Blog/News

The Amazon Effect

Tuesday, 28 July 2020

The Amazon effect is nothing new for those of us who work in the world of logistics. This effect normally refers to the impact that the retail giant has had on traditional brick-and-mortar retail stores, along with the landscape of online shopping. In truth, the meaning of the Amazon effect could be different depending on your intended audience.

 

A traditional brick-and-mortar retail store may refer to the Amazon effect as the negative impact that online shopping has had on their business. With the millions of products available online, combined with competitive shopping and fast + discounted shipping, the traditional retailers continue to lose market shares at an increasing rate to online marketplaces like Amazon.

 

A more modern retailer that is eCommerce focused (or solely based online), may refer to the Amazon effect as the need for these small to mid-market companies to have a presence selling their products on Amazon. This new-found need may be due to the marketing vector that Amazon (specifically Amazon Prime) offers, and the increase in sales that this moniker yields. Inversely, they could be looking to offer their products on the site as a defensive posture to help protect against relevant competition currently selling ‘similar’ items on the site. The Amazon effect for some modern retailers is the quantifiable “need” to have your products available on the Amazon platform (either by FBA or FBM… which is another opportunity that deserves discussion).

 

The logistical arms of companies, parcel carriers, and 3PL’s may have a different view of the term ‘Amazon effect’. For this diverse group, the Amazon effect is the need to provide services that continually evolve, and improve, to remain competitive. This Amazon effect has forced providers to focus on faster order processing with later same day shipping cut-offs, with a decreased dependency on labor. These efforts are pushed forward with technology advancements, automation, and efforts in continuous improvement. The focus on customer service, business agility, and technology have forced these businesses to adapt and innovate.

 

Even as a consumer/ customer, the Amazon effect is tangible. How many times have you competitively shopped on Amazon to see what other, or similar, items are available for quicker delivery at a more economical price? Additionally, how many times have you gone straight to Amazon to look for your newly-needed item – without looking at a larger big-box store or the product company’s website? Amazon has created a position within the consumers' buying habits that companies strive for – to be the first option.

 

At Complemar, we can help you provide the best service offering to your end consumer. The strategic placement of our fulfillment centers allows us to offer you 2-day ground shipping for 98% of the population within the contiguous 48 states. Our proprietary software and technology can offer a unique solution for complex challenges (Serialization, Lot Tracking, Alternate item numbers, etc), and helps us drive for best in class on-time delivery. Additionally, our team of experts and business partners can assist you with the navigation of the Amazon effect – and how you can best position your product/ company for continued success with your customers. We pride ourselves in eCommerce fulfillment, Health Care fulfillment, packaging & co-packing opportunities, with a full-service print facility located in Buffalo, NY.

 

With Amazon's large network of distribution centers, investment capital, technology advancement, and obsession with customer service – the Amazon effect is a real thing that everyone needs to be aware of. It may mean different things to different people within a product's supply chain, but the Amazon effect is affecting the way we do business, whether it is the faster delivery concept that was adopted from Zappos or the quality assurance that Amazon demonstrates on a daily basis. The Amazon Effect is an innovative idea that is reforming and improving the landscape of fulfillment and e-commerce.

Before joining Complemar, my entire experience with the fulfillment industry was as a consumer. My previous background is in food & beverage manufacturing where outside processors and distributors were essential partners.  It’s been enlightening to sit on the other side of the table.  Here is the perspective of my former life. Hopefully, it provides insight into how clients evaluate outside partners from a financial perspective.

Outside Processor/Fulfillment Needs

  • Provide flexible production to meet a seasonal surge in demand;
  • Provide cost-effective solutions for special projects.  These projects included such things as:

o   Producing multi-flavor packs;

o   Producing special themed marketing & product offerings, particularly during holiday seasons;

o   Distributing products from an acquisition that did not fit in the firm’s current distribution and supply chain functions;

o   Re-working products due to manufacturing defects;

o   Destruction of defective products;

 

Strategic Partnering

Finance’s role is to provide analysis of the impact on future results while meeting the objectives shown above.

  • Operations – it’s essential that operational requirements are understood so that internal base costs are properly captured. A clear understanding of the cost to do the outsourced activity will help lead to a positive financial decision;

 

  • Sales/Marketing – Sales & marketing provide input on the packaging and other materials to operations. Understanding these costs is also critical to analyzing who should procure materials and at what cost;

 

  • Quality – Need to validate potential outside partners for compliance with internal requirements and any costs need to be identified;

 

  • Purchasing – validate costs for additional materials as well as assist with RFQ to make sure all costs are included;

 

Putting it All Together

After receiving input from the different teams, the finance work begins.  The final analysis should contain sufficient comparison to facilitate a decision.

  • Tangible costs of each option compared to base;
  • Cost avoidance is an important consideration and should be identified;
  • Intangible benefits that have no identifiable costs or savings, but may have an important impact on the final decision of selecting an outside supply chain partner.

Highlighting these factors will strengthen the presentation and provide valuable data for the analysis that determines the client’s final decision.

Think of packaging that is synonymous with its brand. Perhaps Nike’s Swoosh or Tiffany & Co.’s little blue box and white ribbon come to mind. In the cosmetics and beauty industry, where competition is cutthroat, great packaging is critical. Packaging in the beauty industry must be eye-catching and attractive, as well as able to tempt the consumer over the hundreds of other available options.

Complemar Locations

Rochester, NY (Headquarters)
Harrisburg, PA
Oklahoma City, OK
Reno, NV
Buffalo, NY (Complemar Print)

Bottom Logo