If there’s one brand that has revolutionized the concept of customer delivery, it’s Amazon. Through it’s Prime delivery service, it has raised the bar – and consumer expectations – on fulfillment, promising to provide customers with their goods in as little time as one hour.
This is creating golden opportunities for retailers to impress their customers with super-quick delivery, yet many ecommerce companies haven’t yet signed up to Amazon’s Prime service; despite it being rumored to include more than 50 million members worldwide.
Why?
Unusually it’s not the cost of fulfillment. Usually, the quicker the goods must be dispatched, the higher the price retailers must pay. However, this rise in outgoing costs can be counteracted by an increase in repeat business placed by satisfied customers.
In the case of Amazon, though, the marketplace takes care of fulfilling and distributing goods on behalf of retailers, shouldering the burden of speedy delivery in the case of Prime customers.
So what’s really stopping them?
The truth is, many businesses are worried about the strain Prime membership places on resources. Although there are some smaller companies selling through online marketplaces alone, the majority of retailers are balancing their Amazon order management with sales through other channels – such as their own ecommerce platform, stores and affiliates.
And it’s not just the stock heading out of the distribution center that is cause for concern; they’re also trying to master Amazon inventory management versus goods in storage in other locations, ready to be distributed through alternative trading channels.
If this is the case, why become a Prime retailer?
Of course, turning stock around and replacing it within a short time period is going to challenging. However, retailers that upgrade to Prime delivery are giving customers something that differentiates their offering above their competitors.
One of Amazon’s major challenges, in ecommerce retailers’ eyes, is the fact that they sell pretty much everything. This means that when a customer searches for a product, chances are it will be displayed alongside rival brands. Even if not, loss of a sale to a competitor is only a click away.
Prime customers will actively seek suppliers who offer Prime delivery, as this makes the transaction cheaper and more convenient. By targeting this rapidly expanding consumer group, retailers are reaching new audiences looking for quick delivery, and it’s Amazon that takes care of the shipping logistics.
However, increased business equals quicker replenishment cycles, and this is where lack of integration between Amazon order management systems and business flowing through other channels can really hurt ecommerce retailers. After all, the reputational cost of being repeatedly out of stock is potentially much higher than charging customers for delivery.
But the solution for online businesses shouldn’t be to shy away from Amazon Prime. Instead, they should be reassessing their planning and supply processes to identify how the demands of operating a premium delivery service can be incorporated into their overall inventory management activities.
If utilized efficiently, Amazon Prime can be a powerful tool for growth. The secret is to get back-end systems aligned before launching new functionality to customers.