In February of 2005, Amazon released its Prime service. For $79 per year, members would get free, unlimited two-day shipping on more than one million items. At the time, Amazon charged $9.48 for the two-day shipping of one book and $16.48 for customers who wanted overnight shipping. Now, more than 200 million Prime members worldwide account for $25.21 billion in retail subscription fees.
As one of the top three companies globally by revenue, you may think Amazon would be content to ride the wave of success. But they’re looking for even bigger waves to surf.
Last month, the e-commerce company announced a new Buy with Prime program. The new service gives third-party retailers access to Amazon’s shipping and fulfillment services– even on orders placed on the third-party’s site.
In the press release announcing Buy with Prime, Jamil Ghani, vice president of Amazon Prime, said, “Members will have the flexibility to shop from merchants directly, all while enjoying the fast, free delivery, seamless checkout, and easy returns they’ve come to know and love from Amazon.” This service is just one more way Amazon intends to add value for members and expand its reach.
Currently, the service is only available to merchants using Fulfillment by Amazon (FBA). Eventually, though, the program will roll out to sellers who do not sell on Amazon or use FBA. So the question that begs to be asked: will Amazon eventually replace UPS and FedEx?
Our advice? The eCommerce company has a lot going for it, but don’t put all your eggs in Amazon’s basket.
Buy with Prime is a pay-as-you-use-it service. The press release explains that “Pricing is based on a service fee, a payment processing fee, and fulfillment and storage fees that are calculated per unit. With no fixed subscription fee or long-term contract required, merchants can expand selection or cancel at any time.”
Earlier this year, Amazon hiked its prices by 16% for Prime services, hiking the yearly rate from $119 to $139. We’re creeping close to double the $79 fee from 2005. In the absence of a contract, Amazon can announce and implement similar price hikes that leave businesses scrambling to reassess their pricing strategy as costs change without warning.
With warehouse shortages, Buy with Prime may become a part of your fulfillment strategy one day. Amazon has earned consumers’ trust worldwide, which could also earn clout for your business. Plus, the ease of shopping on third-party sites using their Amazon credentials and saved forms of payment may increase sales.
However, don’t neglect the relationships you have with FedEx and UPS. ShipRx can help you negotiate your parcel rates to lock in shipping fees that inform your pricing strategy and yearly budget. When you have a plan for your spending through contract negotiations, and you take advantage of refunds owed to you through parcel audits, you’ll be set up for success.
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