Any company who uses Deliverr is going to quickly figure out that they have placed their most important business process in the hands of a third party, and that they have very little control over it.
eBay, Wal-Mart, and Shopify are in the business of delivering products. They don't make the products, they make them available to the consumer. Delivery is like 90% of that. This is why amazon runs their own fulfillment centers, it's the most important part of their process.
It would be better for eBay, Wal-Mart and Shopify to merge and compete against amazon as one, rather than fighting over the table scraps that amazon leaves them.
First any business should ask for metrics on past performance and that is how you should judge the performance and not by assertions or business models - Case in point -- Taxis were fully controlled they all looked the same, the drivers were all trained the same way -- yet the consumer experience was bad. Then Uber/Lyft came in and they don't drive the taxis but they are able to orchestrate demand and supply and offer visibility and a better price to customers. So going by your analogy Taxis >> Uber. But I think it is settled that Uber/Lyft >> Taxi. Judge Uber/Lyft with their metrics such (a) time to get a taxi (b) on time delivery and (b) cost to consumer. And businesses and consumers are smart enough to do that.
Second - marketplaces are in business of connecting buyers with sellers; laying out rules of engagement so trust is built for discovery and transaction. They are enablers. But a merchant participates in many markets and not just one. You cannot ask each marketplace to do fulfillment for the merchant because that will mean the merchant will have to predict and send inventory for eBay and Walmart and Shopify separately which is not efficient for anyone in the market.
Ok, I hear you, but I think you're missing the forest for the trees - Why did amazon beat these businesses in the first place?
It wasn't because they connected buyers with sellers, people have been doing that for decades. It has nothing to do with the rules of engagement, amazon is full of fake products and reviews. It wasn't because the user experience was bad, the amazon UX is pretty bad, it's very cluttered, and Shopify's UX is really impressive.
Amazon beats Wal-Mart et al. because their delivery is faster. And that takes control. The difference between delivering in two days and delivering in three days comes down to seconds.
And for what it's worth - Sometimes I am unable to get an Uber, but every time I call the taxi company, a taxi shows up.
(All of this isn't to say Deliverr won't provide value, just that I am doubtful it can beat amazon)
Amazon leads the market for many reasons among those price, selection [1], reviews, and then with more recent shifts faster shipping. The goal isn't to beat Amazon the marketplace. The goal is to bring the Prime experience to other marketplaces. I don't believe it's a zero sum game.
Amazon is a lot more comfortable than they were 10 years ago, and you can already see that as a result in higher prices [1][2] and lower shipping SLAs. Lifting the rest of the market increases competition and helps all buyers have a better experience.
Personally, I think Amazon's original advantage was definitely in a high-quality experience. (FWIW, I've been a customer since 1997, but didn't join Prime until 2010.) They used to have pretty reliable reviews and real products. They used to have better prices. And they used to have a much better user experience.
What I really want is shopping as a utility. I want to spend the minimum time possible and get great results with no worries. Speedy delivery is sometimes part of that, but not always. If there were something as reliable as the Amazon of 2010 but defaulted to 3-day delivery for free, I'd switch in a heartbeat.
I trust the interface much less. Just this week I had to send back two things that were mistakenly ordered. One was clothing. I set the size I wanted, then clicked on the color I wanted. The size I wanted wasn't available, so it switched the size without telling me. The other was a tool. I was searching for Dremel sanding accessories. Mixed in with Dremel-specific stuff were things that weren't compatible, but I didn't notice the switch.
It is now packed with ads of various forms. I want them to be on my side, showing me the best stuff. But instead, they are getting paid to show me stuff without regard to quality or usefulness.
The mixing in of stuff from others stores is another area where my trust has declined. If it were a separate site, that would be fine. But when I want to just buy something from Amazon, I now have to evaluate a bunch of possibly-dubious vendors on the basis of too-little information.
The reports of counterfeit products and comingled inventory has left me much more skeptical when buying things there.
The reports of terrible warehouse work conditions mean that I trust them less to take care of the people doing the work.
