Walmart is looking to generate more profit from its online unit, wants to start storing and shipping products for third-party vendors for the first time, just as rival Amazon.com has done for years. The world’s largest retailer just announced this week it’s testing a fee-based service called “Fulfilled by Walmart" and would allow Walmart to move more items from outside merchants, especially ones that generate wider margins. The move could help Walmart’s U.S. e-commerce business stem losses, which Morgan Stanley estimates may reach $1.7 billion this year, by making transportation a source of revenue rather than just an expense. Amazon, which has operated its own “Fulfillment By Amazon” service since 2006, has found that merchants are willing to fork over fees since the e-commerce giant can often get goods to customers faster through its own distribution networks. Three out of four Amazon sellers employ fulfillment by Amazon in some capacity, which sells advertising and pricing software used by Amazon sellers. Walmart introduced its marketplace site for third-party sellers a decade ago, and it now offers about 75 million products, compared with Amazon’s selection of more than 300 million. Like Amazon, Walmart charges a fee — typically about 15% — to list the item on its site. However, so far Walmart has relied on outside logistics providers to handle those orders.
Amazon has agreed to take space in a first-of-its-kind three-story warehouse, a new type of distribution center that could reduce delivery times in congested cities to hours rather than days. Amazon is taking about 500,000 square feet, and the Home Depot has plans to take almost 100,000 square feet. Amazon recently signed a lease for a three-story warehouse in Seattle. The warehouse is the first of its kind to open in the U.S. with multiple floors that large delivery trucks can access by ramps, property analysts say. Home Depot’s lease at the Seattle warehouse is part of its investment strategy to speed up delivery to customers and stores and reach 90% of its shoppers with same-day and next-day delivery, a company spokeswoman said. Amazon, Target and Walmart and other big retailers are looking to slash delivery times from two days to as short as two hours in some instances. To do so in dense urban centers, having distribution facilities close to the customers, rather than in more distant suburban locations, is critical.
The British government’s “reasonable worst-case scenario” for a no-deal Brexit envisions turmoil in supply chains. A new report issued by Prime Minister Boris Johnson’s government describes potential shortages of fuel and medicines, long traffic jams at ports and rising food prices. The report paints a bleak picture if the U.K. leaves the European Union without a deal to smooth its exit, with traffic snarls stretching to France as customs and other checks are implemented for the first time in more than four decades. The document says significant disruption at ports in Dover and Calais, France, could last up to six months. Trucks could be delayed up to 2.5 days at customs checks before crossing the English Channel. The report estimates between 50% and 85% of exporters wouldn’t be ready for customs checks at the Channel on day one. Read on to learn more.
Uber Freight is driving growth through innovation rather than aggressive pricing to undercut the market. Uber Freight has added tools related to route optimization, dynamic scheduling and facility data and reviews. However, it's not just software where Uber Freight is innovating and expanding. Since Uber Freight launched more than two years ago, the platform has built up a network of 50,000 carriers and more than 500,000 trucks, with more than one million downloads of its app, according to Morgan Stanley. Neither Convoy nor Transfix responded to questions by press time on the size of their networks. In February, Convoy said it was working with 100,000 truckers, around 35,000 carriers and more than 500 shippers. Large brokers still hold some advantages over Uber Freight, as they have established relationships with tens of thousands of carriers. However, Morgan Stanley analysts say Uber Freight's rapid growth, especially as it enters the flatbed market, could even pose disruption to established players, namely Landstar.
Amazon's inventory value has ballooned over the last year compared to some of its retail competitors, increasing 25% up to nearly $18.6 billion in its latest quarterly report from more than $14.8 billion during the same period a year ago. Other large retailers, including Walmart, Kroger and Home Depot, have also seen inventory increase in their most recent earnings, but not to the same level. Amazon has already seen some hiccups in its promise of next day delivery. Many customers complained of later than expected shipping times during Prime Day this summer, an early test of the retailer's delivery promises. But Amazon has learned a lot from Prime Day and know they need to build out more one-day capacity along with their transportation partners. Amazon CFO Brian Olsavsky mentioned "new costs" on the company's Q2 earnings call that were the result of "expanding inventory, getting it closer to the customer and as they launch their multi-million dollar investment in its transportation and fulfillment network.
Thanks for reading! Don’t forget to check out last week’s news and stay tuned for our next Friday Five roundup.
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