On Prime Day, Sellers Rejoice – And Worry

Amazon AMZN took its time, but earlier this month it officially announced Prime Day would return to the summer. For sellers, shippers, warehouse operators and third-party logistics (3PL) providers, it wasn't much notice but something they needed to deal with.

Prime Days are Monday and Tuesday and are among Amazon's biggest single selling days of the year with special deals.

David Glick, CTO of warehouse technology provider Flexe, spoke with Modern Shipper about the challenges Prime Day represents for sellers and shippers hoping to capture some of the increased traffic to amazon.com on these days.

"It used to be that on Jan. 4 you would also start planning for Q4 to make sure you had enough trucks and buildings [for inventory to handle the holiday rush] … and that was true for sellers as well — you had to have enough inventory," he said. "So you would have consistent loads throughout the year and then you would have this hockey stick. Then Jeff [Bezos] decided we would do this twice a year."

Glick, who spent 20 years at Amazon, including five years as the vice president of fulfillment technology, said it was easier on brands when Prime Day took place each summer.

"It's really hard [for sellers] with Amazon moving the date around each year," he said. "When we originally launched Prime Day, it was in July so you had six months to plan."

Last year Amazon moved Prime Day back due to the COVID-19 pandemic but shifted it to June this year. For sellers on the Amazon platform, that represents challenges not only in stocking merchandise but also securing capacity on vehicles. That is made worse this year due to Amazon's tightening of Seller Fulfilled Prime (SFP) requirements. As of June 1, Amazon SFP merchants, which allows Prime sellers to fulfill their own orders, were required to meet the more stringent one- and two-day delivery requirements set by Prime.

FedEx Cuts Available Capacity

Further hampering delivery capacity is FedEx's decision to eliminate approximately 1,400 less-than-truckload customers from its service network, choosing instead to focus on its more profitable customers. Some of those LTL customers move goods for retailers selling their wares on Amazon. FedEx's decision has removed some capacity from an already historically tight market.

"Volumes are going up faster than capacity that UPS UPS and FedEx FDX can add, and FedEx has decided to keep its most profitable customers and cut the tail, including Amazon, a few years ago," Glick said.

It remains to be seen if sellers will have a difficult time meeting Prime shipping requirements this week — if they even have merchandise to sell. Smaller sellers, like the major national brands, have seen the ocean container crisis impact their ability to bring merchandise into the country as a lack of containers and a booming economy have combined to create backlogs on goods moving to the U.S. from overseas.

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"The first challenge is getting things inbound, but then you have this challenge again in securing capacity in both your logistics network and fulfillment networks," Glick said.

Flexe offers a flexible, on-demand warehousing solution. The company works with warehouse operators and 3PLs that have excess space and secures that space for retailers and internet sellers that don't need full warehouses. Glick said about 30% of warehouse space is underutilized.

"There is always space out there, you just need to find it, and that's what Flexe is very good at," he said, noting that Flexe's business model involves matching shippers with the labor and space they need. "We bring the customer and technology and some expertise and what the 3PLs brings is the space and labor."

Advice For The Future

In times like these, the flexibility can make all the difference for a seller that needs to scale up inventory very quickly to meet Prime Day needs. At this point, ramping up inventory is probably not possible for sellers to meet this week's boost in sales, but Glick offered some advice going forward.

"Right now the only levers they have to pull is making sure the inventory gets into the building, … making sure it is ready to be sold and they have the transportation in place," he said. "Next week it is getting it out of the building."

Following this year's Prime Day, sellers should begin to look at their networks, Glick said. Do they want to run their own multi-node network or operate within Amazon's Fulfillment by Amazon (FBA) operations, which means meeting one-day and eventually same-day shipping. To do that, the seller may need to forward position inventory in multiple locations.

"You need to move inventory closer to customers, which means you need to have 12 locations, and Flexe is uniquely positioned to do that," he said. "We think the world of next day and the world of same day is where we are heading, so sellers need to think about [putting the right inventory in the right fulfillment centers]."

Click for more Modern Shipper articles by Brian Straight.

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