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Here's a related development: Amazon has been pushing many of its larger Amazon FBA merchants to use Seller Fulfilled Prime (SFP). Instead of these merchants s

by cepth 8y ago

Here's a related development: Amazon has been pushing many of its larger Amazon FBA merchants to use Seller Fulfilled Prime (SFP). Instead of these merchants shipping from their own warehouses to an Amazon fulfillment center (FC), merchants ship directly from their own warehouse to customers. Amazon is dangling huge fee discounts to incentivize eligible merchants to use SFP. The benefit for merchants is that they get to ship at the negotiated rates for UPS/FedEx/USPS that Amazon has access to. Additionally, these SFP merchants still get the Prime badge. For Amazon, this will likely mean fewer FCs to build, and being able to save on labor, packaging, etc. To me, it was always evident that Amazon loses quite a bit of money on shipping/handling some larger items. When an FBA merchant sells on Amazon, there's a referral fee and FBA fee. The FBA fee is often absurdly low, and might be lower than the cost to just ship from the merchant warehouse to a FC. It seems to make intuitive sense that instead of shipping from point A (warehouse) -> point B (FC) -> point C (customer), if you can ship from point A to point C in a reasonable amount of time, it saves all parties money. ADDENDUM: It's also worth considering that SFP will be great for Amazon's efforts to build out its own delivery fleets. I imagine that in the future, SFP merchants will be forced/given the option to ship with Amazon's own parcel delivery service. This will be a steady base of business (extreme "dogfooding") to start off with, similar to how AWS originated with internal infrastructure for Amazon.

