Kelly Sanchez: Hello everyone. I’m Kelly Sanchez. I welcome you to today’s webinar, Managing the Complexity of Order Fulfillment in Online Marketplaces. I would now like to introduce our presenters.
Toby Rush is CEO of Smart Warehousing. He is a serial entrepreneur and investor with 20 years in the technology sectors. He started and successfully exited multiple companies, one of those in the warehousing and logistics center. His last company sold to Alibaba, where he spent three years as a senior member of the management team, seeing firsthand the next generation of e-commerce and logistics at China’s scale.
Joining him is Kevin Ahrens. Kevin leads the solution team at Smart Warehousing and works with hundreds of clients each year to optimize their omni-channel supply chain. He leverages his knowledge of domestic LTL and small parcel shipping to provide clients with the lowest possible cost per unit, while still meeting the service requirements that retail vendors and e-commerce customers have grown to expect.
Before we get started, I’d like to go over a few items so you know how to participate in today’s event. You have the opportunity to submit text questions to today’s presenters by using the Q&A tool in your control panel. You may send your questions at any time during the presentation. And without further ado, I’ll give the floor to Toby and Kevin.
Toby Rush: Awesome. Thank you, Kelly. Appreciate everybody joining us today as we share a little bit about some thoughts and ideas around market trends and just kind of the crazy world that we live in. So again, my name is Toby Rush, CEO here at Smart Warehousing. I just joined the company on September 1st. So I’m still kind of getting my feet up under me. I’ve done a lot of listening, a lot of learning, a lot of conversations.
And that I’ve kind of come at both a kind of a little bit of the company, as well as this market with some kind of fresh eyes, a little bit different perspective, there’s been a few nuggets and a few things I thought, “Wow, that’s kind of interesting. That’s unique.” And I want to share a few of the market trends, some of the things that I’m seeing, just some perspectives that I’m bringing to the table with you guys.
And then the second half of the session here today is really we’re going to kick it over to Kevin, who really lives in this world day-to-day, working with customers. He really understands the ins and outs of how are we bringing product in? Delivering service to retail, to wholesale, to parcel, to anywhere and everywhere at any given time. So again, appreciate your time today. So some of the market trends and bigger picture.
So the first one’s kind of duh. E-commerce is big. It’s getting bigger. I mean, the stats on this are really pretty tremendous. In 2018, right at 10% of all of retail goods were bought online. In 2020, two years later, that’s jumped up almost 50%. So about 14.5% of all retail spending will be via e-commerce this year. And they’re projecting by 2024 that jumping to almost 21%.
So that kind of jump, when you’re talking about the level of retail goods processed in the United States, that is a staggering. Probably one of the most surprising in that, at least surprising if you were to rewind a year, is 10% of all groceries this year will be bought online. My mom is ordering products from Costco and having them delivered to her house, we’ve crossed a line there that I don’t think we’re going to go back.
And her response is, “Wow, that was pretty cool. That was kind of convenient.” She’s not going to go back just to doing the things that she has always done. And we’re seeing that really across the spectrum. We’ve literally compressed five years into five months, and there’s going to be some really interesting implications from that for everybody involved in and around this area. What are other interesting things that I’ve been able to bring to the tables?
I spent three years working with Alibaba. So in China and in India, Indonesia, I saw a lot of the markets how they’re developing. And China in particular is probably the best model of they skipped a lot of what we’re doing in the United States when it comes to e-commerce and logistics and retail. So they went straight to mobile. There was no really laptop or desktop that they worked with. And they very quickly took to e-commerce.
They’re a number of years ahead of us on how much they buy and shop online. And when I was over there, one of the really big pushes wasn’t, hey, how do we stand up one more digital e-commerce line? It was, how do we make the experience more integrated? And so the phrase they use a lot was OTO, right? And OTO is online to offline, but it’s also offline to online. And sometimes it’s online while you’re offline.
And that kind of integrated experience from a consumer is so much better. A simple example that drove home for me the power of kind of making these services and the ability to buy kind of when I needed, delivered it when I needed, was before you kind of go into work one day, they had this example of I’m getting ready for the day, I’m thinking about what we’re going to do for dinner. I jump on my phone. I order a few things from the store, but realize I probably want some produce and I like to pick my produce out. Maybe I like to pick my own meat out.
