventory Feeds (updates on how much stock of product is available at warehouses) as frequently as possible. This is because Wayfair wants to ensure a good customer experience by only shipping products that are in-stock.

With traditional 3PLs, stockkeeping of inventory levels is often conducted on spreadsheets, or worse, by hand. These inefficient tools create many problems in staying on top of the inventory levels in warehouses.

If a business takes on more orders than it can fulfill, fails to ship all assigned orders, and is forced to cancel, it can damage relationships with both Wayfair and customers. Such cancellations may lead to penalties, loss of trust, and a negative impact on future sales opportunities.

With Cahoot’s intelligent software, inventory is automatically decremented and provides color-coded alerts as inventory starts running out of stock – this ensures proactively replenishing inventory and boosting sales, rather than scrambling to fix problems.

Ability to Offer Late Same Day Cut Offs

Wayfair encourages sellers to deliver a great experience to their customers by ensuring that order cut-off and shipment pickup times are set as late as possible, so that customers can experience fast shipping. This might also be Wayfair’s attempt to keep themselves competitive and relevant in the era of ultrafast fulfillment.

Most traditional 3PLs struggle to meet the demanding expectations from today’s customers. Cahoot is used to meeting expectations for late same-day cutoffs, weekend pickups and deliveries through our expertise in helping Amazon sellers thrive on the Seller Fulfilled Prime (SFP) program. Through our network’s best-in-class fulfillment capabilities, sellers meet and surpass the expectations of Wayfair customers.

Minimum Lead Time – Every SKU Ships Fast

If an order containing different SKUs needs to ship in separate shipments, Wayfair expects merchants to proactively communicate that to customers. However, today’s demanding customer expects ultrafast order fulfillment across every SKU. To meet these expectations, shippers must ensure their 3PL deploys excellent pick-pack practices, have high-quality fulfillment services, and order fulfillment operations in their warehouses.

Consider working with a partner like Cahoot – to fulfill orders for our sellers, a warehouse must pass a 44-point checklist. This ensures that only the very best fulfillment centers join our network. These fulfillment centers are well equipped to handle a variety of SKUs – small, light, slow and fast-moving, heavy, larger-sized and seasonal.

“I highly recommend Cahoot to anyone looking to outsource fulfillment for their business. They go above and beyond to help make sure your needs as a business are met. I reached out to 20 other 3PLs, and fulfillment centers. Cahoot was the best option for business relations, services, and pricing by far.”

~ GN Products LLC

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Responsive, Reliable Customer Support

Needless to say, order fulfillment is a complex operation, and things don’t always go to plan. When issues arise, customers and Wayfair won’t blame the 3PL; the merchant is held accountable and the merchant’s relationship and brand equity is at stake with these key stakeholders. While setbacks can occur, it is crucial to ensure that the 3PL offers responsive and reliable customer support to address problems swiftly and restore normal operations with alacrity.

Most traditional 3PLs lack personnel with either the experience or expertise required to quickly troubleshoot issues. It is essential to identify 3PLs with a dedicated and qualified support team ready on hand to resolve problems, ensuring business operations remain uninterrupted and increasing in sales volume and profitability.

Cahoot – The Best 3PL for Wayfair

Cahoot’s peer-to-peer order fulfillment network is built for the future of ecommerce. Our network of warehouses is located at strategic locations across the US, enabling Wayfair merchants to offer their customers ultrafast shipping. Our fulfillment centers are well equipped to handle all types of SKUs – including heavier, seasonal, larger-sized and slow moving ones. Cahoot’s services come with transparent pricing and no hidden fees.

Cahoot is compliant with all expectations Wayfair has from its dropshippers. Our US based customer support team is always ready and responsive to ensure that order fulfillment operations are running smoothly at all times. Cahoot is committed to helping Wayfair sellers grow their businesses with fast and affordable ecommerce order fulfillment service.

To find out how Cahoot can help ecommerce businesses grow, please get in touch with us. We can’t wait to show how Wayfair order fulfillment was meant to be. Businesses selling on multiple sales channels can also see how Cahoot can help with fulfillment in our other articles:

Frequently Asked Questions

Is Selling on Wayfair Worth it?

Selling on Wayfair can be worth it for businesses that specialize in home goods, furniture, and décor. The platform provides access to a large customer base, but it operates differently from traditional marketplaces like Amazon or eBay. Wayfair uses a drop-ship model, meaning sellers don’t directly sell to customers but instead supply products that Wayfair markets and sells.

How do I Sell on Wayfair?

