Latest and Greatest News in E-Commerce World

Episode 35

In this episode, we will talk about the latest and greatest news that is happening in the e-commerce world. Big names in the industry are making noise from Amazon to Walmart and even Shopify. Some of them are suffering, while others are emerging. How will the market play out when the pandemic is all over?

Let’s dive into this episode and dig into three articles that Ken and I will dissect to give you a better view of what’s in store for the e-commerce industry.

[00:01 – 13:43] Amazon Racing to Remove the Fulfillment Bottleneck

  • Opening Segment
  • We talked about an article about Amazon’s recent struggles with its inventory.
    • Non-essential jobs are unable to perform
    • Amazon’s inventory is running out of space
    • Amazon’s IPI metrics impact on the market
  • Why We Use Amazon Fulfillment Center
    • Amazon is one of the best logistics company in the world
    • Third-party sellers are having a hard time due to capacity increase
  • Amazon’s inability to handle fulfillment is hurting your business
    • Shipments are being delivered but not being checked-in leading to a decrease in the product ranking
  • Amazon is planning to increase its warehouse volume by 50%
    • This is a 100-year asset
    • This is a very long term bet on the future of e-commerce and the future of fulfillment
    • It could help third-party sellers increase their leverage

[13:44 – 19:25] Walmart Doubles Marketplace Size in a Year

  • We talked about an article about Walmart’s unprecedented growth after partnering with Shopify
    • They are competing with Amazon
    • Wallmart has now the opportunity to take advantage of Amazon’s struggles
  • Partnership between Wallmart and Shopify
    • It is increasing their marketplace and product portfolio
  • We talked about challenges and barriers
    • The harder they are, the less amount of competition you’re going to have when you get across.

[19:26 – 24:04] Amazon Lost Web Traffic Market Share

  • We talked about an article Amazon losing market share as measured by web traffic
  • Third-party sellers are stepping up
  • How can amazon bounce back?
    • This is only a chink in their armor
  • Final words from Ken and me
  • Closing Segment

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David 0:00
The free markets are going to work here. And one reason that I always used Amazon fulfillment was because they were easy to deal with. If they’re going to continue to harp on this ipi score, you’re going to see people migrate over to companies that are easier to deal with and have better fulfillment fees. You know, that’s why I went to Etsy. I went over there simply because they had better fees. When I’m thinking about Alright, where do I want to place my efforts in the next couple months? fees is a huge part of that.

Ken 0:32
Once a jump out of me is eBay, you know, looks like they increased 4% more than Amazon in April that that’s huge.

Intro 0:41
Welcome, everyone, to the www.firingtheman.com podcast, a show for anyone who wants to be their own boss. If you sit in a cubicle every day and know you were capable more, then join us. This show will help you build a business and grow your passive income streams in just a few short hours per day. And now Your host serial entrepreneurs David Schomer and Ken Wilson.

David 1:05
Welcome everyone to the firing the man podcast on today’s episode, Ken and I are diving into some current news going on in the e commerce space. We frequent a website called marketplace pulse on a pretty regular basis and pulled up some key articles that we’ve come across in the last few weeks. The first one we’re going to dive into is an article titled Amazon is racing to remove the fulfillment bottleneck. Now can I can tell you in my experience, I have felt this fulfillment bottleneck What about you?

Ken 1:38
Yeah, absolutely in it. It’s something that we you know, discussed on a previous podcast, but it’s if you’re selling on Amazon right now, it’s impacting you. Hands down.

David 1:48
Absolutely. I remember and march 17 was a landmark day when I found out that my items that I was sending in in selling, were non essential man stuff that really hurt my feelings and, and made me a little more sensitive to people that had non essential jobs right in were no longer able to go in and perform their jobs. And so, you know, I look at this and I see, certainly at cons in the near term. But as I read through the lines on this, this means that what we’re doing, there’s demand, right? There’s demand on the buying side of things. More people are shopping on Amazon, and also more sellers are selling on Amazon. And so, to me, it kind of confirms that, hey, we’re on the right track here. You know, I think e commerce is good. You think e commerce is good. And in particular, we both think Amazon’s pretty good spot to sell. And it sounds like there are other people that share that same opinion.