So I’ll build a shopping cart before I go into work. Maybe during my break or over lunchtime I actually go to the store, pick out the produce, pick out the meat that I want. A lot of times these grocery stores are cooking pieces of it for you. It automatically is added to your cart, but you’re not taking it home with you. So basically you’re ordering it. You actually picked out the stuff that you wanted, your virtual cart and your physical card kind of merge.
I go back to the office. I remember a few things that I forgot. I’ll add a few more things to my cart. And then I’ve got a 15 minute window those things get delivered to my house at a particular time. Where in today’s world, you either order everything online or you tend to go to the store and pick it up. And when you go to the store, really your only window is kind of after work. You’re not going to buy fresh produce and then leave it in your hot car all day.
You’re not going to go buy milk and bring it into the office. And so allowing for this fluid nature of kind of where I shop, the kinds of products, when I’m ready to buy, kind of the spur of the moment, oh yeah, add this one more thing. And then the delivery of deliver it to my house between 6:15 and 6:30 tonight just offers such a fluid and integrated experience of omni channel kind of feels fractured and disparate, where I think what we’re going to see and, again, from the experience that I’ve seen over in China with their both retail e-commerce and logistics and delivery network is more of this kind of OTO.
It doesn’t matter where I’m at or what I’m doing, I need an integrated shopping and delivery experience. And of course, the market trend, COVID clearly has had massive impacts. But even before COVID, we started seeing trade wars and a lot of things happening, whether between the US and China or China and India. These containers that they’re moving through our supply chains, they’re shipping for products, they’re shipping empty products.
When a country shuts down its borders for a pandemic like a COVID or there’s even a week or two of disruption because of a trade war and there’s saber rattling, that is a massive hemorrhaging impact on our supply chains. And for years and years, decades, we have spent an enormous amount of time thinning our supply chains, getting the just in time. Really we had a fine tuned machine. And as long as things continue to flow, we could really depend and it was simply an assumption that, oh, yeah, containers are going to show up and we’ll have empties and we’ll have fulls and the ships are going to be running. That’s no longer the case.
And people have seen the impact and the disjointedness of we really are a global economy and things that are happening in India matter, things that happen in China matter, things that happened in South America matter and they impact everybody. And so we’re going to see a lot of those just-in-time inventory and just-in-time supply chain move to just-in-case inventory, just-in-case supply chain. And we need optionality.
We need variability in how we manage supply chain, manufacturing, distribution, even logistics on our end. Amazon gets all backed up and are like, “Hey guys, we’re sorry, but we’re not taking any more product.” Or FedEx and UPS, “Guys, you get two trailers and no more.” These are some pretty uncharted territories. Everybody across the board need really professional partners and people at the table that have capacity and who have the ability to react and respond to these situations because they’re very unpredictable, but they’re the world that we live in and we’ve got to deal with.
We were also seeing a massive trend. In the past four weeks, we’ve had almost $500 million flow into five different companies, all focused on fulfillment. That is a ridiculous amount of money coming into a relatively few number of companies. And that’s just beginning. So we’re fairly plugged into kind of that venture in private equity world. And when people put that much money to work, the expectation is very significant growth.
Grow at all costs. And if that means just marketing the living daylights out of the customer base. It could be, hey, we’re going to buy the business. We’re going to come up with crazy new financial models. And some of it will be great. Some of it’s going to be terrible. I think one of the challenges that sellers and merchants are going to have is they’ve got increasing complexity, which we’re going to talk a little bit more about today on, how do I talk to my customer?
How do I find my customer? How do I do all these things? So then simultaneously turn around and try to figure out, okay, who’s blowing smoke on what they can really do on the logistics side? Who’s legitimate? Who can I really trust for the kinds of products and complexity that I have and my fulfillment needs? That’s going to be a really interesting and challenging space, at least for the next couple of years, as that money kind of works itself out.
So some of the market challenges. Man, there are so many marketplaces here in the US. I can sell on Amazon, Wayfair, eBay, Walmart, Target Plus, Etsy, Newegg. Goldbelly is an interesting one. They kind of think of it as a frozen and refrigerated platform. Wish. It goes on and on and on. And not only do I have to understand the platforms and how do I target and reach and advertise and kind of gain kind of a mind share, eye ball share, wallet share on these markets, I also have social media.