Wayfair does not allow just anyone to list products. First, sellers need to submit an application to the Wayfair Partner Program and be approved.

What is a Wayfair 3PL?

A Wayfair 3PL (Third-Party Logistics) provider is an external company that handles warehousing, fulfillment, and shipping on behalf of Wayfair suppliers. Since Wayfair operates on a drop-ship model, many sellers use 3PL services to manage storage and deliveries efficiently. This helps meet Wayfair’s strict shipping requirements, improve delivery speed, and reduce logistics costs.

How Much Does It Cost to Ship for Wayfair?

Wayfair typically covers shipping costs but requires sellers to price their products accordingly to absorb these costs. There are no direct shipping fees to Wayfair, but suppliers are responsible for ensuring competitive pricing that includes fulfillment expenses.

Written By:

Indy Pereira

Turn Returns Into New Revenue

Convert returns into second-chance sales and new customers, right from your store.

How to Choose the Best 3PL For Target Plus

Nearly every American has shopped at a Target – the retailer holds a level of popularity comparable to that of Amazon and Walmart. The Minnesota retailer’s brick and mortar footprint is massive. As of 2024, Target had 1,956 stores in the U.S and hauled in $107 billion in revenue. More importantly, the company holds a huge audience for sellers and brands to target – according to Business Insider, 8 out of 10 US shoppers are Target customers and the average Target customer makes 23 trips a year to one of their stores. But while Target has had a sizable customer base for years, eCommerce sellers and brands have largely focused on their competitor, Amazon. However, in recent years, Target has begun expanding its online offerings. In 2019, it launched its third party marketplace on its website – Target Plus. This has opened up a massive new audience for eCommerce merchants to expand into.

In this article, we look at the advantages Target Plus offers sellers, the key factors merchants must consider when evaluating a 3PL for their Target Plus orders, and the options that are available.

Why Target Plus Is A Great Option For Sellers

Invite-Only Marketplace With a Large Audience

Target Plus was introduced in 2019 as an invite-only platform. The company said it was doing this to carefully curate the assortment of brands and products available to customers on its website. According to Marketplace Pulse, the program launched with 30 sellers on Target Plus in 2019. Five years later, that number has grown to more than 1,200.

This represents enormously exclusive digital real estate for brands. In certain product categories, there may be just one brand featured. This means that all the customers visiting Target’s site focus exclusively on this limited selection, boosting sales enormously for the featured brands.

Autonomy Over Logistics and Fulfillment

Brands have freedom from having to work with another platform-captive fulfillment solution, such as Fulfilled By Amazon (FBA) or Walmart Fulfillment Services (WFS). Target Plus enables them to handle their logistics and order fulfillment however works best for them – through their own warehouse, a traditional 3PL or order fulfillment networks.

This also means freedom from the fees and surcharges associated with these platform captive fulfillment solutions. Lastly, it allows merchants to manage their inventory in a centralized location – rather than having to send more inbounds to a warehouse owned by a marketplace sales channel, they can simply pull from a centralized pool of inventory that they use for their own website, or Shopify storefront, for example.

A More Equitable Marketplace – No Inhouse Competitor like Amazon FBA

Target Plus allows merchants to send orders out to customers, Target stores or Target fulfillment centers through whatever logistics operation works for them. Additionally, because Target does not have its own competing logistics network (such as FBA on Amazon), there is no preferential treatment provided to sellers who use certain logistics providers.

The model is simple – let the merchants compete, and may those with the best products and order fulfillment standards win.

While Target Plus is a great growth opportunity, the marketplace is still invite-only – Target themselves reach out to the brands that they think would be a good fit for them, explaining the exclusivity. Their website has a form for merchants to fill out if they’re interested in being part of the marketplace, but Target carefully curates participants in the program, and applicants must strive to meet rigorous standards for acceptance.

What Should You Look For In A Target Plus 3PL?

In Target’s own words, the items from 3rd party sellers featured on their website appear exactly the same as all other listings, meaning that these merchants are responsible for upholding the experience customers expect from Target through their product assortment and order fulfillment standards.

Through the invite-only process, Target ensures the product assortment is what customers expect. However, the order fulfillment standards are entirely your responsibility – your ability to maintain enrollment in Target Plus largely depends on the 3PL that you work with.

We’ve outlined the criteria that we think are most important when choosing a 3PL partner for your Target orders:

Ability to Fulfill Orders in 1 Business Day

Target Plus requires participating brands to fulfill their orders (get it out of the warehouse) in 1 business day. This requires warehouses that have excellent picking and packing practices, as well as order fulfillment standards.