reaperducer 8y ago
I've always suspected that much of Amazon's fulfillment process was a loss leader. It's hard to remember, but before Amazon if you ordered online you had to wait at least a week, and sometimes two or three or more for an item to arrive. "Six to eight weeks for delivery" was a popular cliché for a reason. Because of Amazon, people these days expect to have stuff in a day or two or three. Now that Amazon's killed all of its competition, perhaps it no longer needs to take that loss and can start moving to models that make more financial sense.
- toomuchtodo 8y ago
  If by “killed”, you mean I use Target, Home Depot, and Walmart pickup without issue.
  - ec109685 8y ago
    I agree. Their competitors are getting more competent and amazon can’t do ship to store obviously, which makes them less convienent for certain folks. With things like ApplePay, you can get buy with two clicks, which is only slightly more annoying than amazon.
    - reaperducer 8y ago
      Amazon already does ship-to-store with its massive network of Amazon lockers in everything from Whole Foods to gas stations. It has a much more massive ship-to-store than any regular retailer because it’s not locked into a particular brand. I do wish Amazon would adopt ApplePay, too.
      - sparkpeasy 8y ago
        But Target and Walmart have a large amount of products in stock within an hour or so ready for pickup from small towns on up. That's not true for Amazon except in large cities. For most of the country, you still have to wait one or two days to pick it up if you order with Amazon.
  - reaperducer 8y ago
    While I don't disagree that Target and WalMart are doing a good job of trying to catch up to Amazon (and in some scenarios WalMart beats Amazon), I was thinking more of all the bookstore chains, electronics chains, housewares chains, and department stores it killed. The fact that two discounters are also riding the runaway bucket to the bottom says more about the threat that Amazon poses than their ability to beat Amazon long-term.
hoofhearted 8y ago
Their negotiated rates aren't better, and they are actually forcing sellers to buy USPS postage with Amazon's account instead of the sellers. Seller Prime is a couple years old now and it seemed to backfire on them and it seems they are trying to push sellers off of it by enforcing near impossible to meet standards that even Amazon themselves don't meet.
- cepth 8y ago
  > Their negotiated rates aren't better, and they are actually forcing sellers to buy USPS postage with Amazon's account instead of the sellers. It's true that you're forced to buy with Amazon's account, but this is shipping spending that would've been paid for by Amazon anyway. The merchants are not losing out on any volume discounts, since this was never "their" volume anyways. IMO, this is the way to think about this: if the Amazon-negotiated rate for warehouse -> customer shipping is lower than what the FBA fee would've been (which it often is), the merchant is coming out ahead. > Seller Prime is a couple years old now and it seemed to backfire on them and it seems they are trying to push sellers off of it by enforcing near impossible to meet standards that even Amazon themselves don't meet. Yes it's about 2 years old, but it wasn't something that was widely popping up on Seller Central dashboards until earlier this year. I don't know whether you're referring to the ship-out time requirements, but so far my company hasn't had any issues with SFP. Better yet, the merchant controls which items are fulfilled under SFP, and which are FBA.
rrdharan 8y ago
That AWS origin story is a myth: https://www.networkworld.com/article/2891297/cloud-computing/the-myth-about-how-amazon-s-web-service-started-just-won-t-die.html https://www.networkworld.com/article/2891297/cloud-computing... The Amazon store didn't start switching significant pieces over until 2011-12 I believe...
- blaisio 8y ago
  They still haven't converted everything and don't even really need to. AWS duplicated a lot of internal stuff, it didn't really replace it.
- cepth 8y ago
  Seems like this depends on who you ask? (https://techcrunch.com/2016/07/02/andy-jassys-brief-history-of-the-genesis-of-aws/ https://techcrunch.com/2016/07/02/andy-jassys-brief-history-...) > "It began way back in the 2000 timeframe when the company wanted to launch an e-commerce service called Merchant.com to help third-party merchants like Target or Marks & Spencer build online shopping sites on top of Amazon’s e-commerce engine...At that point, the company took its first step toward building the AWS business by untangling that mess into a set of well-documented APIs." > "The internal teams at Amazon required a set of common infrastructure services everyone could access without reinventing the wheel every time, and that’s precisely what Amazon set out to build — and that’s when they began to realize they might have something bigger." > As the team worked, Jassy recalled, they realized they had also become quite good at running infrastructure services like compute, storage and database (due to those previously articulated internal requirements). What’s more, they had become highly skilled at running reliable, scalable, cost-effective data centers out of need. As a low-margin business like Amazon, they had to be as lean and efficient as possible. > "It was at that point, without even fully articulating it, that they started to formulate the idea of what AWS could be, and they began to wonder if they had an additional business providing infrastructure services to developers." From The Everything Store: >"Groups within Amazon were told to use AWS while the services were still immature, a demand that led to another round of consternation among its engineers." (Page 221) I guess we could say that AWS's first customer was not necessarily Amazon, but the team and infrastructure predated AWS, and AWS was used by Amazon internally.
blattimwind 8y ago
> (extreme "dogfooding") More like grabbing your dog by the neck and pushing its snout into the food bowl; many of these merchants solely exists due to Amazon permitting their existence, with the highly dependent relationship that entails.
- delecti 8y ago
  Considering what we inflicted on wolves (Pugs being one notable example), your characterization might not be a terrible definition for "dogfooding".
ikeboy 8y ago
This is false. You do not get Amazon rates for shipping using SFP. I've used SFP and have talked to many sellers that do as well. You might be confusing this with onsite, where you convert a warehouse and give Amazon much more control over it and get better rates.
- cepth 8y ago
  My company easily does 6 figures in shipping spending across UPS and FedEx annually (on non-Amazon shipping). What we're paying for SFP shipping is at worst equal to, and at best 20% below, what our own rate tables quote. YMMV, but given the variety in what Amazon merchants ship in terms of size, weight, hazardous/insurance status (not to mention shipping origin and destination), don't you think it's a tad glib to tell me I'm "confused"?
  - ikeboy 8y ago
    SFP rates are equal to Amazon MF rates, which are better than public rates but certainly aren't Amazon's own rates being passed through. Being as my info comes from multiple talks with people shipping hundreds or thousands of packages a day I'm quicker to assume there's something confused about your claim rather than Amazon making a change and it not reaching me through any of the sellers that use SFP heavily I network with. I'm not even the only one replying to you that disagrees with your claim
    - cepth 8y ago
      > SFP rates are equal to Amazon MF rates, which are better than public rates but certainly aren't Amazon's own rates being passed through. Refer to your original comment: "This is false. You do not get Amazon rates for shipping using SFP." I took this mean that you do not get any discounted rate from Amazon for shipping using SFP. If you're now amending your claim to say that a SFP seller has access to "Buy Shipping" rates, then yes we agree. And if you're conceding that "Buy Shipping" rates are cheaper than those available to other businesses, then we agree again. At no point did I claim that an individual merchant is getting the exact same quote to ship a package as Amazon would. UPS/FedEx wouldn't allow this, since pickup points are different, etc. But, it is certainly because of Amazon's volume that merchants who want to sell with a Prime badge can now get deeply discounted shipping rates. This is what I meant by "negotiated rates for UPS/FedEx/USPS that Amazon has access to". > I'm not even the only one replying to you that disagrees with your claim At the time of your comment, who else is disagreeing? This comment (https://news.ycombinator.com/item?id=18695969 https://news.ycombinator.com/item?id=18695969) is saying that Amazon's negotiated rates "aren't better". Better than what? Even you agree that buying through Amazon's "Buy Shipping" services are better than the baseline rate tables from UPS/FedEx. What I'm saying is that these rates are better than even the ones available to a merchant doing significant volume.
sct202 8y ago
If you could throw out a number, about how much off of the list rate is the SFP pricing for shipping thru Fedex or UPS?
User23 8y ago
AWS didn’t actually originate with Amazon’s internal infrastructure. It was years before even trivial services were moved to AWS. It was an entirely new business plan based solely on accumulated expertise at data center management, nothing else was shared.

