I think you analysis is extensive but misses a few points. To analyze the economics you have to look at the entire value chain. For e-commerce fulfillment it looks likes this roughly - sending products into the warehouse, receiving, storing and pick packing the products in the warehouse, shipping the products out. Traditionally each of these items are decided on sequentially in isolation. Without any regard on how it impact the others in the value chain. This causes inefficiency in the system and bloated costs for everyone.
To consider all of these value chains at once requires your to evaluate literally millions of data points (no exaggeration here) for every SKU inventory placement decisions; evaluate different states of the world and choose the is likely to represent the future. Majority of efficiency comes from this and that is what is reflected in the cost savings merchants get from using Deliverr.
Second - the state of the world is changing and we hope to be leading that change - 1 day shipping and same day shipping are not far away. That requires more distributed infrastructure and radically different placement strategies to keep overall costs in the systems down.
Thanks for the response, I definitely see the potential of Deliverr (related to the use of excess warehousing capacity) as expectations move to 1 day and same day shipping.
It seems inventory placement strategies developed by demand prediction models are only as good as the data set used to build the models. Obviously it's going to be hard to compete with Amazon on the breadth of data you have access to.
Where has Deliverr gotten the data to feed the prediction models in the early days?
Do you require your customers to provide historical sales data?
Do you pool customer data to improve the models for all of your customers? If so, do customers have a way to opt-out of their data being pooled?
Having worked at Amazon; one of the things I respect a lot about Amazon is that they not competitor focussed - they really do not spend much time thinking about competition; they are maniacally customer focussed. I am sure Amazon is really working on upping the game on faster delivery whether is 1 day prime for large number of SKUs or same day.
Absolutely the pricing is per unit per SKU - all inclusive of receive, shipping, box and pick pack. I think you will find pricing to be at least 30% lower. You can check out pricing for your items here - https://deliverr.com/fulfillment-cost/
However the bigger reason for our existence is faster shipping. You can now affordably do 2 day shipping on Walmart and Guaranteed Delivery on eBay and offer 2 day shipping on your Shopify store. You can see here the sales boost we are seeing with fast 2 day shipping -- https://deliverr.com/walmart/
Two things
a) I dont think this is competing with Amazon infrastructure. Outside of Amazon, this is a very large industry and very broken which needs to be fixed.
b) I agree with you 7M is not going to be enough to fix this industry; its complex and moves physical things (way harder than moving bits) but you gotta start somewhere.
First any business should ask for metrics on past performance and that is how you should judge the performance and not by assertions or business models - Case in point -- Taxis were fully controlled they all looked the same, the drivers were all trained the same way -- yet the consumer experience was bad. Then Uber/Lyft came in and they don't drive the taxis but they are able to orchestrate demand and supply and offer visibility and a better price to customers. So going by your analogy Taxis >> Uber. But I think it is settled that Uber/Lyft >> Taxi. Judge Uber/Lyft with their metrics such (a) time to get a taxi (b) on time delivery and (b) cost to consumer. And businesses and consumers are smart enough to do that.
Second - marketplaces are in business of connecting buyers with sellers; laying out rules of engagement so trust is built for discovery and transaction. They are enablers. But a merchant participates in many markets and not just one. You cannot ask each marketplace to do fulfillment for the merchant because that will mean the merchant will have to predict and send inventory for eBay and Walmart and Shopify separately which is not efficient for anyone in the market.
Ok, I hear you, but I think you're missing the forest for the trees - Why did amazon beat these businesses in the first place?
It wasn't because they connected buyers with sellers, people have been doing that for decades. It has nothing to do with the rules of engagement, amazon is full of fake products and reviews. It wasn't because the user experience was bad, the amazon UX is pretty bad, it's very cluttered, and Shopify's UX is really impressive.
Amazon beats Wal-Mart et al. because their delivery is faster. And that takes control. The difference between delivering in two days and delivering in three days comes down to seconds.
