Arguably, the biggest contributor to Amazon’s e-commerce success has been its FBA (Fulfillment By Amazon) service. The service eliminates the need for e-commerce merchants on Amazon to find their own fulfillment partners, which can be expensive and time-consuming.
Now, Shopify has announced that it’s rolling out its own fulfillment network. So far, Shopify has had massive success when it comes to taking care of the e-commerce store owners who use the platform. The new fulfillment network could be the feature that allows Shopify to directly compete with Amazon.
But does Shopify really have what it takes to compete with such a giant in the industry? Let’s take a closer look.
The Logistics of Fulfillment
According to Lexico by Oxford, fulfillment is the achievement of something that was desired, promised and predicted. Let’s use that definition to explain how the e-commerce fulfillment system works.
Desire: Browsing through an online store
There are many factors that lead customers to make a purchase from an online store, but all the factors can be wrapped up into one word: desire. Customers desire your product (for whatever reason), so they purchase it.
Predict: The estimated delivery time
This seems easy. The estimated delivery time just shows when the package will arrive, right? Well, it’s a bit more complicated than that.
Depending on where the package comes from, it could take a plane, a truck and a van just to ship the package from A to B. And those vehicles could all be owned by different companies.
So, delivery involves a lot of communication, coordination and cooperation between those individuals and companies, and it’s not as simple as it sounds to get an accurate estimation of when your package will arrive at your doorstep.
Promise: Making the delivery time official
Some e-commerce sites don’t just predict the delivery times, they guarantee it on checkout. To do this, the infrastructure and coordination between different delivery companies must be robust.
The more people handling the package, the more complicated the coordination is. Often the trade off e-commerce companies face is making it cheaper for the consumer but offering fewer guarantees and less expediency or guaranteeing delivery but at a higher cost to the consumer.
Achievement: Doorstep delivery on time, safely
Customer satisfaction is highly affected by on-time and safe deliveries. The truth is, the amazing clockwork that it takes to run the logistics of e-commerce won’t matter to a customer if, in the end, the package was delayed, damaged or not delivered.
This is also where the last mile delivery and logistics comes inn, which is the most time-consuming and the most expensive part of shipping. As the term suggests, last mile delivery is the process of getting the product from a nearby mail center to the customer’s doorstep. Bespoke products and services, like delivering to your doorstep, are always costly because of the economies of scale. Let’s look at why that is using the following example.
Imagine buying a mouse pad online. Let’s say that for some reason, you are the only one who ordered something online in your area. A logistics company will not have any incentive to deliver your package. Every empty space inside a delivery van on transit is a financial opportunity loss for the logistics company. So if you want to have your package delivered without waiting for more orders in your area to come in, you have to pay extra to offset the cost of the empty space.
Another factor that makes last mile delivery expensive is its time-consuming nature. It involves passing through traffic, navigating through and locating delivery points and having multiple stops along the way. And the same opportunity cost principle applies here. Every time a delivery van stops for a long time, due to traffic or whatnot, it’s also losing money.
The only way to keep last mile delivery costs low is to keep the demand high--meaning the delivery vehicle is always packed to the brim--or to push the cost onto the consumer in some way, most commonly through a subscription model. This ensures that if the delivery vehicle goes on transit, even if it’s not fully packed, the space gets paid for by the subscription fee.
Shopify Fulfillment Network
Now that you’ve got the basics of the complicated logistics of fulfillment and delivery down, you’ll notice it’s really hard to make delivery work every time when it’s at the mercy of multiple people. This is one of the reasons why Shopify wants their own fulfillment service. The fewer people that Shopify deals with, the less money spent on moving the package from one place to another. It would also mean there would be fewer expenses passed on to the customers.
But the main goal of Shopify in building their own fulfillment service is to build out the final piece of their e-commerce ecosystem. To be a literal one-stop shop for e-commerce.
To have an ecosystem is to have control at every part of the e-commerce process and ensure that quality for every transaction.
A very good example of a tech ecosystem is Apple’s.