Ensure Order Delivery in 5 Business Days

The marketplace requires that brands/products deliver orders to the end-customer in under 5 business days. However, customers today expect fast, free shipping in under 2 days across every channel. Amazon and their Prime loyalty program have created this customer expectation.

Flexibility To Use All Shipping Carriers and Services

Target Plus expects participating sellers to be able to accommodate a variety of carriers and shipping services.

Ability to Produce a Target.com Branded Packing Slip on Every Shipment

On every order that is sent out from the warehouse, Target requires a branded packing slip to be part of the shipment. This is something that needs a 3PL who will sweat the details and ensure that the little – but very important – things are taken care of.

Full Compliance with Target’s EDI Requirements

Target requires merchants to be able to receive and push communications via Electronic Data Interchange (EDI). These communications are automated. Target will use EDI to push purchase order information to merchants. To provide acknowledgement of order receipt and notify Target that the order has been shipped from the warehouse, the merchant must EDI to push this information back.

There are a variety of EDI systems that you can use to connect to Target. Importantly, your 3PL must be able to help you stay fully compliant with these requirements.

Responsive, Reliable Customer Support

Most traditional 3PLs may not have personnel with the experience and expertise required to troubleshoot and fix problems fast – costing you precious time and sales. It is important to identify a Target Plus fulfillment partner with a reliable, responsive customer support team – who will be ready to dive in and solve problems quickly, so that you’re always selling and keeping your customers happy.

So now that we’ve taken a look at the important criteria that guide your choice of a 3PL for Target Plus, let’s look at the options that are actually available to you, and the pros and cons of each of them:

Top Target Plus 3PLs

Amazon Multi-Channel Fulfillment

Amazon Multi-Channel Fulfillment (MCF) is Amazon’s service through which you can fulfill orders on sales channels outside Amazon, such as eBay and Target Plus.

The service deploys the same infrastructure and resources that power Amazon’s in house Fulfilled By Amazon (FBA) logistics network.

Pros:

Huge nationwide network – as of February 2024, Amazon operated over 175 warehouses in the US

Cons:

Despite deploying the same logistics infrastructure powering FBA, the fees for MCF can be significantly higher (the reason is obvious – Amazon would like to ensure that its own marketplace takes top priority for merchants and sellers).

ShipBob

Pros:

Compliant with Target’s EDI requirements.

Nationwide network of fulfillment centers.

Cons:

ShipBob customers have complained in the past about inefficient packaging choices. This can both lead to higher costs and disappoint environmentally conscious shoppers who are trying to cut down on packaging waste.

Some customers have also complained of an inconsistent customer support experience. This might be a crucial factor for sellers as Target holds them accountable for issues with order fulfillment, not their 3PL.

Cahoot: The Best Target Plus 3PL

Cahoot’s peer-to-peer order fulfillment network is built for the future of eCommerce. Our network of warehouses is located at strategic locations across the US, enabling Target Plus merchants to offer their customers ultrafast shipping. Our fulfillment centers are well equipped to handle all types of SKUs – including heavier, seasonal, larger-sized and slow moving ones (which the typical Amazon Fulfillment Center may struggle to process).

We are compliant with all aspects of the Target Plus program. Our US based customer support team is always ready and responsive to ensure that your order fulfillment operations are running smoothly all the time.

Cahoot is committed to helping Target Plus sellers grow their businesses with fast and affordable ecommerce order fulfillment service.

With Cahoot’s next generation shipping software, you get much more than that. Our system intelligently rate shops across different carriers, services and warehouse locations on every single order to ensure that the cheapest shipping label that will meet the 5 day delivery timeline is picked on every order.

This ensures you see savings on every order, which gives you back money to invest in growing your brand and sales.

Summary

Target Plus is Target’s curated, invite-only marketplace for third-party brands. Unlike open marketplaces, Target’s program is intentionally exclusive: the retailer hand-picks sellers whose products “complement Target’s assortment” and uphold a high bar of quality. Sellers list on Target.com alongside Target’s own inventory, and must fulfill orders from their own warehouses (Target does not fulfill on behalf of sellers). In return, sellers gain exposure to Target’s ~200M monthly visitors and Target’s marketing tools (e.g., Roundel ads).

Officially launched in 2019 with just 30 sellers, Target Plus has grown cautiously. Market data shows about 650 sellers as of early 2023, and ~1,200 sellers by mid-2024 – roughly doubling in one year. Target executives say they “doubled the number of partners and products” on Target Plus in the prior year. Notable recent expansions include a June 2024 partnership with Shopify’s Marketplace Connect, enabling qualified Shopify merchants to apply to Target Plus and even sell in Target’s stores. This partnership is expected to significantly ramp up vendor count in the coming years.