What about Facebook stores and how Instagram? I mean, they’ve got a really slick method of, hey, someone’s talking about a particular product. They mentioned it. Look at that. That ad shows up. Now I’m ready to buy. Snapchat, TikTok. So many different methods and means with which people are engaging and interacting where commerce is happening. Not only that, but you have your own e-commerce right. If you care about your brand, if you’re selling your own, you’ve got a Shopify or WooCommerce or a number of the other shopping cart platforms to allow you to have your own e-commerce channel.
And brick and mortar, they’re not going anywhere. They’re here to stay. It will shift. It will change. We’ll see it evolve, which is a great thing. But really, they’re not going away, especially if you’re a branded seller market. You care about your brand, you care about your name. You’ve got to still have a least a thought towards that brick and mortar world. And we got do all these things at the same time.
It really will trend towards an integrated approach for the consumer. So whether I’m on a marketplace at Amazon or Wayfair, or I’m seeing something that’s on Facebook, I need to be able to jump over to your website or go into the store and have those flow back and forth in a seamless manner. The challenge is not small on how we reach out, touch and communicate with our consumer. On top of that, consumer expectations.
So not only do we have an increasingly challenge of how we reach out and touch our customers, but the expectations of the shape and size of the products that I can buy are increasingly challenging. I used to be, “Hey, I can get a 12 pack of Coke or I can get a 24 pack of Coke.” When I was like, “Hey, can I get a single Coke? But I just want a single cam.” Or maybe I’ve got a free pack for whatever my situation is. I want three packs or nine packs or a variety packs.
I like Coca-Cola, I like diet Coke, and I like vanilla. Can you give me a variety pack of vanilla, diet and regular Coke? Then the next person is like, “I don’t really like the regular Coke. Just give me the diet and the vanilla. In fact, I order this every week. Can you just put me on a subscription? Send this my way every week. Send it up to me again and again and again.” So the mix and the variety of how people want their products mixed and packaged, again, increasing in complexity, and that trend line will not stop.
They also want any size, any temp, any weight, and they want it now. So consumers expect today. It’s a two-day window. I go online. I expect to be able to get it in two days. Next year, realistically, it’s going to be one day. Definitely it’s where Amazon is pushing folks. It’s why a lot of folks really are looking for that more outsourced model of, hey, I’ve got to have a national partner that could hit two day, next year is one day, the year after it’s probably same day for a lot of products. And they expect it free.
They expect it perfect and they expect the returns to be simple. So as people get comfortable and understand the returns process, I think we’ll continue to see that flywheel get bigger and bigger and stronger and stronger for buying more stuff online, higher levels of expectations. I want to be able to deliver it, Amazon’s now pushing for six days a week. Soon that will be seven days a week.
And again, these things really continue to compound on each other, making for a pretty fun and dynamic, but yet a very challenging environment. And so as you think about the complexity of what we have to do, really sellers and merchants have to do on call it the front side of their business, their consumer facing side, to be able to brand and to message and to find those consumers, to pull them into a sales process, to work them through the sales funnel, to actually get to a shopping cart, to not abandon the shopping cart, to actually check out. That’s complex.
And the back end of the logistics is equally complex. So the front of the store and the back of the store have complexities that raise together. And so as we think about kind of the omni-channel, the OTO, the backend ability to say, hey, I got to ship to Walmart and they’ve got a very specific retail compliance. Well, now I’ve got to ship to Target or Home Depot or Lowe’s or Bed Bath and Beyond, or Kohl’s. I need to ship to a dealership in the middle of nowhere.
I got to ship to Amazon. They have their own requirements. I’ve got drop ships that have different requirements. Being able to handle the complexity of the backend truly does mirror the complexity of the front end. So sellers are left with this question, like, hey, what’s the highest and best use of my time? I’ve only got so much time. I can only learn so many new things on a given day.
And most folks rightly will say, “I’ve got to focus on the consumer. They’re my customer. They’re the ultimate driver of my business.” So I got to make sure I understand where my consumers are going, where they’re talking, where they might have the spur of the moment I want to be able to buy. I’ve got to be there ready to be able to show them my product and then have a really seamless way for them to purchase that product.
And realistically, I’m going to partner in the backend. But I can’t do the front end and the back end to the level that I need in the dynamic and fast paced environment that I’ve got today, which brings us to kind of fulfillment. And so obviously smart warehousing, that’s kind of what we do. We’re in that order fulfillment, that warehousing world.
