1. Amazon Direct Fulfillment (dropship): Order is shipped directly from the manufacturer to the customer. Amazon pays for the shipping label and contractually "own" the item once it leaves the MFR doors. Amazon incentivizes Manufacturers by paying the freight and loosening shipment deadlines. [1]
2. Ships In Own Container (Amazon SIOC) certification puts the responsibility on the manufacturer to certify their products can be shipped without extra packaging. MFR pays for the testing/certification from a third-party. After July 3st 2019, Amazon will charge/fine manufacturers $2/unit received that are NOT SIOC certified and greater than a certain dimensional threshold. [2]
Its a tough economic balance for Amazon because they want to keep shipping stuff, but many MFRs will literally stop selling items to Amazon on July 31st because the costs of SIOC certification are greater than the estimated product profitability.
Source: I am a consultant for Manufacturers that sell to Amazon. [3]
1: https://www.andersonassociates.net/guides/amazon/what-is-dro...
2: https://www.andersonassociates.net/2018/frustration-free/
Sorry, but how can this be a good idea? I'd hate if I ordered something expensive, for example a digital camera, and every porch pirate (or shady parcel delivery subcontractor) immediately sees "this thing is worth a couple grand", compared with the usual Amazon grey packaging.
More common these days is for manufacturers to produce items, and separately purchase very durable over-boxes that are sent to eCommerce customers like amazon/walmart/bestbuy/etc.
Shady subcontractors are Amazon's problem.
Blair, how do you Amazon's private label effort ? How will that end, would we buy mostly Amazon exclusive brands ?
Their retail team used to consist mostly of buyers. Most of those resources have shifted to private label.
Imagine a thousand people previously managing external brands now focused on finding/creating private label brands with the data of sales volume at their fingertips.
They have something like 150 private label brands right now.
1. Amazon changes the market(a huge challenge). it's now easier for manufacturers and other retailers to do e-commerce.
2. Amazon becomes the best in the world in packaging, and keeps the skill to itself. It's now harder to compete with Amazon.
Naturally Amazon prefers #2.
Of course, there's no reason #2 can be a check-and-balance against #3 becoming too expensive/independent.
Why would Amazon comoditize its greatest competitive advantage? (Yet, it seems that they are, so the question is not rhetorical.)
It's a lot easier for a manufacturer to send a boxcar of toilet paper to a warehouse (Amazon or otherwise) than to mail the case to you. Lacking Amazon or Safeway, they'd probably just recreate a similar system in the form of a co-op.
In any case, I don't doubt they've gamed and spreadsheeted the bejeepers out of dropshipping, returnable containers, standardized containers, third party (USPS) vs. self shipping vs. drones, etc.
I've been studying this lately, and it really seems to be more than that. Consumers love to compare goods based upon initial purchase price (or even loan payment price) with relatively little regard for the long-term cost of that good.
As evidence, take a look through AutoNation's annual report, in which they clearly make more gross profit on part sales & service, finance, and extended warranties than on actual car sales. It is to the point that it is questionable if the business would be viable only on the basis of new & used car sales alone.
A business that chooses to try to make profit without these addons will ultimately have to sell more expensive cars. Will consumers understand the difference?
Nothing wrong with that, but it could very well be the first clue that Amazon is behaving more like an incumbent than a disrupter as described in the Innovator's Dilemma.
If items are usually/never ordered by themselves, packing in a larger box might still always work out to be cheaper than paying for shipping for two boxes.
There's already enough of a problem with theft of generic 'Amazon'-branded boxes -- can you imagine if things were regularly shipped with $high_value-brand labeling on the outside (if not just glossy full-color retail box)?
Now they have included a free option to wrap inside another bigger Amazon box. I guess they got too many damaged items and complaints from customers.
This would also be very inefficient because you would have to store the postal-ready boxes at the fulfillment warehouses in an inefficient way instead of just putting them into bins. When shipping products to customers, also, it's often more efficient to pack multiple products into a single box to ensure both durability and cost efficiency.
Most of the goods available on Amazon also do not come direct from the factory. They come from various intermediaries. Not all products are shipped from the Amazon FBA warehouses, either. So, there are many reasons why it is impossible.
It is possible to ship to customers direct from the factory, as some other comments have mentioned. However, as you might imagine, this is impossible for many businesses. Processing customer orders is time and labor intensive particularly because it involves making many tiny shipments versus shipping out entire truckloads at a time only. Furthermore, contract manufacturing is very common. A given factory may be manufacturing products for many different brands at the same time and a certain brand can have its products manufactured in entirely different countries at the same time.
One problem is that showing what's inside helps thieves.
Erm... manufacturers have been shipping their own products for years... but they're not very good at it, compared to Amazon?
As in, they offer standard slow shipping (vs. same-day or next-day with Prime), shipping you have to pay for per item (vs. Prime), shipping that is often unreasonably expensive (vs. Prime) and have other issues resulting in a worse UX e.g. poorer website design, and/or signing up for individual accounts with every website (vs. Prime).
Even as big as they are, I don't think they have that much power. So maybe they could do that with some items, but they're still going to have to package some items.
In some cases, it might even be less efficient to do it this way. It means spending more up front on packaging, so the time value of money is a factor. Also, some products never sell, so why create packaging for them that will never be used? And an already-packaged product may take up more space on warehouse shelves. It might only be 10% more space or something, but 10% of everything adds up.
Also, sometimes people order more than one item. It is probably more economical to ship everything in one box. (Postage would be lower, and it might still cost less even if Amazon does the delivery themselves.)
They still put your FFP box into another bigger shipping box.
"Amazon.com works with manufacturers to box products in Certified Frustration-Free Packaging, which reduces the overall amount of packing materials used."
Also:
"It’s designed and tested to ship to customers in its own packaging without the need for additional Amazon packaging."
https://en.m.wikipedia.org/wiki/Drop_shipping
And something that Amazon does as well. If you're a third-party seller:
https://sellercentral.amazon.com/gp/help/external/201808410
But this more-or-less hidden from the customer if Amazon is the seller.
Isn't that drop shipping?
Because Amazon saves significant money with fewer boxes.
Here are the savings
- Transportation Volume (no matter the vendor)
- Potential trips from warehouse to customer
- Package damage or loss
- Cost of packaging (they can charge their supply chain less OR make more margin if they can decrease this)
Even if Amazon uses their own delivery service.
Importantly, one of the major promotions they offer is delaying your 2 day guaranteed shipping until all items are ready to ship.
Amazon goal is same day delivery using low paid, Uber type contractors.
In my opinion, the first one to successfully do this on scale will be the next Amazon, just even bigger.
That being said, packaging for customer shipments is inherently different from B2B. The later usually uses some sort of bulk-level packaging for pallets and such. Cheaper for big volumes but unsuitable for B2C. Still, Amazon is pishing Ship-in-own-container (SIOC) wherever possible.
DISCLAIMER: I used to work there.
Another answer would be to have products packaged in standard, or at lease square, boxes that could be thrown into larger shipping boxes.
Or do away with the warehouse altogether and have products ship directly from manufacturers. I wonder if anyone has tried that?