by cepth 8y ago

reaperducer 8y ago

I've always suspected that much of Amazon's fulfillment process was a loss leader. It's hard to remember, but before Amazon if you ordered online you had to wait at least a week, and sometimes two or three or more for an item to arrive. "Six to eight weeks for delivery" was a popular cliché for a reason. Because of Amazon, people these days expect to have stuff in a day or two or three. Now that Amazon's killed all of its competition, perhaps it no longer needs to take that loss and can start moving to models that make more financial sense.

toomuchtodo 8y ago
If by “killed”, you mean I use Target, Home Depot, and Walmart pickup without issue.
- ec109685 8y ago
  I agree. Their competitors are getting more competent and amazon can’t do ship to store obviously, which makes them less convienent for certain folks. With things like ApplePay, you can get buy with two clicks, which is only slightly more annoying than amazon.
  - reaperducer 8y ago
    Amazon already does ship-to-store with its massive network of Amazon lockers in everything from Whole Foods to gas stations. It has a much more massive ship-to-store than any regular retailer because it’s not locked into a particular brand. I do wish Amazon would adopt ApplePay, too.
    - sparkpeasy 8y ago
      But Target and Walmart have a large amount of products in stock within an hour or so ready for pickup from small towns on up. That's not true for Amazon except in large cities. For most of the country, you still have to wait one or two days to pick it up if you order with Amazon.
- reaperducer 8y ago
  While I don't disagree that Target and WalMart are doing a good job of trying to catch up to Amazon (and in some scenarios WalMart beats Amazon), I was thinking more of all the bookstore chains, electronics chains, housewares chains, and department stores it killed. The fact that two discounters are also riding the runaway bucket to the bottom says more about the threat that Amazon poses than their ability to beat Amazon long-term.

hoofhearted 8y ago

Their negotiated rates aren't better, and they are actually forcing sellers to buy USPS postage with Amazon's account instead of the sellers. Seller Prime is a couple years old now and it seemed to backfire on them and it seems they are trying to push sellers off of it by enforcing near impossible to meet standards that even Amazon themselves don't meet.

cepth 8y ago
> Their negotiated rates aren't better, and they are actually forcing sellers to buy USPS postage with Amazon's account instead of the sellers. It's true that you're forced to buy with Amazon's account, but this is shipping spending that would've been paid for by Amazon anyway. The merchants are not losing out on any volume discounts, since this was never "their" volume anyways. IMO, this is the way to think about this: if the Amazon-negotiated rate for warehouse -> customer shipping is lower than what the FBA fee would've been (which it often is), the merchant is coming out ahead. > Seller Prime is a couple years old now and it seemed to backfire on them and it seems they are trying to push sellers off of it by enforcing near impossible to meet standards that even Amazon themselves don't meet. Yes it's about 2 years old, but it wasn't something that was widely popping up on Seller Central dashboards until earlier this year. I don't know whether you're referring to the ship-out time requirements, but so far my company hasn't had any issues with SFP. Better yet, the merchant controls which items are fulfilled under SFP, and which are FBA.

rrdharan 8y ago

That AWS origin story is a myth: https://www.networkworld.com/article/2891297/cloud-computing/the-myth-about-how-amazon-s-web-service-started-just-won-t-die.html https://www.networkworld.com/article/2891297/cloud-computing... The Amazon store didn't start switching significant pieces over until 2011-12 I believe...

