Sramana Mitra: What is the cost implication of all this? What does it cost to deliver this level of service?
Rafael Zakinov: By working with a third-party logistics provider, there’s obviously a lot of advantage. Amazon has the advantage because they’re a goliath. A startup might not have that capital and scale to achieve multiple warehouses and conveyor systems. The cost is mitigated by pooling it together amongst other brands. It’s relatively inexpensive compared to if you try to do it yourself.
Sramana Mitra: Prime gives an incredible level of service with their unlimited free shipping based on subscription. Cost-wise, it’s formidable to compete with this.
Rafael Zakinov: It’s definitely not free. You do pay for it throughout the year. Their costs have shipping fees embedded in them. If you shop on Amazon and add-on an item, they’re significantly cheaper than buying them separately. The cost of shipping is included within the items themselves as well. Amazon is strategically placing that inventory much closer to the consumer. A perfect example is one of our clients such as Brooklyn; they strategically place their inventories in multiple of our warehouses to achieve that two-day delivery to about 90% of their customer base.
Sramana Mitra: What I’m hearing from you is that the pressure is on.
Rafael Zakinov: Amazon is setting the bar for the consumers. Three years ago, you would advertise your handling time as one day. That was acceptable even a year ago. That is no longer acceptable. Our sellers are literally putting on their websites, “Order by 2 PM. Ships same day.” Not many companies can achieve that. Amazon is setting that bar. It’s really the consumer expectation. That’s much harder to trail because they’ve already delivered that expectation. You expect to get something on your doorstep within two to three days.
That helped our business very much. We have sellers that are currently shipping out of their own warehouses for years on end. They have a pretty good structure. Either they can’t physically get orders out fast enough or their cost can’t accommodate that. We have very successful companies that are closing up their own warehouses and their own distribution center, and coming over to us to achieve that consumer expectation of shipping same day and getting the product there within two to three days.
Sramana Mitra: Getting that kind of coverage across the country with their own warehouses is a very expensive proposition.
Rafael Zakinov: Very expensive. They have to go out and find a different solution outside of going out and opening up another warehouse and hiring another manager.
Sramana Mitra: In general, the trend outside of e-commerce is about flexible resources, whether it’s human resources with the gig economy or office facilities.
Rafael Zakinov: Absolutely. If you asked me 10 years ago about sharing office space or going into a stranger’s car, I’d say ,”What?” The Ubers and the WeWorks of working together and outsourcing these important parts of your business is today’s standard. It’s beautiful to walk into a WeWork. You have a fully-designed space. There’s the fully-stocked kitchen at all times. The same thing with fulfillment where you traditionally wouldn’t have conveyors and other systems. You now have that. The emerging of the Ubers and WeWorks of the world has definitely alleviated some of that hurdle of giving over your inventory to another company.
Sramana Mitra: Terrific. Thank you for your time.