And so I spent a good deal of time, again, my first few months at Smart Warehousing understanding, okay, what are the options? Who’s out there? How do I get a product off a container in a port, into under rail, under a trailer, into a warehouse, back out to other warehouses, eventually either into a retail footprint or to someone’s front door.
In my mind, I kind of broken up into these kinds of five basic segments. And there’s probably some mixes and there might be a few others, but these five are fairly solid. One of the biggest ones, and I have been amazed and impressed at how large Amazon’s FBA program is and fulfilled by Amazon. Hey, ship us your product. We’ll take care of everything else. It’s an easy. It’s a great message.
As it’s grown, I think it’s become, if you fit inside the Amazon box, it works really well. If your primary channel is through Amazon as the vast majority of your product, if you’re not branded, your brand isn’t as important, FBA likely is a great path for you. They’ve got a really one-stop shop. They’re investing a massive amount in their infrastructure.
And so if Amazon is kind of your primary or only channel, FBA is great. Shopify Fulfillment Network announced last year to great fanfare their fulfillment network. It’s really early. It’s very, very small at the moment. Very limited skew set, very simple skews that are pulling through. Big plans. I think ’21 it’ll still be relatively small.
But it’ll be really ’22 and ’23 until we really begin to understand what’s the size and scale and scope and depth and breadth of what the Shopify Fulfillment Network will be. So as it evolves, we think we’ll see more. But as it is today, it is incredibly small. I wouldn’t say it’s irrelevant. It’s just very small volume if they’re able to pump through that, but will be a player for sure in the next few years.
The biggest group that I probably spent the most time looking at is Asset Light, almost a 4PL model. So there’s a number of folks. In fact, the vast majority and all of that $500 million went into companies that are taking an Asset Light or software-only approach, where they’ve got their software, and they’re going to say, “Hey, we’re going to almost be like an Airbnb of warehouses.”
We’re going to go get a bunch of customers that need places to put product, predominantly eCommerce products, and be able to ship out. And then they’re going to go get hundreds of warehouse providers that have excess capacity and the pitch to the the seller or the merchant is, “Hey, guys, you can use a software, really well done, easy to use. We’ll manage all the warehouse.”
So we’ll put you wherever you need to be, in as many warehouses you need to be, and it kind of warehouse on-demand, right? It’s the Airbnb for warehouses or the AWS for warehousing. And that works really well if you have a certain type of product and fulfillment needed. So it’s relatively simple fulfillment. One of the ways I’ve wrapped my own head around this, that I’ve kind of explained and talked to others, is I love Airbnb.
I’ve used Airbnb a bunch. It’s a great service. And if I just need a bed and a place to stay and I’m in and I’m out, it’s awesome. But an analogy of warehousing, if you need the Airbnb host to make you breakfast and then lunch, and then host a dinner party, and to do that across 12 geographies and provide a similar level of service and experience across those 12 completely different houses, there’s no way.
There’s a level of complexity that Airbnb can’t handle because the consumer can only talk to Airbnb. Airbnb only talks to the host and nothing can ever cross. So as the complexity and the scale increases, the Asset Light model is really going to struggle with customer service and providing a little bit more complexity. But if it’s relatively simple, if it’s commoditized, it’s I’m going to grab a box, I got to put a label on it, I’m going to ship it out the door, it’s going to work really, really well.
But it’s kind of understanding that Asset Light model. The fourth type of service here when we think about fulfillment really is that tech enabled and vertically integrated. And that’s where smart warehousing fits in. So we’ve got 32 warehouses. We’ve got 10 million square foot. We’ve got spread across 12 different geographies and we’re open seven days a week.
It’s our own warehouse managers. It’s our own team of supervisors. It’s our software that’s kind of wrapped around all of that, which allows us to really provide a much more kind of a white glove experience, heavily customer service. We love to talk to our customer and we love it when our customers want to be able to talk directly to our warehouses.
The downside is we’ve got 32 facilities. We’re not opening a 33rd facility tomorrow. We’re not opening our 50th facility in two weeks. With the Asset Light, they are able to flex and scale very quickly. Geographically in particular, we’re going to be more limited in that. So we do have great coverage. I think we’re at 100% two-day coverage today. We’re at 74% one-day coverage right now.
By the end of next year, we’ll be over 95% one-day. So we have a plan. But again, we’re going to be much more limited on physical presence on where we can be. Because again, it’s kind of our people, it’s our technology, it’s our buildings, but that also allows us to make it kind of our promise. So the fifth group, old school 3PL’s, they’re in trouble.