Ken 2:49
Yeah, absolutely. And one thing that’s kind of ironic is I mean, I know we’re in a pinch, you know, we’re in the middle of a pandemic. But what’s ironic is one of the largest companies on the earth is Having growing pains, you know, like it’s growing so fast that it can’t keep up like one of the quotes in this article. I’m gonna I’m gonna butcher this name, but it’s Brian olsavsky, the CFO at Amazon, he said, quote, we’ve run out of space.

David 3:16
And that that’s huge when Amazon says we’ve run out of space. I mean, that’s crazy. And some of the other stats here, it said and 2019, they increased their square footage by 15%. And then they expect to increase their square footage in 2020 by 50%. That’s huge. That’s huge. And, and, you know, I’ve seen I was back and I was city a couple weeks ago, and they just put in a new fulfillment center there, and it is massive. And I can tell you that that was probably not an overnight project going up. But my dad drives by it every day on his way to work. And he said he was shocked by the number of contractors and people that they had out there working on that particular project, and so Amazon’s response To this, but there is going to be a near term crunch where they’re just running out of space. And they’ve they’ve put certain restrictions on people’s accounts. You know, one thing in particular is this inventory performance index. I had a meeting this morning with my PPC manager. And that’s a question that he’s asking everybody is what’s your inventory? performance index score? And mine was 650 are right around 650. And I think a it’s an arbitrary number, but but below 500, you’re going to get major restrictions put on your accounts. And I asked him, I said is it is a low inventory performance index score, is that a function of sending in too much inventory, or constantly stocking out? And he said, it is more often the case that people are sending in too much inventory. They’re getting hit with long term storage fees. And that’s the genesis of this whole problem is they’re out of space. And so they’re They’re wanting people to send in just enough inventory to where they’re in stock, but they don’t have a surplus. And it’s interesting because you’ve got a lot of amateur inventory management people, you know, flooding Amazon with inventory. And it’s one of those components where they need to rely on third party sellers like us to do a better job. And so, I had seen that score floating around in my amazon seller central account. It never meant anything to me because it never had any implications, but it does now.

Ken 5:32
Yeah, absolutely. You know, one of my accounts, I have the ipi scores like, you know, 780 or something is really high and then I have another account that the ipi scores 525 and I looked at them like, and I think it’s kind of crazy. The ipi score is made up of four metrics, and its sell through rate out of stock. rate. And, you know, there’s a couple of them off top my head, I can’t remember those two. But some of those metrics out of the four, Amazon directly impacts two of them with their fulfillment, right? So if I send something in and then they’re not receiving it, it’s out of stock. So that that’s one of the metrics on the API. So the account that I have a 525, then I can guarantee you that some some of it’s because stranded inventory, one of them is stranded in Porto, I have zero stranded inventory on that account, some of the sell through rate is was in the green, but the out of stock rate was way low, in the red, right. So, back in April, May, everybody’s sold out of everything and had a tough time getting more inventory. And when you send it in, it’s taken them six weeks to receive it. So it’s kind of an unfair index, but nonetheless, it’s there, and it’s impacting us.

David 6:50
Absolutely. I think, you know, on something like this, we focus on the things that we’re in control of, and the things that are out of our control, we just forget about it. Don’t worry about it. Don’t stress about it because there’s there’s not shit you can do about it.

Ken 7:04
Exactly. Absolutely. Now, in this article, there was a couple of looks like there are third party sellers and companies that were commenting on this, how this was impacting them. I’ll go through a couple of them. The top one says we have 40 plus containers in limbo. Now, no notice from Amazon and asen restriction only looks at last 30 days of sales, not historical or seasonal, some three weeks, the increase in sales from COVID also wiped out our inventory on best sellers, which has now been out of stock for greater than 30 days and gets a 200 unit restriction. Same thing we’ve talked about right? Even though days 31 to 60 sold over 500 then they go on the list here specific fulfillment center as log jammed, can’t get container appointments now until early September. So it’s almost exactly the same numbers we were talking about on the last podcast episode whereas you know used to Sell 500 units a month, and then you’re out of stock for 60 days, and then you can’t ship anymore in?

