Amazon is winning at the expensive game of fulfillment. Even without Prime, items are shipped within 3 to 5 days for free with a $35 order. As the graph above from L2’s Intelligence Report: Amazon shows, it’s cheaper and faster than what any other retailer offers.
That service comes at a cost. Amazon has built fulfillment centers all over the country. Consumers living in the top 20 US metropolitan areas are on average just 57 miles away from an Amazon fulfillment center. Not all retailers can replicate Amazon’s strategy; it is the only company whose share price continues to rise despite steady losses due to heavy investments in fulfillment. (Only recently, investors started to become alarmed about when these investments will bring huge payoffs.)
New startup Shyp is introducing a concept that could help retailers up their fulfillment game without going broke. The service takes care of packaging, shipping, and delivery cost management for businesses from e-Bay dealers to enterprises with 500+ shipments a month. Items are picked up via courier and shipped from the Shyp warehouse. As Shyp launched in March, it remains to be seen whether it can be a profitable alternative to in-house shipments. But the concept of outsourcing the costly and time-consuming fulfillment looks promising.