Who's Winning the Fulfillment War During COVID-19: Amazon Prime or Merchant-Fulfilled?
"Have orders around Prime items gone down since Amazon announced major shipping delays? Are more people paying for fast shipping now, and are Fulfilled by Merchant (FBM) sellers seeing more sales?"
The Short Answer
Yes, definitely. Since a wave of ‘panic buying’ at the end of February/early March, and Amazon’s first warning of delayed shipping, the percent of orders fulfilled by Prime has dropped almost 30%. Historically we’ve seen almost 90% of Amazon orders go through Prime, but data shows that that has now dropped to 63% in the wake of new COVID-19 policies that Amazon has been rolling out. Conversely, the next two largest marketplaces, Walmart and eBay, are seeing big GMV lifts as a result.
The Long Answer
The below graph looks at the percent of Amazon orders fulfilled by both FBA versus FBM merchants over the last 12 months. The pandemic was publicly announced at the turn of the year, which is why we start to see a small decline of FBA orders in January and February. As major fulfillment issues continued, we saw a faster deceleration of FBA orders beginning in early March (Amazon’s announced shipping delays on March 2).
Of course, Amazon’s freeze on nonessential items also shook things up. This is part of the reason why we see an even sharper decline of FBA orders in mid-March, and a bigger surge of FBM orders. Around this time, buyers also started to take their frustration out on social media about default delivery dates of April 21 on Amazon.
As shortcomings of Amazon's fulfillment come to light in the marketplace, consumer needs are clearly being met elsewhere. So, who else is benefiting? We’re clearly seeing customers value the fastest shipping option as they make their purchase decisions.
Marketplaces that have not experienced the same fulfillment disruptions, notably Walmart and eBay, have seen major growth at the same time we see FBA orders go down. Walmart GMV was up 300% last week.
Sellers we’ve spoken to have also seen a jump in webstore orders. (“My website sales are going through the roof!” one seller told us.)
Many people in industry share the opinion that shipping time is one of the biggest, if not the biggest, factors in winning a sale, which is in part why we’ve seen ecommerce giants like Shopify and Walmart recently announce major fulfillment services to compete with FBA. Our research today may corroborate that theory and underscore the importance of maintaining control over the customer experience.
We’re curious to know how long this takes to normalize. In an unprecedented move earlier this week, Amazon made changes to their Buy Box algorithm favoring merchant-fulfilled sellers who could fulfill faster than Prime. Is this an indication that this trend will continue?
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Tucker and Paul (a.k.a. the Zentail Growth Team) are looking at the data to answer your burning questions about ecommerce. What's on your mind these days? Submit an anonymous request here.