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The argument in this article doesn't really make any sense. It hinges on the idea that somehow Amazon is shifting fulfillment costs onto suppliers by discouragi

The argument in this article doesn't really make any sense. It hinges on the idea that somehow Amazon is shifting fulfillment costs onto suppliers by discouraging them from using Amazon's fulfillment services (FBA) in favor of doing fulfillment in-house (FBM). But what is conspicuously omitted is that Amazon charges for fulfillment. And they cost about the same as other fulfillment providers. They offer some competitive advantages that you would expect given their tremendous scale, but they are basically on-par with other providers. Which totally undermines the thesis of this article, since Amazon isn't losing money on their fulfillment business. Sure, fulfillment isn't a high margin business or anything, but Amazon has shown lots of willingness to get into low-margin business that require operational excellence (like package delivery). And having such an excellent fulfillment offering is a major competitive advantage, because it makes it a lot easier for sellers to get started on Amazon's platform. Source: my company brought new products to market recently, initially selling exclusively on Amazon.

excitom 8y ago
It makes perfect sense, distilled down to "shift variable costs to suppliers while slowly extricating from the costly business of acquiring, storing, and shipping merchandise".
- toasterlovin 8y ago
  Whether a cost is variable or fixed doesn't really matter if it's either A) something you can do cheaper than competitors and, thus, an area of cost savings, or B) part of a profitable service offering (for items you're fulfilling for merchants). For the author's thesis to make sense, Amazon would have to be either worse at warehousing and logistics than other providers or they would have to be losing money on fulfilling for 3rd party sellers. Both of those seem exceedingly unlikely to me. The other reason none of this makes sense is that Amazon is moving aggressively into same and next day delivery. For that to work, they need scale. Having more products in their fulfillment network helps them achieve scale. It's not really possible for them to offer same day delivery on items that are fulfilled by merchants.

excitom 8y ago

It makes perfect sense, distilled down to "shift variable costs to suppliers while slowly extricating from the costly business of acquiring, storing, and shipping merchandise".

toasterlovin 8y ago
Whether a cost is variable or fixed doesn't really matter if it's either A) something you can do cheaper than competitors and, thus, an area of cost savings, or B) part of a profitable service offering (for items you're fulfilling for merchants). For the author's thesis to make sense, Amazon would have to be either worse at warehousing and logistics than other providers or they would have to be losing money on fulfilling for 3rd party sellers. Both of those seem exceedingly unlikely to me. The other reason none of this makes sense is that Amazon is moving aggressively into same and next day delivery. For that to work, they need scale. Having more products in their fulfillment network helps them achieve scale. It's not really possible for them to offer same day delivery on items that are fulfilled by merchants.