Table 1. Summary of the Target Plus Program Requirements

Requirement	Details
Fees	No setup or listing fees. Target charges category-based commissions (5–15%) on each sale. No monthly account fees.
Application	Invite-only. Potential vendors must have a U.S. business (with W-9) and sell non-competitive product lines. Target typically assesses fit via partner referrals (ChannelEngine, Zentail, Shopify) or direct invitation. A Target Plus application exists, but final approval is at Target’s discretion.
Integration	Must integrate via an approved technology partner. Target provides access to a Merchant API (via Mirakl backend) and supports integration through platforms like Shopify’s Marketplace Connect or ChannelEngine/Zentail. Sellers can sync products, inventory, and orders via these partners. (Custom integrations must adhere to Target’s API specs.)
Shipping SLA	Ship within 24 business hours of the order. Target expects orders to arrive to the guest within a 5-business-day transit window. Only UPS, USPS, or FedEx may be used (no Amazon/Walmart fulfillment). Sellers must use plain (unbranded) packaging and cannot use Target’s or competitors’ branding.
Payment Terms	Target pays sellers weekly (every Tuesday).
Returns	Target’s customers enjoy free returns. Sellers must accept both mail-in returns and in-store returns. Specifically, sellers pay for free return shipping on individual orders. For returns in stores, sellers can either accept palletized returns at their warehouse or instruct Target to destroy/recycle items. Sellers are expected to process refunds quickly after returns are received.
Other Expectations	Sellers must honor Target’s RedCard 5% discount on eligible orders and offer free shipping on orders $35+. Product data requirements are strict (size charts for apparel, ingredient panels, etc.). Target reviews item productivity and can delist underperforming SKUs. Dedicated staff (9 am–5 pm CST) should monitor the Partner Portal daily.

Invitation and Onboarding Process

Joining Target Plus typically starts with selection or referral. Target rarely opens blanket applications; instead, they curate brands that “mesh well with existing offerings”. Sellers often improve their visibility (on Amazon, Walmart, etc.) first; Target favors known, trusted brands. Integration partners (like Zentail or ChannelEngine) may nominate promising sellers to Target. In June 2024, Target announced that U.S. Shopify merchants can now “apply to sell online on Target Plus” via Shopify’s Marketplace Connect app, but even this route is selective.

Once invited, the seller signs Target’s Marketplace agreement and attends onboarding training. Onboarding steps include product catalog setup (matching Target’s category and data rules), shipping/return process alignment, and systems integration. Most vendors use an approved partner tool: for example, a Shopify merchant would install the Target Plus app and push products through Target’s Mirakl-powered channel. Vendors must pass an onboarding checklist (covering legal docs, inventory validation, and test orders) and typically have about 120 days to get 75% of desired SKUs live. After activation, sellers begin receiving Target orders via the integration and must adhere to the platform’s SLA and pricing rules.

Growth (2022–2025)

Target Plus has grown steadily under its curated model. Key milestones: As of early 2023, the marketplace had about 650 sellers, and by mid-2024, it reached ~1,200 sellers. Target roughly doubled its partner count in a year (adding ~190 sellers in 2022, then nearly 600 in 2023). Target’s management has stated that Target Plus is “critical” to digital growth and expects the platform to play an “outsized role” in future revenue. The 2024 Shopify partnership is intended to significantly accelerate this growth, potentially increasing the seller base by thousands over the next few years. Categories have also expanded: originally focused on décor, housewares, and niche items, Target has added fashion, pet, baby, and grocery items on Plus.

Common Fulfillment Pitfalls

Because Target Plus is highly service-oriented, operational missteps are the biggest mistakes. The most frequent issues include: shipping delays, insufficient customer support, and pricing non-compliance. For example, some sellers neglect to offer the mandatory 5% RedCard discount or free shipping threshold, which annoys customers. Others miss the strict 24-hour ship window or try to ship via non-approved methods (using Amazon Multi-Channel Fulfillment, for instance, is expressly forbidden). Poor data quality is also common: missing size charts for apparel or incorrect GTINs can delay listing approvals.

On the returns side, inexperienced sellers may underprepare: Target expects free returns, so failing to pre-pay return labels or mishandling store returns (Target will charge sellers for customer store returns if not covered) is penalized. Finally, because Target Plus is curated, sellers sometimes face delisting if their products don’t meet performance benchmarks (e.g., low sell-through or many cancellations).