They’re going to struggle. So simple pallet in, pallet out. So we’re trying to be smart warehousing, kind of like dumb warehousing. It’s pallet and pallet. Anybody with a forklift, anybody with a warehouse will likely be able to manage that. And it’s okay business and it’s business that’s got to be done. It’s just not going to be very sophisticated.
We’ve had a number of customers move over to us where kind of their old school 3PL were managing, again, simple kind of I think a whole good or a machine, a mower in and out. But as soon as they started adding complexity of, hey, I need to add all these extra service parts. I need to add a new e-commerce line. I need to add these other things that created really like an e-commerce like feel to it, the software and the people and the systems and processes really just fell over on his face.
He just couldn’t handle the complexity. Everybody got angry. Everybody got upset. And it’s really we weren’t set up for that level of complexity. So I think the old school 3PLs will continue to manage a lot of the wholesale pallet in pallet out type of world. But as merchants and sellers move more and more to this blended kind of physical brick and mortar and e-commerce across lots of channels that’s true OTO, I think those guys are really going to have to transform, or they’re going to have a smaller and smaller market share to go after.
So none of these approaches are wrong. Like a lot of things, they’re just different. And so understanding your own fulfillment needs, understanding kind of where you’re trying to go, what kind of partners you’re looking for. And then where do these kind of comparative advantages across these four or five different sets work for you? And be able to find that signal out of the noise in that fulfillment world.
And I can probably go on and on for a long time on interesting nuggets and insights and different pieces. And we’ll have a time here in a little bit to kind of open Q&A. We can dive a little bit more into that. But in the meantime, I’m going to kick it over to Kevin. So Kevin has kind of lived in this world, really understands as he’s really helping customers problem solve, build solution sets, really kind of, what are the challenges that they need solve and then kind of when and where can smart warehousing kind of help with that? So I’m going to flip it over to him and he’s going to talk a little bit about what are these common challenges that we’re seeing across customers. So Kevin, take it away.
Kevin Ahrens: Thanks, Toby. Really appreciate it. And thank you everyone for joining us today. As Toby mentioned, I lead our solution design team. So in my role, I listen to all of our customers who are making inbound inquiries to smart warehousing, listen to their heartburn that they’re currently experiencing, either with another 3PL or maybe an in-house solution, or maybe they’re new to the US market and they’re looking for a partner to get in into the fulfillment world.
I also spend a lot of time understanding the shifts in market. So understanding the changes that we’re seeing, the growth in B2B or B2C, retail, dropship, whatever that shift may be. And then in my team, we design and implement custom solutions. So really in the past year we focused on trying to understand what challenges our customers are feeling in this emerging market and how we can help. So we’ve highlighted six.
I’m curious if any of our attendees are experiencing the same or have any more to add. Obviously I’d love to connect with everyone after the webinar today and see which ones of these six hit you the hardest or which ones maybe aren’t as applicable and any new ones. So the first is a national two-day shipping network. So obviously in today’s direct to consumer world, everyone wants things freer and faster, as I had a prospect tell me the other day.
A lot of that falls on the small parcel carrier network and still the need to get everything delivered in a two-day window. So realistically, you need to be about 680 miles from your customer to deliver it through the two-day window on a FedEx home delivery channel. And what we’ve done is we’ve identified that warehouse locations in Seattle, Los Angeles, Kansas City, right outside Philadelphia and Southern Florida would give you greater than 99% of the US population covered in two-day standard shipping.
The next one is the emergence of the cold chain fulfillment. So as Toby mentioned, 10% of groceries are being ordered online. As that market continues to grow, we know that our customers and customers all across the network and all across the marketplace are going to need more two-day fulfillment. So the growth of a multi-market network and adding reno in Nevada and adding something in Philadelphia would give you 95% two-day coverage, allowing you to use less dry ice.
Obviously the big thing in the news right now is the COVID-19 vaccine and the use of dry ice with that product. So using less dry ice is always beneficial. And then a lot of things that I hear about right now are sustainable packaging. So the green cell foam that goes inside of a corrugate liner instead of the EPS foam cooler box, that requires 48 hour delivery.
The manufacturers of the green cell foam don’t typically endorse it for 72 hours. So growing that network is going to be increasingly important. The third challenge that we found and we’re focusing on is the drop shipping and the retail compliance world. I personally feel like retailers are using this compliance network that they have to increase the revenue that they’re losing from in-store foot traffic.
