Amazon has long been a dominant force in e-commerce, and now the company is taking yet another step toward cementing its role as a logistics powerhouse. The company has unveiled a new service—Supply Chain by Amazon—that offers third-party sellers a fully managed, end-to-end logistics solution. This latest move reinforces Amazon’s strategy to control every aspect of the customer experience, from product acquisition to delivery, ensuring efficiency, speed, and cost-effectiveness for both sellers and buyers.
This service represents a significant development for merchants who use Amazon’s platform, providing them with an integrated solution that connects Amazon Warehousing and Distribution with its expansive fulfillment centers across the United States. With this addition, Amazon aims to enhance the entire supply chain process, offering sellers greater control, visibility, and optimization from manufacturing to customer delivery.
What Does Supply Chain by Amazon Offer?
Supply Chain by Amazon is a full-service logistics offering designed to streamline the movement of products for third-party sellers. From sourcing products directly from manufacturers to delivering them to customers, Amazon’s service manages every step of the process. It leverages Amazon’s vast warehousing, distribution, and transportation networks, promising improved efficiency and faster deliveries.
At the core of this service are advanced forecasting and optimization tools, which aim to assist sellers in anticipating customer demand, optimizing inventory levels, and ensuring the smooth flow of products through the supply chain. The company has already claimed that sellers using this service have seen a 20% increase in sales conversions, largely thanks to faster delivery times and better overall service.
A Boon for Smaller Sellers
For small- and medium-sized sellers, the offering could be transformative. Rick Watson, founder and CEO of RMW Commerce Consulting, believes that this new logistics solution could make a significant difference for those who are already familiar with Fulfillment by Amazon (FBA). “For smaller sellers already using FBA, the new offering could make a lot of sense,” Watson remarked. “It is really the holy grail—how to optimize your supply chain automatically by someone with more capabilities and data than you.”
While Watson remains skeptical about the claim of a 20% conversion increase, he acknowledges the tangible benefits the service provides, especially in a competitive marketplace where speed and reliability are crucial factors. He added, “This is exactly what I think Shopify had wanted to do with its logistics offering, but didn’t have the capital or expertise necessary to do it. And Flexport isn’t going to be doing this either, not on Amazon’s scale—not even close.”
The Competition: Shopify and Flexport
Amazon’s logistics offering enters a crowded field, with competitors like Shopify and Flexport already vying for market share. Shopify, which made a splash by acquiring Delivery, aimed to establish its own end-to-end logistics network. However, as Watson pointed out, Shopify lacked the scale and resources to compete with Amazon. Flexport, another competitor in the logistics space, also fell short in this area. Although Flexport has made strides by teaming up with Veho to improve e-commerce fulfillment, it still struggles to match Amazon’s sheer reach and capabilities.
Flexport faced significant challenges in 2023, including layoffs that reduced its workforce by 20%. However, in early 2024, Shopify invested $260 million in the company, giving it a much-needed financial boost. The alliance with Veho expanded Flexport’s next-day and two-day delivery capabilities, allowing it to serve 85% of U.S. households with two-day shipping. Still, even with these improvements, Flexport cannot offer the same comprehensive service as Amazon.
Amazon’s $2.1 Billion Investment in Delivery
Amazon’s logistical dominance is further reinforced by its massive investment in its Delivery Service Partner (DSP) program. On September 13, 2024, the company announced a $2.1 billion injection into the program, bringing its total investment to $12.3 billion since 2018. The DSP program empowers small business owners to launch and operate their own delivery services under Amazon’s umbrella. By investing in this network, Amazon is not only expanding its delivery capabilities but also creating opportunities for entrepreneurs to grow alongside the e-commerce giant.
The DSP program is a key element of Amazon’s logistics ecosystem, enabling the company to offer faster delivery times and handle an increasing volume of orders. This investment will help ensure that Amazon remains competitive in a rapidly evolving marketplace where delivery speed and efficiency are becoming critical factors for customer satisfaction.
Competing with Other Retail Giants
Amazon isn’t the only retailer beefing up its logistics network. Competitors like Walmart and Target are making significant investments to enhance their own fulfillment capabilities. Last month, Target opened a new fulfillment center in Detroit, which can handle up to 60,000 packages a day. This move is part of a $100 million plan to expand Target’s sortation center footprint to over 15 locations by the end of 2026. Target’s management has also announced plans to invest up to $5.5 billion a year, starting in 2025, to deepen its supply chain capabilities.
Walmart, on the other hand, has been increasingly active in rolling out logistics services aimed at third-party sellers. In mid-August, Walmart began offering an ocean shipping service from China to the U.S. to sellers using its Walmart Marketplace, a platform it launched in 2020. This service helps drive traffic to Walmart’s U.S. fulfillment centers, providing sellers with a cost-effective shipping option.
Walmart’s recent moves show how serious it is about competing with Amazon in the logistics space. The company’s ocean shipping pilot exceeded expectations in terms of volumes and seller feedback, indicating that there is strong demand for such services. In addition, Walmart has opened up its ground carrier network to third-party sellers, promising them special rates for shipments ranging from small parcels to full truckloads.
At the Walmart Marketplace Seller Summit in August, the company announced its new Multichannel Solutions program, allowing sellers to use Walmart’s supply chain for both order fulfillment and returns. The program offers sellers two shipping options: expedited shipping in two business days and standard shipping in three-to-five days. This flexible approach allows sellers to cater to a variety of customer needs.
The Future of Logistics for Third-Party Sellers
The logistics landscape is rapidly evolving, and third-party sellers now have more options than ever before. With Amazon, Walmart, Target, and others investing heavily in their logistics networks, sellers can leverage these services to improve their customer experience, reduce costs, and grow their businesses. Amazon’s Supply Chain service offers a particularly attractive solution for small- to medium-sized sellers looking for an all-in-one logistics partner.
While competition in the logistics space is heating up, Amazon’s unmatched scale, advanced technology, and substantial financial investments give it a significant advantage. The company’s ability to manage every aspect of the supply chain, from warehousing to final-mile delivery, positions it as a leader in the field. Sellers who choose to partner with Amazon can benefit from faster delivery times, more reliable service, and the potential for higher conversion rates.
Conclusion
In conclusion, Amazon’s introduction of Supply Chain by Amazon is a game-changer for third-party sellers. It offers an unparalleled logistics solution that integrates every aspect of the supply chain, giving sellers more control and flexibility. While competitors like Shopify, Flexport, Walmart, and Target are making strides, none can yet match Amazon’s scale and reach. For sellers looking to streamline their operations and grow their businesses, Amazon’s new service presents a compelling option. The logistics landscape will continue to evolve, but for now, Amazon remains at the forefront, leading the charge into the future of e-commerce logistics.