And for what it's worth - Sometimes I am unable to get an Uber, but every time I call the taxi company, a taxi shows up.
(All of this isn't to say Deliverr won't provide value, just that I am doubtful it can beat amazon)
Amazon leads the market for many reasons among those price, selection [1], reviews, and then with more recent shifts faster shipping. The goal isn't to beat Amazon the marketplace. The goal is to bring the Prime experience to other marketplaces. I don't believe it's a zero sum game.
Amazon is a lot more comfortable than they were 10 years ago, and you can already see that as a result in higher prices [1][2] and lower shipping SLAs. Lifting the rest of the market increases competition and helps all buyers have a better experience.
Personally, I think Amazon's original advantage was definitely in a high-quality experience. (FWIW, I've been a customer since 1997, but didn't join Prime until 2010.) They used to have pretty reliable reviews and real products. They used to have better prices. And they used to have a much better user experience.
What I really want is shopping as a utility. I want to spend the minimum time possible and get great results with no worries. Speedy delivery is sometimes part of that, but not always. If there were something as reliable as the Amazon of 2010 but defaulted to 3-day delivery for free, I'd switch in a heartbeat.
I trust the interface much less. Just this week I had to send back two things that were mistakenly ordered. One was clothing. I set the size I wanted, then clicked on the color I wanted. The size I wanted wasn't available, so it switched the size without telling me. The other was a tool. I was searching for Dremel sanding accessories. Mixed in with Dremel-specific stuff were things that weren't compatible, but I didn't notice the switch.
It is now packed with ads of various forms. I want them to be on my side, showing me the best stuff. But instead, they are getting paid to show me stuff without regard to quality or usefulness.
The mixing in of stuff from others stores is another area where my trust has declined. If it were a separate site, that would be fine. But when I want to just buy something from Amazon, I now have to evaluate a bunch of possibly-dubious vendors on the basis of too-little information.
The reports of counterfeit products and comingled inventory has left me much more skeptical when buying things there.
The reports of terrible warehouse work conditions mean that I trust them less to take care of the people doing the work.
The way many people are now making bank doing store arbitrage, where they buy things at Target, Walmart, Trader Joes, etc, and sell it at high markups means I trust the pricing much less. I also suspect Amazon of marking things up more now than they used to.
And finally, their experiments with various shipping options means less reliable delivery. If something comes via UPS or Fedex, I know when it will arrive and trust the drivers will put it in the right place. But their various other shippers provide a different and usually worse experience.
When they started, it was magic. They took all the confusion and stress out of mail order. Now they've slowly been putting it back in. I'm sure it has increased the revenue metrics of various sub-sub-teams. But they've taken me from being a loyal customer to one ready to switch.
I'm with the other person saying much of the same thing. Far as less reliable, they might mean all the people and companies paid for fake reviews. Google for that to find a lot of reasons for not trusting Amazon results.
Another thing Amazon is doing is competing with companies selling product through them. Competitors might differentiate a bit by making a deal, contract and/or charter, that they will never make products that compete with those using them as an intermediary. They'll always be a facilitator and nothing else far as those kind of contracts are concerned. That could help in that current and long-term risk might be reduced.
>> And for what it's worth - Sometimes I am unable to get an Uber, but every time I call the taxi company, a taxi shows up.
FWIW from me, I have had taxi companies fail to send me a taxi, or send me one hour+ after they said they would, every time I have called them in the small cities I've been in that didn't have uber. I can count the times I didn't get an uber when I wanted one on one hand, and I get dozens of them a week...
To consider all of these value chains at once requires your to evaluate literally millions of data points (no exaggeration here) for every SKU inventory placement decisions; evaluate different states of the world and choose the is likely to represent the future. Majority of efficiency comes from this and that is what is reflected in the cost savings merchants get from using Deliverr.
Second - the state of the world is changing and we hope to be leading that change - 1 day shipping and same day shipping are not far away. That requires more distributed infrastructure and radically different placement strategies to keep overall costs in the systems down.