Support Tip: Use an integration partner or consultant familiar with Target’s policies. For instance, setting up the Shopify + Target integration will automatically sync key settings (carriers, shipping templates) to meet requirements. Check Target’s published requirements (via Zentail/ChannelEngine) before launching. Enroll in Target’s promotional programs (Roundel) and train staff on Guest service standards to avoid negative reviews. Proactively monitor the Partner Portal for messages or order notifications, so you can take immediate corrective action. If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We can’t wait to show you how order fulfillment was meant to be done.

If you’d like to find out how Cahoot can help your ecommerce business, please get in touch with us. We can’t wait to show you how Nordstrom order fulfillment was meant to be.

If you are selling on multiple sales channels and are interested in 3PLs that can help you with fulfillment, you can read our other articles:

Frequently Asked Questions

How can I become a Target Plus seller?

Target Plus is an invite-only marketplace offering launched by Target in 2019. Target reaches out to brands that they think would be a good fit for the marketplace. Interested merchants can also fill out a form on Target’s website to express their interest in joining the program.

What are the benefits of selling on Target Plus?

Selling on Target Plus offers several benefits, including access to Target’s large customer base, autonomy over logistics and fulfillment, and a more equitable marketplace without preferential treatment for certain logistics providers.

What should I look for in a 3PL for Target Plus?

When choosing a 3PL for Target Plus, consider factors such as the ability to fulfill orders in 1 business day, ensure order delivery in 5 business days, flexibility to use all shipping carriers and services, ability to produce a Target.com branded packing slip on every shipment, full compliance with Target’s EDI requirements, and responsive, reliable customer support.

Written By:

Jeremy Stewart

Turn Returns Into New Revenue

Convert returns into second-chance sales and new customers, right from your store.

Choosing the Best Shopify 3PL for Your Store | Cahoot

We hear it all the time – you start out on your own with a Shopify store, fulfilling orders from your garage. Your ecommerce website catches on, and soon, what started as a side hustle has turned into a full-time boxing, label-printing, and shipping operation. The success is great, but your back isn’t happy with all the box-lifting.

It’s time to outsource your Shopify Order fulfillment to a third-party logistics (3PL) company that can solve your operational headaches and let you get back to what you do best – creating and selling amazing products. There are so many 3PLs and warehouses out there. How do you choose one that’s right for your ecommerce business?

In this post, we’ll dive into what makes the best Shopify 3PL and evaluate a few of the leading order fulfillment options in the industry today.

Introduction

What is Third-Party Logistics (3PL)?

Third-party logistics (3PL) refers to the outsourcing of logistics and supply chain management to external service providers. These providers specialize in managing various aspects of the supply chain, including inventory management, order fulfillment, warehousing, and shipping. By partnering with a 3PL company, Shopify store owners can focus on core business activities while ensuring efficient and timely order delivery.

Benefits of Using a 3PL for Shopify

Using a 3PL company can bring numerous benefits to Shopify store owners, including:

Improved customer satisfaction: By outsourcing logistics operations, businesses can ensure timely and accurate order delivery, leading to increased customer satisfaction.
Reduced shipping costs: 3PL companies can negotiate better shipping rates with carriers, resulting in cost savings for businesses.
Increased efficiency: 3PL companies can streamline logistics operations, reducing the time and resources required to manage inventory, fulfill orders, and handle shipping.
Scalability: 3PL companies can help businesses scale quickly and efficiently without the need for significant investments in infrastructure and personnel.

Types of 3PL Companies

There are several types of 3PL companies, including:

Full-service providers: These companies offer end-to-end solutions, managing all aspects of the supply chain, from freight forwarding to bulk inventory storage and management to shipping and reverse logistics.
3PL warehouses: These companies specialize in storing, shipping, and handling returns for businesses.
Transportation-based 3PLs: These companies focus on transporting goods between locations, often using their own fleet of vehicles.
Financial- and information-based 3PLs: These companies provide financial and information services, such as sales analyses and supply chain analytics.

What Makes a Good 3PL for Shopify Sellers?

If you’re an ambitious ecommerce Seller looking to boost your growth, you should know that the right Shopify 3PL can be a revenue driver and not just a cost center. The best 3PLs will improve your delivery experience, delight customers, and open new avenues for growth. Here are the most important things to look for in a 3PL for your Shopify store:

1. Nationwide USA Warehouses

Don’t sell yourself short. Even if you’re small now, you can still distribute your inventory across the country to unlock affordable, fast, and free shipping without huge expense. That is…if your Shopify 3PL has a nationwide network of warehouses.