The way many people are now making bank doing store arbitrage, where they buy things at Target, Walmart, Trader Joes, etc, and sell it at high markups means I trust the pricing much less. I also suspect Amazon of marking things up more now than they used to.
And finally, their experiments with various shipping options means less reliable delivery. If something comes via UPS or Fedex, I know when it will arrive and trust the drivers will put it in the right place. But their various other shippers provide a different and usually worse experience.
When they started, it was magic. They took all the confusion and stress out of mail order. Now they've slowly been putting it back in. I'm sure it has increased the revenue metrics of various sub-sub-teams. But they've taken me from being a loyal customer to one ready to switch.
I'm with the other person saying much of the same thing. Far as less reliable, they might mean all the people and companies paid for fake reviews. Google for that to find a lot of reasons for not trusting Amazon results.
Another thing Amazon is doing is competing with companies selling product through them. Competitors might differentiate a bit by making a deal, contract and/or charter, that they will never make products that compete with those using them as an intermediary. They'll always be a facilitator and nothing else far as those kind of contracts are concerned. That could help in that current and long-term risk might be reduced.
>> And for what it's worth - Sometimes I am unable to get an Uber, but every time I call the taxi company, a taxi shows up.
FWIW from me, I have had taxi companies fail to send me a taxi, or send me one hour+ after they said they would, every time I have called them in the small cities I've been in that didn't have uber. I can count the times I didn't get an uber when I wanted one on one hand, and I get dozens of them a week...
Having worked at Amazon; one of the things I respect a lot about Amazon is that they not competitor focussed - they really do not spend much time thinking about competition; they are maniacally customer focussed. I am sure Amazon is really working on upping the game on faster delivery whether is 1 day prime for large number of SKUs or same day.
“Uber didn’t change the physical infrastructure of cars. They didn’t build their own taxis. What they did was create software that could connect excess capacity drivers,” Krakaris told TechCrunch. “Most warehouses aren’t going to be full. We are going in and filling that extra space they wouldn’t otherwise fill.”
Does Deliverr rely on the third party warehouse staff to perform fulfillment? How do you ensure SLA's are met?
That's right. Effectively we measure everything and have multi-factor performance metrics with our partners. So it's a bit more objective than Uber which is entirely based on user feedback. If we detect that a node in the system is performing poorly we will not use it.
We definitely aren't. I posted this to our Slack and one of our new sales guys created an account and posted. When I saw it I asked him to take it down.
Isn’t this what selling 3rd party on Amazon is? They handle fulfillment and delivery? I think it’s a good idea since I don’t think eBay or Walmart offer this service (?), and I’m continually hearing how Amazon is screwing over their 3rd party sellers (Amazon basic to replace 3rd party products that sell well, etc). What would you happen to you guys if say Walmart started offering 3rd party fulfillment? Think they could do it well?
Amazon has a program called Multi-channel fulfillment. But there are significant drawbacks to sellers and marketplaces:
1. It comes in an Amazon box. Large marketplace have started penalizing sellers for that.
2. They don't integrate into fast shipping programs that act like Prime, as an example eBay eGD.
You are right that eBay and Walmart can offer this service, but most sellers will sell in multiple places, and splitting inventory across different facilities is expensive, inefficient, and difficult to manage. Isolationism in this market hurts everybody.
Absolutely the pricing is per unit per SKU - all inclusive of receive, shipping, box and pick pack. I think you will find pricing to be at least 30% lower. You can check out pricing for your items here - https://deliverr.com/fulfillment-cost/
However the bigger reason for our existence is faster shipping. You can now affordably do 2 day shipping on Walmart and Guaranteed Delivery on eBay and offer 2 day shipping on your Shopify store. You can see here the sales boost we are seeing with fast 2 day shipping -- https://deliverr.com/walmart/
I was interested, so I dug a little. Here is my conclusion:
While Amazon continues to lower the cost of fulfillment through management and the development of new technology that is driving operational efficiencies, Deliverr tries to lower fulfillment cost by gaining access to excess warehouse capacity for pennies on the dollar.