David 8:06
Absolutely. You know, I think one thing you’re going to see as a result of this, and maybe this is just my inner libertarian coming out, but the free markets are going to work here. And one reason that I always used Amazon fulfillment was because they were easy to deal with, you know, in my opinion, probably one of the best logistics companies in the world until recently, when they’ve had this hiccup from COVID. But you’re gonna see people adding three PL to their team you did this month is you’ve added a three PL service. And I think if they’re going to continue to harp on this ipi score, you’re going to see people migrate over to companies that are easier to deal with and have better fulfillment fees. And so I know one of my products is right on the brink of on a sizing tier. And in some of the skews, it’s, it’s in the lower Tear in some of the skews, it’s in the higher tier. And I’ve measured it myself. And I know it’s below point seven inches, but you really got to squeeze it. And if I could find a three PL that had a better fulfillment fees, that’s adding profit to my bottom line. And so it’s going to be interesting to see how this plays out with them adding 50% increase in capacity, they’re going to need to continue to be somewhat seller focused, because if they’re not, that’s going to be unused capacity. And so, it is tough right now, as a third party seller. There’s a lot of rules to play by. But again, the free markets are going to act. There’s going to be a supply and demand for logistic services. And we’ll see if Amazon comes out on top.

Ken 9:47
Yeah, absolutely. And to kind of circle back a little bit. We talked about the increased capacity at the CFO mentioned, and they said that that those capacity to 50% capacity for 2020 was not going to come line until q3 and q4. So, you know, we’re seeing this pinch right now. You know, we’re, we’re at the beginning of while we’re in q3 right now. So some of that stuff’s coming online but like it’s not going to be dialed in like something coming you bring you bring a warehouse online, it takes a while to get it dialed in, get workers and get them trained, get get everything functioning properly. So you know, this is going to be, you know, long term and 2021 before all that capacity is up and functioning properly. So yeah, I definitely agree with you, in terms of Amazon is as it’s a chink in their armor, right? They’re grown they grew so fast due to the pandemic that at log jam to everything so now you have third party sellers looking at Walmart, three pls, Shopify, all these other you know, Google, whatever, whatever cases. There’s other avenues you know, so another one of the just a quick one here from another third party. seller says in the same boat, all at the list of Amazon fulfillment center, multiple shipments that have been delivered for over a month and have not been checked in almost half my products out of stock, which is decimating my product rankings. Same thing we’ve talked about. So this ipi score, you know, you can’t get stuff shipped in and when you’re out of stock, it impacts your rankings. It’s just so Amazon’s inability to handle fulfillment is impacting your business, your ecommerce business. And that takes a toll. And at some point, as a business owner, you have to make a decision, you know, when do I pivot and switch gears? Or how do I hold this off until it improves? You know, absolutely.

David 11:40
The last thing I want to comment on on this article is just thinking about a 50% increase in warehouse volume. I mean, they already have a ton of warehouse volume and capacity. I shouldn’t say capacity, but they have a lot of warehouses. So to have a 50% increase That is a long term bet on e commerce in I say that because at some point we’re going to get a vaccine, this epidemic is going to be over, and things may revert back to normal, but they may not. And I think in my opinion, once someone buys something online, they never again buy in, in a brick and mortar retail store. And so, you know, they’re when you think of a warehouse, that’s a 50 or 100 year asset. And so yes, they’re building these warehouses, but that is it. That is a very long term bet on the future of e commerce and the future of fulfillment. And so I take that as a vote of confidence from Amazon that this marketplace online marketplace is going to continue to grow. And once this pandemic is over, people that were brought into e commerce in terms of buyers, they’re not going to go back, although I’m feeling the pinch right now in my own business. I do like to see this Because, again, like I said, I think ecommerce is a great industry to be in right now. According to, you know, the C suite at Amazon, they do too. And so I, I like this. I like seeing this.

