Amazon Launches New Warehousing and Distribution Service, Upping the Game with Competitors

Amazon Major Launch: Warehousing and Distribution Ups the Game With AEO and Shopify

Never content to rest on its laurels, Amazon has introduced a major new supply chain service, signaling its clear intention to be the sole supply chain provider for retailers and brands. Better believe this feeds Amazon's flywheel.

Here are the details:

* Amazon truly trying to get "all of sellers inventory", even slow-moving. Amazon is promising sellers no storage limits. A claim as unbelievable now as Gmail's 1GB storage offer was in 2004. (who remembers this?)

* Will handle auto-replenishment to FBA which is a huge problem for sellers.

* This will also work globally, and sellers can consolidate their global inventory under Amazon instead of managing multiple zones and problems like Amazon US, Amazon Europe, etc.

* Next year (2023), Amazon will expand the service to work in wholesale and retail scenarios to send inventory to stores.

Thoughts:

1 - Similar to the way that Amazon can offer lower parcel rates than anyone in the industry (more volume = lower cost per label), Amazon likely will have lower storage rates than anyone (more volume = lower cost per sqft).

2 - Did I mention that logistics is entirely a volume game? ;-). This is a smart move on their part to go for the whole enchilada.

3 - This reminds me of AWS Storage tiers for fulfillment. In AWS there are no fewer than eight different classes of data storage (S3) with different performance characteristics that sellers can select individually or that Amazon can auto-manage for you. From high-availability to options like "Glacier" for mostly archive and read-infrequent.

I've been waiting a long time for Amazon to bring this idea to supply chain.

4 - FBA has been limited FOREVER, and Amazon needed to expand its storage options for its Buy With Prime launch, as FBA only really works from a storage or profitability point of view for small, very fast-moving items. This changes the game there.

Most people are missing the BuyWithPrime angle here. It is a requirement for this service to be successful.

5 - The biggest threat is to existing 3PLs in my point of view. 3PL has been consolidating lately, this will help turn that trend into hyper-gear.

6 - Big challenge here is, is this inventory optimized for curbside and BOPIS scenarios? A retailer like Target has optimized its entire supply chain to make its stores more efficient. However, most have not and very difficult for Amazon to cover this use case in an optimized way.

For Amazon, major competitors are nipping at their heels in various parts of the supply chain: Shopify, AEO, Flexport, and Maersk, to name a few. This removes some oxygen from the room in this space.

At this point, no one carries more parcels than Amazon, ensuring they continue to extend their lead rather than rest on their laurels to leverage their volume and tremendous investments.