blaisio 8y ago
They still haven't converted everything and don't even really need to. AWS duplicated a lot of internal stuff, it didn't really replace it.
cepth 8y ago
Seems like this depends on who you ask? (https://techcrunch.com/2016/07/02/andy-jassys-brief-history-of-the-genesis-of-aws/ https://techcrunch.com/2016/07/02/andy-jassys-brief-history-...) > "It began way back in the 2000 timeframe when the company wanted to launch an e-commerce service called Merchant.com to help third-party merchants like Target or Marks & Spencer build online shopping sites on top of Amazon’s e-commerce engine...At that point, the company took its first step toward building the AWS business by untangling that mess into a set of well-documented APIs." > "The internal teams at Amazon required a set of common infrastructure services everyone could access without reinventing the wheel every time, and that’s precisely what Amazon set out to build — and that’s when they began to realize they might have something bigger." > As the team worked, Jassy recalled, they realized they had also become quite good at running infrastructure services like compute, storage and database (due to those previously articulated internal requirements). What’s more, they had become highly skilled at running reliable, scalable, cost-effective data centers out of need. As a low-margin business like Amazon, they had to be as lean and efficient as possible. > "It was at that point, without even fully articulating it, that they started to formulate the idea of what AWS could be, and they began to wonder if they had an additional business providing infrastructure services to developers." From The Everything Store: >"Groups within Amazon were told to use AWS while the services were still immature, a demand that led to another round of consternation among its engineers." (Page 221) I guess we could say that AWS's first customer was not necessarily Amazon, but the team and infrastructure predated AWS, and AWS was used by Amazon internally.

blattimwind 8y ago

> (extreme "dogfooding") More like grabbing your dog by the neck and pushing its snout into the food bowl; many of these merchants solely exists due to Amazon permitting their existence, with the highly dependent relationship that entails.

delecti 8y ago
Considering what we inflicted on wolves (Pugs being one notable example), your characterization might not be a terrible definition for "dogfooding".

ikeboy 8y ago

This is false. You do not get Amazon rates for shipping using SFP. I've used SFP and have talked to many sellers that do as well. You might be confusing this with onsite, where you convert a warehouse and give Amazon much more control over it and get better rates.

cepth 8y ago
My company easily does 6 figures in shipping spending across UPS and FedEx annually (on non-Amazon shipping). What we're paying for SFP shipping is at worst equal to, and at best 20% below, what our own rate tables quote. YMMV, but given the variety in what Amazon merchants ship in terms of size, weight, hazardous/insurance status (not to mention shipping origin and destination), don't you think it's a tad glib to tell me I'm "confused"?
- ikeboy 8y ago
  SFP rates are equal to Amazon MF rates, which are better than public rates but certainly aren't Amazon's own rates being passed through. Being as my info comes from multiple talks with people shipping hundreds or thousands of packages a day I'm quicker to assume there's something confused about your claim rather than Amazon making a change and it not reaching me through any of the sellers that use SFP heavily I network with. I'm not even the only one replying to you that disagrees with your claim
  - cepth 8y ago
    > SFP rates are equal to Amazon MF rates, which are better than public rates but certainly aren't Amazon's own rates being passed through. Refer to your original comment: "This is false. You do not get Amazon rates for shipping using SFP." I took this mean that you do not get any discounted rate from Amazon for shipping using SFP. If you're now amending your claim to say that a SFP seller has access to "Buy Shipping" rates, then yes we agree. And if you're conceding that "Buy Shipping" rates are cheaper than those available to other businesses, then we agree again. At no point did I claim that an individual merchant is getting the exact same quote to ship a package as Amazon would. UPS/FedEx wouldn't allow this, since pickup points are different, etc. But, it is certainly because of Amazon's volume that merchants who want to sell with a Prime badge can now get deeply discounted shipping rates. This is what I meant by "negotiated rates for UPS/FedEx/USPS that Amazon has access to". > I'm not even the only one replying to you that disagrees with your claim At the time of your comment, who else is disagreeing? This comment (https://news.ycombinator.com/item?id=18695969 https://news.ycombinator.com/item?id=18695969) is saying that Amazon's negotiated rates "aren't better". Better than what? Even you agree that buying through Amazon's "Buy Shipping" services are better than the baseline rate tables from UPS/FedEx. What I'm saying is that these rates are better than even the ones available to a merchant doing significant volume.

sct202 8y ago

If you could throw out a number, about how much off of the list rate is the SFP pricing for shipping thru Fedex or UPS?

User23 8y ago

AWS didn’t actually originate with Amazon’s internal infrastructure. It was years before even trivial services were moved to AWS. It was an entirely new business plan based solely on accumulated expertise at data center management, nothing else was shared.