The below pricing shows that Deliverr is able to drive value by offering competitive pricing on the fastest shipping times over other third party logistics providers (3PL). They claim they are able to achieve this cost savings through their "machine learning and predictive intelligence" which they use to determine which of its warehouses to store its client’s goods. However, they go on to say they typically only store the good's in 3-5 warehouses. This means any 3PL should be able to compete on pricing for "2 days shipping" by having 3-5 properly placed warehouses.
It seems the key cost saver for Deliverr is their outsourcing of the fulfillment to the excess capacity of the third party fulfillment centers. Using a similar model as Uber.
In determining if they will be able to gain access to the 1.7% of excess warehousing and maintain SLA's, it is interesting to see what the current warehousing market is in the US. According to this report: https://www.logisticsmgmt.com/article/cbre_research_shows_th..., it seems the majority of this excess warehouse space is most likely not well suited to efficiently deliver on the type of fulfillment Deliverr is advertising.
"In data analysis for 56 major U.S. markets, a key finding from CBRE showed that the majority of facilities built before the mid-2000s have certain limitations that hinder e-commerce distribution usage, including low ceilings, small footprints, uneven floors, and inadequate docking."
The article goes on to mention that only 11% of total warehousing in the US (1 billion square-feet) was built within the past 10 years. It does not mention how much of this space is not being occupied on a daily basis. It would seem Deliverr will need to access about 7% of this warehousing, at a fraction of it's 3PL rate, to reach FBA scale.
Unlike Uber drivers, let's hope Deliverr's fulfillment partners are pricing their excess capacity appropriately so as to be able to afford to pay their employees a living wage.
I think you analysis is extensive but misses a few points. To analyze the economics you have to look at the entire value chain. For e-commerce fulfillment it looks likes this roughly - sending products into the warehouse, receiving, storing and pick packing the products in the warehouse, shipping the products out. Traditionally each of these items are decided on sequentially in isolation. Without any regard on how it impact the others in the value chain. This causes inefficiency in the system and bloated costs for everyone.
To consider all of these value chains at once requires your to evaluate literally millions of data points (no exaggeration here) for every SKU inventory placement decisions; evaluate different states of the world and choose the is likely to represent the future. Majority of efficiency comes from this and that is what is reflected in the cost savings merchants get from using Deliverr.
Second - the state of the world is changing and we hope to be leading that change - 1 day shipping and same day shipping are not far away. That requires more distributed infrastructure and radically different placement strategies to keep overall costs in the systems down.
Thanks for the response, I definitely see the potential of Deliverr (related to the use of excess warehousing capacity) as expectations move to 1 day and same day shipping.
It seems inventory placement strategies developed by demand prediction models are only as good as the data set used to build the models. Obviously it's going to be hard to compete with Amazon on the breadth of data you have access to.
Where has Deliverr gotten the data to feed the prediction models in the early days?
Do you require your customers to provide historical sales data?
Do you pool customer data to improve the models for all of your customers? If so, do customers have a way to opt-out of their data being pooled?
Commenting only on the title here (I haven't RTFA yet or heard of Deliverr before)...
Amazon is a logistics powerhouse. $7M probably wouldn't even cover the capital investment of a fraction of their equipment in just one of their warehouses. Claiming a series A startup is going to compete with that is a surefire way to discredit it.
I'm part of the team at Deliverr. The implication that the $7M will go towards building a parallel infrastructure is not an accurate view of the strategy.
This company is setting up the infrastructure to leverage the vast investments in warehousing that already exist all over the US.
Definitely recommend reading the article, it does a solid job of summing the mission up :)
Two things
a) I dont think this is competing with Amazon infrastructure. Outside of Amazon, this is a very large industry and very broken which needs to be fixed.
b) I agree with you 7M is not going to be enough to fix this industry; its complex and moves physical things (way harder than moving bits) but you gotta start somewhere.
eBay, Wal-Mart, and Shopify are in the business of delivering products. They don't make the products, they make them available to the consumer. Delivery is like 90% of that. This is why amazon runs their own fulfillment centers, it's the most important part of their process.
It would be better for eBay, Wal-Mart and Shopify to merge and compete against amazon as one, rather than fighting over the table scraps that amazon leaves them.