You’ll want to make sure your Shopify 3PL has at least 4 order fulfillment centers across the USA. Still, ideally, the best 3PL will have many more warehouses so they can fine-tune exactly where your product inventory is placed to be near your largest customer base.

The best 3PLs offer true national order fulfillment services by strategically placing inventory in 4+ locations across the country. The benefit to you is that these networks cover 99%+ of US consumers with 2-day shipping at economy shipping rates. No matter where your customer wants their product shipped, you’ll have inventory nearby. They will get their products quickly, and you’ll pay the cheapest shipping rates possible.

If you aren’t already offering free 2-day shipping, it’s a recommended upgrade that can truly turbocharge your ecommerce growth. Today, 90% of US online shoppers expect free one-day and two-day shipping. Amazon metrics show that turning on the Amazon Prime badge can net up to 50% growth for a product!

Adding a banner or top bar to your Shopify store that says “Fast and free shipping” can boost your ecommerce conversions and revenue.

Source: Shopify App Store Free Shipping Bar

2. User-Friendly Shipping Software

As a business owner, giving up control and outsourcing to other companies is tough. The best Shopify 3PLs know that, so they provide their customers with easy-to-use shipping software that provides proactive notifications and robust reporting on how they’re doing. If you can’t get real-time updates on your orders’ status, inventory levels, and shipping and order fulfillment costs, then you’re not working with a cutting-edge 3PL.

One key benefit of great 3PL shipping software is proactive notifications. Unfortunately, things go wrong all the time in the shipping logistics world. It can be as simple as an undeliverable address incorrectly input by the customer or as complex as a worldwide supply chain and shipping crisis. The best Shopify 3PLs don’t leave it up to you to identify order fulfillment problems. Their shipping software should alert you when a customer orders with an undeliverable address. You can immediately fix the issue before it turns into a late shipment, and you’ll keep the customer happy.

“I use Cahoot to process our shipping labels. Their auto label creation feature is a huge time saver. We are continuing to use Cahoot over our previous shipping label provider.”

~ Home and Garden Supply

Speak to a fulfillment expert

3. Achieve a 99% On-Time Order Fulfillment Rate

Reviews are the lifeblood of your ecommerce business, and a happy customer is a repeat customer. You can probably recall more than a few lost customers and poor reviews that were due to errors in the order fulfillment or shipping workflow that were not your fault.

The best Shopify 3PLs minimize these issues and have an on-time fulfillment rate of 99.9% or higher. Anything less signals a Shopify 3PL that isn’t built for the rigorous demands of modern ecommerce.

Top 3PLs designed for ecommerce order fulfillment also integrate technology like barcode scanning into their warehouses to eliminate errors. Simple but effective innovations like these stop issues before they happen, and they also fuel the functionality of the software mentioned above.

4. Multi-Carrier Shipping Discounts and Carrier Flexibility

Shipping fees consume a significant chunk of every ecommerce merchant’s profits, but where there’s extra cost, there’s an opportunity to save. The best 3PLs who ship huge volumes of packages every year will negotiate preferred rates with major and regional parcel carriers, and they should pass those savings on to you.

Beware though. A trick in the 3PL industry is to consolidate pricing into a single one-line item and not itemize what you’re paying for every component of their service. While it can feel helpful to be quoted one simple price, keep in mind this enables the 3PL to charge you more for shipping than what they’re paying the carrier and keep the difference without you knowing.

The best Shopify 3PLs work with all shipping carriers, not just one. The reason why is simple. Different carriers have the best rates for different routes, package sizes, and types of products. If you’re locked into just one carrier, you’re not getting the best shipping prices.

5. Pre-built Ecommerce Integrations and Open APIs

It shouldn’t be hard to connect your Shopify store to your 3PL. The best 3PLs have pre-built integrations that will do it in a few clicks (this goes for other ecommerce platforms, too). Many merchants are scaling into multiple sales channels to maximize growth, and your 3PL should be able to integrate easily with all of them.

Not every ecommerce merchant can work with pre-built integrations, especially larger ecommerce merchants with custom and complex order and inventory management systems. For that, your Shopify 3PL choice should have an open API and support resources that make the order fulfillment integration process as seamless as possible.

6. Responsive Customer Service

Finally, the best Shopify 3PLs offer amazing customer support. You should be able to get in touch with your 3PL easily to troubleshoot challenges. Look for a Shopify 3PL that assigns a real person to work with your ecommerce account. Make sure there are multiple ways to get in touch with them. If it’s a small issue, live chat works. Complex challenges should be handled by an advanced ticketing system. And finally, request direct phone support for critical or time-sensitive order fulfillment issues.

