We live in a gig-based sharing economy. We share rides via Uber and Lyft, homes via Airbnb. We even have our groceries delivered by everyday people driving everyday cars.
But while everyone is fixated on the Ubers of the world, few are paying attention to the ways in which Amazon is tinkering with this transformational service model and applying it to fulfillment, delivery and more.
Over the last several years, Amazon has quietly built up a portfolio of gig services, including:
- Amazon Flex
- Amazon Logistics
- Amazon Shipping
- Amazon FBA Onsite
Read on to learn more about each of these—and why FBA Onsite may be the most innovative of them yet.
Amazon Flex Program
The Amazon Flex app gives regular people the chance to pick up delivery jobs for a range of Amazon’s services, like Prime Now, Amazon Restaurants, and Amazon package deliveries. Drivers are paid $18 to $25 an hour to make deliveries from their own vehicles. Amazon Flex promises the ability to “be your own boss, set your own schedule, and have more time to pursue your goals and dreams.”
Amazon’s last-mile delivery service, Amazon Logistics, is powered by a growing number of independent contractors or “Delivery Service Partners.” It’s intended to complement official providers (UPS, USPS and FedEx) by employing everyday drivers, walkers, cyclists, and other motorists to achieve 7-day or same-day delivery. Partners enrolled in Amazon Logistics can help themselves to Amazon’s delivery technology and vehicles while observing certain stipulations and leasing fees, though they are not Amazon employees. For a $10,000 startup cost, they can build a small business of up to 40 delivery vehicles.
Amazon Shipping now offers its marketplace sellers the ability to ship orders via Amazon Logistics instead of UPS, FedEx or USPS. The rates for this service, which include parcel pickup from the seller’s warehouse, are rumored to be as much as 10% lower than the rates that UPS and FedEx offer small- and medium-sized merchants. Amazon Shipping is now being rolled out in cities beyond Los Angeles and London, according to the Wall Street Journal. It’s safe to assume that Amazon will expand this offering to merchant shipments beyond its third-party marketplace. And you can bet that Delivery Service Partners will play a major role in supporting the execution of Amazon Shipping.
Amazon FBA Onsite: a ‘Groundbreaking’ Program
Rumored to be the most groundbreaking of Amazon’s gig services, FBA Onsite combines the best parts of FBA and Seller-Fulfilled Prime (SFP) to bring shipping rates down and to widen access to the coveted Prime badge. The program invites independent fulfillment center warehouses—mostly owned or operated by Amazon Marketplace sellers—to become nodes in the Amazon Fulfillment Network. Any Amazon orders fulfilled from these warehouses become eligible for FBA-only programs, like Prime, Subscribe and Save, and Small and Light.
The FBA Onsite program is Amazon’s latest move against warehouse congestion. By leveraging existing fulfillment center infrastructure, it relieves the burden on Amazon to build more fulfillment centers or overcrowd existing ones.
What Are the Benefits of FBA Onsite?: A Seller's Perspective
One Amazon Marketplace seller cites the following advantages from an email they received about the program.
He further explains the process: Amazon flies engineers to set up your warehouse and integrate its Amazon Onsite WMS (Warehouse Management System) software. Afterwards, you can simply move items into the “node” to make it available for Prime offers, as opposed to sending inbound shipments to an FBA warehouse.
Aside from avoiding Amazon FBA storage and inbound shipping fees, participating sellers potentially benefit from:
- A customized rate card: “I’m assuming the pricing won’t be as sharp as traditional FBA because they have to guarantee 2-day shipping to sites all across the USA from one location instead of across a network of fulfillment centers.”
- No longer having to spend time or money prepping inbound shipments to FBA
- No longer having to account for wait times while restocking inventory at FBA
- Ability to remove items from the warehouse to avoid long-term storage fees
- The return process: all returns go back to an Amazon fulfillment center and are set aside (not placed into their fulfillment network) to be batch shipped back to the warehouse on a regular basis
- Customer service: Amazon still handles all customer service and returns
What Are the Drawbacks of Amazon FBA Onsite?
Many of the consequences have yet to be seen, since FBA Onsite was only launched a year ago to a purported 50 sellers. However, the same seller raises a few concerns:
- Returns will be processed by an FBA facility, so any abuse that currently happens there will still happen
- All returned items to the FBA facility need to be sent back to the seller’s warehouse, so the seller will be charged an extra $.50 return fee for every FBA return
- Amazon can deputize your warehouse to act fully in their name as an Amazon fulfillment center, i.e., install their WMS software on your servers, require you to physically assign items to a node to “replenish” FBA inventory (which is then reported to Amazon’s fulfillment network that they have more items in their MFN fulfillment network)
- If you have extra capacity in your warehouse, you’ll likely take in additional packages and fulfill them for Amazon on behalf of other sellers
The Verdict on Amazon FBA Onsite
While there are still many unknowns about the program, Amazon FBA Onsite may represent a transformational change to the Amazon Marketplace. It enables Amazon to support third-party (3P) FBA sellers with lowered costs and accelerated supply chains, while opening up space for them to build up their first-party (1P) retail business.
The program is currently invitation-only, but we expect it to expand to more high-performing MFN and SFP merchants soon, falling in line with Amazon Shipping, Amazon Logistics and Delivery Service Partners as yet another gig-based sharing program.