So we like to stress the importance of our customers finding a warehouse partner that can help them or having an in-house solution that can meet three really important criteria. The first is the routing and the ASN submission for the order. The second is the label content and the label location on the package. And the third is the cutoff time and the ship windows to meet the retail compliance requirements.
The fourth challenge we’re facing is product restrictions. So customers who have temperature sensitive product, whether that be frozen, refrigerated, freeze or melt protect, have an even smaller selection when it comes to fulfillment partners or fulfillment softwares, WMS or in-house solutions. And then also all of our customers, regardless of temperature requirement, who have lock control serialization requirements, really needing to be able to track product at the order level or at the unit level.
And then also our customers who have hazmat materials, whether it be full hazmat or limited quantity hazmat with lithium ion batteries and aerosol as well. To me, the most important one is the customer service. And Toby hit on it a little bit. It’s our fifth challenge. It’s the one single source as the voice for the customers. So we feel like the Asset Light providers do play an important role in the marketplace for our customers.
They solve a niche. If you need a warehouse in billings Montana, it’s likely that they’ve got somebody for you that maybe somebody like smart warehousing doesn’t. But what we found and what we’re hearing from our customers is that they feel like when an issue inevitably arises, they’re playing a game of telephone. It goes from customer to Asset Light provider to warehouse, back to Asset Light provider before the customer finally gets a resolution.
So really stressing the importance of that. And the sixth and final challenge that we found is the need for value added services. This can be a variety of things. The one that we see the most is prepped for FBA. But we can also talk a lot about transload, kitting, labeling and returns. So, as Toby mentioned, the exponential growth in Amazon FBA has been apparent in the last couple of years.
So we’ve identified eight attributes of Amazon FBA that we wanted to discuss. Obviously, most people are familiar with the shifts in the Amazon requirements. The announcement in the fall that FBA was going to have a reduced allowance for slow moving inventory or surplus inventory. And then also the announcement that starting February 1 some of the changes to the seller fulfilled prime offering.
The first one for me is brand awareness. I’m a pretty devout Amazon user. And I have found that when I buy something from Amazon, I always associate the product that I receive with being from Amazon, not being from Acme toys. It shows up in the smiley face box. It’s got the Amazon packing list and I’m ordering it through the Amazon network. That brand awareness is extremely important for our customers and FBA kind of strips you from that.
The second one is fitting into Amazon’s box. On the 2020 Amazon pricing, there are 18 sizes and 25 categories that our customers have to fit into. Additionally, on our second attribute, there’s no marketing material allowance, and you have limited acceptance of product with expiration dates. I know that based on product category, Amazon has a available shelf life requirement. And so customers have to fit into that box to make that switch.
The third and fourth attributes for Amazon kind of go hand in hand. It’s the product and inventory restrictions, as well as new product launches. I was really surprised to learn about the limitations that Amazon is putting on new product launches. And when I’m talking to customers who are entering the market, Amazon FBA is maybe willing to take on a hundred units. But if the initial launch is for a thousand units, what backups sales channels do you have for those other 900 units?
Are you launching a Shopify? Are you selling on WooCommerce? Are you also on Amazon Seller Central? And so what are you doing to make sure that sales aren’t halted while Amazon is deciding if they want to increase their allowance or product with you? The next one is the dock-to-stock that Amazon is currently experiencing. I had a call yesterday with a prospect who’s launching product into FBA.
And he’s got experience using FBA with some other companies that he’s had, but he was saying that his expectation is two weeks from when the product arrives to Amazon to when it’s available to sell. And some of my other calls leading up to the holiday, I heard that stretch out to as far back as four weeks. And to me, that really makes you as the seller handcuffed in what you can have in FBA.
They’re saying you can only have so much product. But when you send new product in, it takes two to four weeks to make it available to sell. So understanding that dock-to-stock is certainly a challenge. The next one is the peak season and bottlenecks. So right now, obviously we’re in our holiday season. We’re seeing a rapid increase in order volume and just sheer packages that are moving.
For me, at my apartment complex, we’ve got a package room. We’ve got those parcel lockers that a lot of the new apartment complexes have. And I get daily emails from the complex saying, “Hey, don’t forget to pick up your packages.” So that’s what tells me that Amazon’s priorities are always consumer first, Amazon second, and seller last. As a buyer, I love that. I love that when I buy on Amazon, I know that as the purchaser I’m going to be in good hands.
