E-commerce is one of the economy’s luminous spots; U.S. e-commerce sales have nearly doubled in five years, and now exceed $500 billion. Unsurprisingly, Amazon has swooped in to bay a disproportionate share of the riches, gobbling up nearly 50 percent of the mart share, driving competitors out of business and solidifying its position as one of the world’s most precious companies.
As part of its finish transformation of the e-commerce landscape, Amazon has made two-day shipping the brand-new industry grade — a grade which most would-be competitors can’t meet on their own without either investing millions in infrastructure or partnering with their greatest competitive hazard. Fortunately for merchants, some mind-blowing brand-new logistics startups are emerging to support them contest with Amazon.
In classic coopetition form, Amazon now enables more than a million merchants to vend through Amazon market. It offers these merchants two-day shipping via a cheap flat fee per package — a fee so cheap, in fact, that no shipping provider can come close to matching it. Amazon is doubling down on its advanced fulfillment network by investing $700 million in Rivian, an electric truck company; augmenting its fleet of 50+ delivery planes; and rolling out 20,000 Mercedes-Benz delivery vans.
Two-day delivery is so interesting, often doubling sales, that many merchants are becoming increasingly dependent on Amazon despite the obvious risks of partnering with the juggernaut. This in itself is spurring startups that support merchants thrive on Amazon. Amazon forces those merchants who work with them to contest side-by-side with other brands, including the company’s own private-label amass that it promotes aggressively. Amazon also pressures merchants to provide their lowest prices on Amazon — despite the fact that Amazon takes a significant revenue percentage. Even then, Amazon still might suddenly kick merchants off its platform without prior notice.
Once merchants vend on Amazon, they often find it impossible to extend to other platforms with higher margins and more regulate because they become reliant on Amazon’s indomitable two-day delivery price. This pressure is making merchants increasingly nervous as Amazon squeezes them from all sides. Merchants are desperately seeking solutions to support them get out of Amazon’s chokehold. a brand-new batch of startups is seizing the opportunity to provide just that.
Aggregated delivery routes
Transportation accounts for more than 75 percent of delivery costs. Merchants can save millions by pooling together their shipping, trucking and last-mile delivery costs. Traditionally, this pooling was done by high-price freight brokers on pen and paper. Today, companies like Flexport, which just raised $1 billion, and Convoy, which was just valued at more than $1 billion, can more effectively match shippers and carriers to combine packages and lower costs.
Addicted to convenience, consumers keep demanding that their merchandise arrive ever more quickly.
Last-mile delivery companies like ShipBob, which recently closed a $40 million investment circular, are also beginning to offer Amazon-like two-day shipping solutions. Deliv* takes an even more aggressive come by gifting
same-day shipping for retailers via its couriers. By combining volume, these startups allow merchants to save more than 20 percent by negotiating for larger bulk discounts with carriers and by optimizing routes.
To consign within two days, merchants must have access to warehouses located near their customers. While companies like Walmart and Amazon might be able to invest billions in multiple distribution centers located throughout the U.S., smaller merchants and distributors can rely on startups like Flexe and Darkstore to provide on-require storage in pooled warehouses across the country. Rather than keeping everything in a central warehouse thousands of miles away, merchants can use artificial intelligence to predict consumer require and ship inventory to nearby distribution centers. These startups will become increasingly important as retailers seek to go beyond two-day shipping and offer one-day and even same-day shipping.
Robotics and automation
Despite the heavy upfront costs, robotics offer a cheaper long-term alternative to manual labor in many distribution centers. RightHand Robotics, which just landed $23 million, uses a robotic arm to support pick and place items at warehouses. Each arm can operate at the same speed as an experienced packer, while working around the clock. Other startups use automation to reduce last-mile delivery costs through a variety of methods, ranging from self-driving cars to delivery drones. Starship Technologies, for example, is construction a fleet of tiny self-driving robots to consign locally. Although single merchants may not buy robotic arms, they can leverage logistics startups to reduce costs and upgrade efficiencies via these brand-new automation techniques.
Addicted to convenience, consumers keep demanding that their merchandise arrive ever more quickly. Amazon is chief of convenience and is constantly pushing the bar higher — or faster in this case. Merchants are struggling to keep up. Fortunately for them, a brand-new era of logistics startups are helping them contest. By creating solutions for the logistics infrastructure of the future, these startups are helping merchants stay in the race against Amazon.
* Denotes Trinity portfolio company