“We switched to Cahoot from a different 3PL and the team has bent over backwards to make the transition easy and seamless. Great personal assistance every day from the team and very quick, reliable shipping from the Cahoot partner warehouse. Highly recommend their service.”

~ Cut.com

Speak to a fulfillment expert

Top Shopify 3PL Companies

Now that you know what to look for, how do a few of the top players in the 3PL industry stack up? We’ve provided a primer to help jump-start your order fulfillment research.

Amazon Multi-Channel Fulfillment

Amazon Multi-Channel Fulfillment (MCF) is Amazon’s outsourced fulfillment service for merchants selling on non-Amazon sales channels whereby Amazon handles the picking, packing, and shipping of the orders coming from those sales channels. Ecommerce Sellers can store their inventory at Amazon’s warehouses, and MCF will fulfill the non-Amazon orders from select channels.

Pros:

Biggest ecommerce order fulfillment network in the USA, powers fast shipping

One provider for Amazon orders and Shopify store orders

Pre-built integration with Shopify

Cons:

Much more expensive than FBA, despite being the same service

Only works with ecommerce platforms – won’t fulfill for other marketplaces

Orders take lower priority than FBA so it can be slower to ship and deliver

Many prohibited items across top categories

Shopify Fulfillment Network (Flexport)

Shopify Fulfillment Network (sold to and rebranded as Flexport in mid-2023 but still operating the Shopify Fulfillment Network app) is geared towards Shopify sellers. The pricing and shipping speed aren’t expected to be comparable to FBA as Shopify does not own any logistics infrastructure. This fulfillment option will work for you if you only need to fulfill orders in the United States, have fewer than 2,000 SKUs, ship more than 10 orders but less than 10,000 orders per day, and don’t sell any prohibited or regulated products.

Pros:

Integrates seamlessly with your Shopify account

Inventory syncs seamlessly between Shopify and Flexport

Native integration is built and supported by Shopify

Cons:

Fulfillment services are reported to be 20-40% more expensive than competitors

Not fast shipping by default – have to pay more

Only 99% on-time shipping and 97% on-time delivery – competitors are 99.95%+

ShipBob

Pros:

Global fulfillment from a nationwide network of US fulfillment centers

Offers Warehouse Management Software if you operate your own warehouse

Integration and support for emerging channels like TikTok Shop

Cons:

Not fast shipping by default – have to pay more and not always ground rates

Affordable for small and lightweight products but quickly gets pricey for others

Red Stag Fulfillment

Red Stag Fulfillment is a more traditional 3PL with only two locations in the United States. They offer B2B fulfillment in addition to B2C since they have a wider focus than just ecommerce.

Pros:

Specialize in oversize (bulky) products

Shipping discounts across different carriers

Pre-built integrations with ecommerce platforms and marketplaces, and will custom build

>99.9% order accuracy with a 100% guarantee

Cons:

Only two USA warehouses – can’t cover all USA customers with affordable one-day or two-day shipping

Cahoot: Shopify’s Premier Fulfillment Network

Cahoot’s order fulfillment services network is built for ecommerce. We’ll help you level the playing field and delight your customers with a stellar, Amazon Prime-like delivery experience for your Shopify store. And we don’t stop there. We have pre-built ecommerce integrations with major marketplaces to fuel your multi-channel growth. Don’t see one that you need? Let’s talk.

Our innovative peer-to-peer model offers low-cost, fast, nationwide order fulfillment by design. As a result, our pricing is typically 30% lower than the 3PL providers listed above, and we can beat them on order fulfillment speed and delivery reliability.

		Traditional 3PL
Same-day fulfillment until 2pm
Nationwide 1-day & 2-day coverage
Weekend fulfillment
Powerful, easy-to-use software
Flexible fulfillment
Real-time fulfillment & shipping visibility
All sales channels
Seller Fulfilled Prime (SPF)
Fast-shipping badges – Walmart, Amazon
30% avg. lower cost

Cahoot is committed to helping Shopify Sellers grow their businesses with fast and affordable ecommerce order fulfillment service.

When is the best time to work with a 3PL?

The best time to work with a 3PL depends on your business’s specific needs and growth stage. It might be time to consider outsourcing fulfillment when you’re starting to run out of capacity. For example, if order volume consistently exceeds what you can handle efficiently in-house, or if your available storage space reaches or exceeds 75-90% of your capacity. Businesses that experience seasonal spikes in demand can benefit from a 3PL’s ability to seamlessly scale operations up or down as needed.