Ken 13:15
Yeah, I like the long term play. And, and I just hope that like what you touched on earlier that it could give a third party sellers a little bit of more leverage moving forward. If they increase your capacity, they kind of need us to fill that capacity, right. So it could sweeten the pot for us. You know, Congress might have another answer to that as well. But we will we will. We won’t go into that.

David 13:39
Sounds good. All right. Moving on to the next article. The next article we’re going to cover is titled Walmart doubles its marketplace size in a year. And first sense of this is Walmart marketplace has surpassed 50,000 sellers doubling in size in July 2019. The partnership with Shopify announced on June 15, has accelerated its growth bringing over 5000 new sellers during the six weeks since. This is huge. Yeah, absolutely. For so long Amazon has been, you know, the gargantuan of e commerce and they have such a large market share. And I think you’re seeing the free markets work. The way that free markets work right now, is that, you know, as Amazon becomes more difficult to deal with, you’re seeing, you know, Shopify pop up Walmart, pop up and increase their market share. So I personally, I love to see this.

Ken 14:38
Yeah, same here. I love competition. You know, it says here, Jeff Clements, the VP of the Walmart marketplace, says, growing our marketplace is a strategic priority. And we’re going to be growing smart as we grow. I think that’s, that’s huge. They know, you know, Amazon’s the 800 pound gorilla and they’re, you know, I would say Walmart is the 800 pound gorilla and that Amazon kind of snuck in on the on the e commerce side right now Walmart has an opportunity to, to come back. And, you know, this article, it also mentions Amazon having difficulties with fulfillment recently and Walmart’s kind of swooping in and taking advantage of that. So I think that’s really smart and also growing at a controlled manner. Like this suggests, you know that that is smart. So you so you don’t, you know, you don’t grow too fast where you have issues.

David 15:32
Absolutely. You know, if you think about this business model, there’s supply and demand on both sides, right. There’s supply and demand on the customers that are shopping, right. But there’s also supply and demand of third party sellers like us, and I like to see this competition because in my opinion, some of the referral fees on Amazon are way too high. And there’s not a great alternative though. You know, if you think of Amazon as a mall, it is giant, it is huge. And by having alternatives, this gives third party sellers alternatives to sell their products elsewhere. And so, you know, adding this level of competition, I think, maybe I’m wrong, but I think you’re going to see those referral fees chipped away at in decrease. You know, that’s why I went to Etsy. I don’t know the specific referral rate, but it’s low, much lower than Amazon. And and I went over there simply because they had better fees. And doesn’t mean that I’m abandoning Amazon, but it’s just when I’m thinking about, alright, where do I want to place my efforts in the next couple months? fees is a huge part of that. And so I love to see this competition. And I’m glad that Walmart and Shopify married up and partnered. So Ken, what do you think about this partnership between Walmart and Shopify?

Ken 16:50
Yeah, you know, I think it’s great. I think the the technology and the reach that Shopify has, you know, kind of partnering with Walmart and integrating The Shopify stores and the that technology into the marketplace on Walmart is huge. And it increases their their marketplace and their product portfolio really quick, right? So I think it’s great news. It’s just like what you said the the markets at work? Absolutely, absolutely. A couple of stats we’ll go through right here just to give some specifics. So it says in 2020, so far more than 15,000 new sellers joined the marketplace. And at the start of the year, they were at about 1400 sellers a month and then it says here and July their target is to exceed 3600. So it looks like it’s tripled since January. So they’re starting to compound the sellers that they’re allowing onto the you know that they’re vetting and allowing into the marketplace now. I’m not selling on Walmart yet. I’ve heard it’s, it’s a it’s a lengthy process, weeks, few weeks month, but I like that I like that they’re vetting sellers and it’s and hopefully it’s Not gonna be, you know, like the early days of Amazon where it’s the Wild West and you have these Chinese sellers with 50 accounts and you know, it’s doing all this blackhat stuff. Maybe you, you know, Walmart, studied Amazon a little bit and figured out let’s do this in a controlled manner and, and kind of vet out some of that that crap.