Some people have the impression that Apple is very expensive for no reason. They say it’s just because of the brand and it’s marketing, but it’s not. It’s expensive because you pay for the convenience and security of buying within an ecosystem.
An iPhone is expensive by itself, but if you’ve bought multiple Apple products and experienced its ecosystem, you know that it’s worth the money. The seamlessness of using multiple Apple products working together really well is extremely convenient to say the least. And that is what contributes to its cost. You pay for a product that is guaranteed to work across all its products.
Some people criticize Apple as a walled garden, but this is also the reason why Apple devices are the most secure devices ever. Apple has an almost absolute control of every part of their devices, and that’s what makes them the most reliable consumer products, especially for professionals.
One of the biggest trends in marketing right now is omnichannel strategy. This means that a company and its consumers can communicate with each other through multiple channels seamlessly. Omnichannel support prioritizes the customer’s experience, no matter which channel they are communicating through.
Shopify’s fulfillment network will also enable them to have that approach for its merchants and their consumers.
A merchant will always want to ensure that the product be delivered on time and safely to the customer. He has all the tools and manpower to do that in the store itself, but once the product goes to the hands of logistic companies, all the control he has is lost. All that he can do is observe the package.
Shopify’s own fulfillment system means that any Shopify store, regardless of the size, will be able to ensure product-to-customer every time.
Shopify’s own fulfillment system gives merchants the opportunity to stand out.
This is a huge plus for merchants, compared to Amazon’s fulfillment system. Some people can forget your store and think that they bought your product from Amazon, because the package is labeled by Amazon. Shopify’s network will give merchants the option to customize the packaging.
And since online stores through Shopify will have this much control over their processes, they can definitely stand alone on its own, with Shopify just providing the platform and the tools. It’s like being a shop on the street rather than just a product on a shelf (as you are on Amazon).
Competition is always good for the industry
You’ve got to give it to Shopify for having the ambition to innovate and the guts to compete with the reigning king of e-commerce, Amazon.
Amazon’s fulfillment service might be the gold standard right now, but for Shopify to launch a competitive fulfillment service while being 22 times smaller is a formidable feat. Shopify does not fool around.
Amazon grew as large as it did not because it is a monopoly, but because it competes with itself. They always want to one-up what they did before. And that’s why competition is always great for the market.
Competition forces other e-commerce platforms to innovate more, find ways to better their service and keeps the top platforms in check. It tells everybody in the industry that they have no time to rest on their laurels, which is good for everybody.
Shopify’s Goal: Customer and store owner fulfillment
It’s easy to forget how far we’ve come when it comes to technological advances. The fulfillment service we’re used to is so efficient, we sometimes take it for granted.
The thing that you bought online in two minutes can be at your doorstep in just a few days. It’s crazy to think that just a few years back, buying something was less of a convenience and more of a chore. Not too long ago, online stores were just for special and rare items.
Now accessible e-commerce has changed the market for everyone. Consumers can buy almost anything, anywhere, anytime. It’s convenience at its finest.
E-commerce also opened the doors to more business owners. Any person can start an online business easily. But Shopify did not stop at just providing a platform. They really want merchants to have all the tools they need in order to be successful with their online stores.
Their eagerness to innovate and push their boundaries shows what Shopify really cares about: their merchants. Having their own fulfillment system, gives SMB (small or midsize business) owners the opportunity to operate like large online stores by using Shopify’s ecosystem.
Shopify Fulfillment early access qualifications
If you are interested in trying out Shopify’s fulfillment service, it is currently only available for “qualified merchants” in Nevada, California, Pennsylvania, Ohio, Texas, New Jersey and Georgia.
Qualifications–according to Craig Miller, Chief Product Officer of Shopify–are assessed “on a case-by-case basis depending on their product types and fulfillment needs.”
He also said that at launch, the fulfillment network aims to target small to medium online store owners who have difficulties with their third-party logistics partners or want to expand their fulfillment processes.
If you are qualified, we recommend that you try out the program as it’s going to boost your control over your store, offering you...
- 99.5% order accuracy
- Hands-on warehouse help
- Low stock alerts
- A single back office
- Recommended warehouse locations