When logistics management becomes too time-consuming, or rising shipping costs are creating excessive margin pressure, outsourcing fulfillment allows you to focus on growing your business and improving your products while leveraging a 3PL’s carrier network and negotiated rates.

If you’re struggling to meet your on-time delivery promises or you’re dealing with frequent fulfillment errors and the customer service burden has gotten to be too much, it would be worth looking into a 3PL’s expertise and infrastructure; in particular, look into 3PLs that can support nationwide inventory distribution to reduce shipping times and costs.

Merchants looking to get smarter and more efficient with inventory forecasting so they can procure the right amount of inventory at the right time should partner with 3PLs that offer AI-driven intelligent demand planning software. Agentic AI is able to analyze fluctuations in market demand, freight forwarding trends, trade and policy current events, etc., and automatically create purchase orders with your suppliers (in their language), optimizing the amount of capital tied up in inventory.

If you’d like to find out how Cahoot can enhance your efficiency, reduce your costs, and support the growth of your ecommerce business, please get in touch with us. We can’t wait to show you how Shopify order fulfillment was meant to be.

If you are selling on multiple sales channels and are interested in a 3PL that can help you with fulfillment, check out some of our other articles:

Frequently Asked Questions

Can Amazon fulfill Shopify orders?

Yes, Amazon can fulfill Shopify orders using the Multi-Channel Fulfillment (MCF) service. MCF integrates a Shopify website with Amazon’s fulfillment network to pick, pack, and ship orders using the Fulfilled by Amazon (FBA) infrastructure and resources.

Does Shopify offer fulfillment?

Yes, Shopify owned and operated the Shopify Fulfillment Network (SFN, formerly known as Deliverr), before it was sold to Flexport in mid-2023. Shopify promotes Flexport as its trusted fulfillment partner.

How much does Shopify fulfillment cost?

Enter your product information into the Flexport Cost Calculator to see what you would pay with Flexport Fulfillment.

What does order fulfilled mean on Shopify?

When you fulfill an order in Shopify, you begin the process of sending the order on its way to the customer. The customer receives an email telling them that their item has shipped, and the order’s Fulfillment Status displays as Fulfilled on the Orders page.

What is fulfillment on Shopify?

Shopify Fulfillment Network connects your online store with Flexport, a leading logistics partner that will pack, pick, and ship online orders to your customers without any intervention.

Written By:

Rinaldi Juwono

Rinaldi Juwono leads content and SEO strategy at Cahoot, crafting data-driven insights that help ecommerce brands navigate logistics challenges. He works closely with the product, sales, and operations teams to translate Cahoot’s innovations into actionable strategies merchants can use to grow smarter and leaner.

Turn Returns Into New Revenue

Convert returns into second-chance sales and new customers, right from your store.

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What factors should I consider when picking a 3PL partner for my cosmetics fulfillment?

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In this article

Why You Can’t Rely on Just Amazon FBA

Evaluating Amazon FBA Order Fulfillment Alternatives

1. Open Multiple Fulfillment Centers Yourself

2. Third-Party Logistics Companies (3PLs)

3. Tech-enabled Fulfillment Network

Definition of a Fulfillment Company

Benefits of a Fulfillment Company in Ecommerce

Cahoot: Alternative to Amazon FBA

Frequently Asked Questions

What are the costs for FBA?

What is a 3PL?

Is 3PL pricing more transparent?

Turn Returns Into New Revenue

Related Articles

In this article

Understanding 3PL and Macy’s Fulfillment Needs

What Is Third-Party Logistics (3PL)?

Benefits of Outsourcing Macy’s Order Fulfillment

Why is The Macy’s Vendor Direct Program Great For Sellers?

Simplified Inventory Management

Whatever The Logistics Setup, Everyone Has a Fair Chance

What Should You Look For in Macy’s Fulfillment Services?

Full Compliance With Macy’s Vendor Direct Fulfillment (VDF) Tech Stack

Flexibility to Work With Macy’s Carrier Accounts

Ultrafast Shipping

Adherence to Macy’s Packing Requirements

Responsive and Reliable Customer Support

Experience Working With Macy’s Sellers

The Role of Logistics in Customer Satisfaction

Top Macy’s 3PL Companies

Amazon Multi-Channel Fulfillment

ShipBob

Cahoot: The Best Macy’s 3PL

Summary

Invitation and Onboarding Process

Common Fulfillment Pitfalls

Frequently Asked Questions