David 18:16
Absolutely Yeah, I would love for them to adopt a similar model from a private label standpoint where they’re acquiring trademarks, they’re vetting companies. I don’t like going over hurdles or barriers to entry myself. But once I’m over that barrier, Boy, am I glad that they exist. Right. So I’ll say like, when I was going through a Brand Registry, I was a pain to get a trademark Yeah, to apply it to weight. But now that I’m on the other side of that, I’m glad it exists. You know, those barriers keep out other sellers. And so I’m a I talk about both sides, my mouth on this one. I like that they exist only after I’ve passed those landmarks.

Ken 18:58
Yeah, I agree. Look at it as I actually like challenges and barriers to entry because the harder they are, the less amount of competition you’re going to have when you cross that, right. Like, as I’m going through something like that. I’m like, this sucks, but you know what a not a lot of people are going to do that. So I’m gonna I want to do it. Right. So, any last minute thoughts on that, David?

David 19:22
No, I think that about wraps it up. All right, the next article is Amazon lost web traffic market share. The article goes into detail. Amazon lost some market share, as measured by web traffic to the top 10 biggest online retail rivals down 52% in January 240 7% in June, yet as the pandemic broad accelerated ecommerce adoption, top players remain the same. And, you know, similar theme to some of these other articles that we’ve talked about, you’re seeing new players here and as Amazon show down or, you know, puts up these hurdles for sellers to overcome. You’re seeing some some new players in the market. And so, as we look at this article, what are some that stand out to you?

Ken 20:11
Yeah, you know, that this, these statistics are are very enlightening. You know, again, this is a news brought to you by marketplace pulse that we’re reading this graph off of. But, you know, some of the ones that jumped out at me is eBay, you know, looks like they increased 4% more than Amazon in April that that’s huge. Walmart, they went up 18%, Etsy. 40%, Home Depot, 41%. Lowe’s. 46, wayfair, 56%. That’s huge numbers.

David 20:48
That is huge. You know, one thing that stood out to me was, you know, we talk a lot about eBay, Walmart, Etsy, but some of these sleepers like Home Depot, target Lowe’s best, buy Macy’s Costco when I think of those that’s more of a retail facing platform. But I think that to the extent that you had a product that would fit in the Home Depot, product catalog, that may be something worth exploring. And I can’t speak to the logistics of how to get in with Home Depot or Lowe’s or target. But you know, the fact remains is people are shopping on the Home Depot calm or on Lowe’s calm. And to the extent that Lowe’s isn’t sourcing those products themselves, they’re going to look to third party sellers. And so I also would think if I was sitting on a panel at Home Depot, looking at other successful companies like Amazon, who does rely on third party sellers, that may be something I would be considering adding as we move forward. And so when you see you know Walmart’s been the ultimate conversion, or they have been you know, it used to be five years ago, if you bought from Walmart, you were buying from Walmart, it And as we’ve seen this transition of them into more of an ecommerce facing business model, you’re seeing third party sellers, who can step up the plate and sell there. And so I would expect that Home Depot, Lowe’s and some of these other more traditional retail branches are going to be looking towards third party sellers as a solution.

Ken 22:20
Yeah, absolutely. And I think, you know, this is obviously just kind of a kind of a short term chink in Amazon’s armor that their that their fulfillment centers failed during this pandemic, you know, they couldn’t keep up with demand, like we talked about earlier. They’re adding 50% capacity coming online in q3 and q4. So, this is a kind of a short term play. But, you know, it did give all of these other names that we listed, it gave them an opportunity to shine a little bit, but at the end of the day, you know, a lot of them are known for brick and mortar stores, and that’s what they’re going to stay as an Amazon is going to kind of shoot back up long term, I think. Absolutely.

David 22:59
Thank you everyone for tuning in to today’s firingtheman.com Podcast. If you liked this episode, head on over to firingtheman.com and check out our resource library for exclusive firing the man discounts on popular e-commerce subscription services that is www.firingtheman.com/resource. You can also find a comprehensive library of over 50 books that Ken and I have read in the last few years that have made a meaningful impact on our business or that head on over to www.firingtheman.com/library lastly, check us out on social media at firingtheman on YouTube at firingtheman for exclusive content. This is David Schomer and Ken Wilson. We’re out

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