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I own an ecommerce business, and I recently moved away from my previous 3PL (third party logistics company, like Deliverr). In doing so, I evaluated a number of

I own an ecommerce business, and I recently moved away from my previous 3PL (third party logistics company, like Deliverr). In doing so, I evaluated a number of 3PLs, including Deliverr. For those who aren't familiar, Amazon Multi Channel Fulfillment, which allows you to fulfill orders not placed on Amazon from their warehouses, is much cheaper than all alternatives for a lot of smaller packages. As an example, I have one item that's 2.5 pounds, and about 8.5"x4"x4". To ship it via USPS would cost me $10-12, depending on where it's going. Amazon charges me $6.77. Deliverr, at least when I evaluated them about six months ago, matched Amazon's pricing exactly. That was pretty shocking to me, since Amazon's clearly only able to maintain those prices because they have their own fulfillment network and lots of revenue from elsewhere to subsidize the actual cost of delivery. I am currently using Amazon MCF as my 3PL, and one of the reasons I went with them over Deliverr was a genuine concern that Deliverr had a money-losing business model that would only work at Amazon scale, which is obviously a nigh-impossible thing to achieve. I'm glad to see they got acquired by Shopify, as I think the competition for Amazon is a good thing in the marketplace. That said, I'm definitely curious to see if Shopify will be able to maintain price parity with Amazon.

hef19898 4y ago
Not sure about the US, but for my, failed, start-up that went in a similar direction like Deliverr I did some price calculations. And for Europe it was, before Covid, very realistic to achieve price parity with FBA. I'd have too look the numbers up again, but the volumes were easily within reach for a single, not too big FBA merchant. Not enough to make a whole business based on that profitable, with all the overhead and such, but profitable on a transaction basis.
- awillen 4y ago
  Here it definitely depends on the types of packages, and my experience is very much in the 1-5 pound range - as you get larger, it's clearly more profitable. Still, however I ran the numbers, I just couldn't see Deliverr taking on my company as a client and not losing money on shipping alone (before factoring in all the overhead). Obviously it'd depend on their mix of business, but overall I just think being a 3PL, unless you have some specialty that allows you to charge a premium, is just a brutal, low-margin, race-to-the-bottom kind of business. I'm glad that Shopify made the acquisition, as having both Deliverr and Amazon MCF run as part of broader ecommerce platforms, as opposed to standalone 3PLs, will be good for ecommerce merchants and customers.
  - hef19898 4y ago
    Being a 3PL is a brutal business, that's true. Logistics is, for what it's worth, regardless of industry. Not sure if it is actually a race to the bottom, because costs are the same for every player, more or less, in the same region. And the region is defined by infrastructure, customer requirements and so on. Which leaves salaries, and there it is sometimes a race to the bottom. Amazon, funny enough, is paying their own warehouse workers above average so (at least in Germany last time I checked). Amazon does have an advantage on small item (sortable in Amazon parlance). For larger items 3PL operations are actually pretty straight forward. Edit: or rather items you don't mind to ship as singles, one item per package.
revel 4y ago
I work at an international logistics unicorn and I used to work at Amazon in some of these groups. Amazon has a glass jaw. They are good at being an aggressor but I don't know how they will cope with some of the changes taking place in the logistics industry.
- awillen 4y ago
  I don't really understand what you mean - it's not like others can just decide to aggressively come after them when it comes to fulfillment. It takes enormous scale to be able to do that. In every part of logistics, Amazon's scale acts as a moat.
  - relueeuler 4y ago
    It’s capital intensive! They have a huge moat that has been developed for two decades. People are really understating the problem.
shmatt 4y ago
Seeing that they raised $500M in 5 rounds, they were probably just paying the difference themselves, there never was real parity The fact they were bought for the same value as their series E valuation 6 months ago also doesn't say good things about their cash flow. Imagine every new employee these past 6 months just got $0 profit from their options/RSUs (assuming there was some double trigger)

hef19898 4y ago

Not sure about the US, but for my, failed, start-up that went in a similar direction like Deliverr I did some price calculations. And for Europe it was, before Covid, very realistic to achieve price parity with FBA. I'd have too look the numbers up again, but the volumes were easily within reach for a single, not too big FBA merchant. Not enough to make a whole business based on that profitable, with all the overhead and such, but profitable on a transaction basis.

awillen 4y ago
Here it definitely depends on the types of packages, and my experience is very much in the 1-5 pound range - as you get larger, it's clearly more profitable. Still, however I ran the numbers, I just couldn't see Deliverr taking on my company as a client and not losing money on shipping alone (before factoring in all the overhead). Obviously it'd depend on their mix of business, but overall I just think being a 3PL, unless you have some specialty that allows you to charge a premium, is just a brutal, low-margin, race-to-the-bottom kind of business. I'm glad that Shopify made the acquisition, as having both Deliverr and Amazon MCF run as part of broader ecommerce platforms, as opposed to standalone 3PLs, will be good for ecommerce merchants and customers.
- hef19898 4y ago
  Being a 3PL is a brutal business, that's true. Logistics is, for what it's worth, regardless of industry. Not sure if it is actually a race to the bottom, because costs are the same for every player, more or less, in the same region. And the region is defined by infrastructure, customer requirements and so on. Which leaves salaries, and there it is sometimes a race to the bottom. Amazon, funny enough, is paying their own warehouse workers above average so (at least in Germany last time I checked). Amazon does have an advantage on small item (sortable in Amazon parlance). For larger items 3PL operations are actually pretty straight forward. Edit: or rather items you don't mind to ship as singles, one item per package.

revel 4y ago

I work at an international logistics unicorn and I used to work at Amazon in some of these groups. Amazon has a glass jaw. They are good at being an aggressor but I don't know how they will cope with some of the changes taking place in the logistics industry.

awillen 4y ago
I don't really understand what you mean - it's not like others can just decide to aggressively come after them when it comes to fulfillment. It takes enormous scale to be able to do that. In every part of logistics, Amazon's scale acts as a moat.
- relueeuler 4y ago
  It’s capital intensive! They have a huge moat that has been developed for two decades. People are really understating the problem.

shmatt 4y ago

Seeing that they raised $500M in 5 rounds, they were probably just paying the difference themselves, there never was real parity The fact they were bought for the same value as their series E valuation 6 months ago also doesn't say good things about their cash flow. Imagine every new employee these past 6 months just got $0 profit from their options/RSUs (assuming there was some double trigger)