But as a seller, maybe you don’t feel that same love from Amazon. So they brought in a few alternate Amazon channels to FBA. Obviously seller fulfilled prime and fulfilled by merchant are great options. But when I’m talking to customers, we stress the importance of a really solid in-house solution or an outsourced 3PL network who can handle the locations to be able to meet all the prime requirements, but also has the system to be able to integrate.
I saw something when Amazon came out with their announcement that fewer than 16% of prime packages hit the two-day requirement. And personally, I believe that a lot of that is on the small parcel carriers more than on the warehouse partners. And so having an in-house system that’s flexible and being able to ship on a third-party account number is extremely important.
I imagine, in the next year or so, Amazon will say that FBM and SFP sellers have to use the Amazon carrier channel. And the last one for us is Saturday shipping. This is the last one that we want to call out. Making sure that the 3PL or the in-house warehouse that you have is available and going to be open on Saturday, starting February 1. And like Toby mentioned, we’re probably moving to seven days a week in the following years.
So with that, those are the six challenges that we see and that we’re hearing from our prospects and customers about the omni-channel fulfillment world, and then the eight attributes of FBA that we like to call out. So, Toby, I’ll turn it back over to you.
There we go. Sorry about that. Kevin, appreciate just kind of the insights and thoughts. So again, kind of from the feet on the street. Let’s open up. We ran a little bit long. Kevin and I can get kind of excited about some of the nuts and bolts of what we do. Let’s see. Kelly, do we have maybe just two or three questions that we can hit here from the audience before we let folks go?
Kelly Sanchez: Yeah, of course. We had a great one come through that reads, do you broker out warehousing?
Toby Rush: Good question. So we do not. A lot of stuff that we do, kind of the business model that we’ve taken is really it’s our people, our buildings, it’s our processes that allows us to kind of make a promise. There are a lot of folks that do and that do work in some. But for smaller housing, no, everything we have is vertically integrated.
Kelly Sanchez: Great. And another one we have here reads, do you allow people to use third-party shipping?
Toby Rush: Kevin, you want to talk a little bit kind of the flexibility and kind of what we do on the shipping side?
Kevin Ahrens: Absolutely. So a couple of things on the shipping side, and this comes up quite frequently. My belief is that some of the market options do require you to ship on their account number. But here we are carrier and account number indifferent. We can work with any carrier. We can ship on any account number, whether it be our own discounted rates or any retailer rates or our customers third party account numbers.
Kelly Sanchez: All right. And here’s an interesting one. It says, can you give some examples of some of the complex kitting and return processes that you do?
Toby Rush: Yeah. Kevin, you want to go ahead and take this one as well?
Kevin Ahrens: Yeah, absolutely. So a lot of what we’re doing on the kitting side of things are building variety packs. So as Toby mentioned, taking a case of regular Coke, diet Coke, and vanilla Coke and making a four cans of each skew 12 pack. So we’re doing some of that. We also do some bundled skews for the e-commerce platform. So you order a green apple, red apple, and yellow apple. We’ll put those all together when we receive the product and inventory it as a kitted skew, allowing us to be a little more efficient on the picking, packing and processing side.
Kelly Sanchez: All right. This looks like it’ll be our last question. It says, what is your perspective on the amount of funding coming into this space and the impact it will have on the market?
Toby Rush: I’ll take that one. I do think it is a growing space. There is a ton of challenges and a ton of opportunity. So kind of venture capital and private equity like to invest where there’s disruption, where there’s dislocation in current markets that are growing and evolving. And that money tends to quicken the rate of change.
Toby Rush: So I think you’re going to continue to see new models, new approaches, new ways to market, new ways to price things, new ways to deliver. And at the end of the day, that’s going to be great for everyone. So there’ll be some challenges and growing pains as we get there. So net-net, when you see folks really willing to invest in a space that ends up being great for everyone though, it can sometimes be a bit of a Rocky road to get there.
Kelly Sanchez: All right. Thank you so much, Toby and Kevin. That is all the time we have for our webinar today. If you have any further questions following today’s discussion, please reach out to Kevin at firstname.lastname@example.org. Please look for a follow-up email, which will include the recorded video from today’s webinar. Thank you all for joining us and have a great rest of your day.
Toby Rush: Thanks all.