On March 18, 2021, Walmart removed requirements for sellers on its platform to have a US address or business tax identification. As a result, sellers based outside of the US can now sell on Walmart.com, assuming they receive approval.
Unlike Amazon, Walmart’s online marketplace is gated; sellers need approval from Walmart before they can start selling on the platform. Walmart will maintain these vetting procedures for new US and foreign sellers to continue to protect its marketplace from counterfeits and other undesirable goods.
How This News Affects Sellers
Prior to this policy update, foreign sellers could sell on the Walmart marketplace, but they were required to have a physical presence in the US, which greatly limited the number of foreign sellers able to apply to Walmart. The policy update positions Walmart to more aggressively compete with Amazon for ecommerce market share.
Amazon has allowed non-US based sellers to operate on its US marketplace for years. In 2020, 48% of sellers on Amazon.com were from outside the US, the vast majority of whom are based out of China.Now that Walmart has opened its doors to foreign sellers, Walmart may experience a similar diversification, though it will surely take time.
Requirements for Chinese Sellers
Walmart announced the news to Chinese sellers at a conference in China on March 25th. According to Marketplace Pulse, sellers must meet the following requirements to sell on Walmart.com:
Valid Chinese business license
1+ year of selling experience in North American marketplaces
Good store ratings
Must use Walmart Fulfillment Services
Marketplace Pulse reports that nearly one hundred China-based sellers have joined the Walmart Marketplace since the policy update.
The Future of the Walmart Marketplace
The increase in sellers means the marketplace will likely become more competitive. Product selection, prices, and advertising costs will all be affected. It’s worth noting that many foreign sellers interested in Walmart likely already have an Amazon presence.As they expand to Walmart, they will have to coordinate Walmart pricing and branding strategy with Amazon. This may lessen the impact to product pricing on Walmart.
In the fiscal year ending January 31st, 2021, Walmart’s ecommerce salesgrew 79%year-over-year (YOY). Total US sales increased 8.6% YOY and international sales grew 1% YOY.
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Amazon has long dominated online marketplaces in the US. However, in 2020, Walmart launched a series of initiatives that would borrow from Amazon’s learnings to bring Walmart into a competitive position, such as Walmart Fulfillment Services and a subscription service, Walmart+ (Walmart Plus).
The success of these initiatives immediately underwent a trial by fire as the coronavirus pandemic swept the US. Amidst quarantines and dramatic swings in consumer buying behaviors, Walmart’s online segment has conducted itself admirably.
So, in this post, we’re taking a closer look at how Walmart Marketplace compares to the great leviathan of US ecommerce.
Walmart vs Amazon – History
Amazon was founded as an online book selleron July 5, 1994. The company went public just under three years later in 1997, then expanded into music and DVDs in 1998.
Amazon as we know it today, with millions of third-party sellers selling alongside Amazon on its platform, began in 1999, when Amazon launched its third-party seller marketplace.Amazon Web Services, or AWS, joined the fray in 2003.
2005 brought the introduction of Amazon Prime. From there on out, Amazon continued to grow into the behemoth we know today. The last 15 years have been filled with acquisitions and ventures into all types of industries, including mobile phones, robotics systems,the Washington Post, Twitch video game streaming service, Whole Foods, the creation of Echo and Alexa, prescription medication, and more.
This article contains a thorough summary of Amazon’s major milestones over the years.
Walmart is far older than Amazon, founded in 1962. The company went public in 1970.
The next 30 years saw rapid growth in physical store locations, but it wasn’t until 2000, just five years after Amazon launched, that Walmart launched online stores. Likewise, it wasn’t until 2009 that Walmart launched a third-party seller marketplace, 10 years after Amazon.
However, Walmart beat Amazon to the online grocery game, starting online grocery pickup in 2015.
Walmart acquired Jet.com in 2016, a move that would ultimately teach Walmart many lessons about ecommerce, but not drive any immediate, significant growth.
Walmart launched TwoDay Delivery in 2017 to compete with Amazon’s 2-day shipping, then NextDay Delivery in 2019.
Though Walmart had been making progress in developing its online marketplace, it wasn’t until 2020 that their online marketplace really began to capture brands’ attention as a high-opportunity ecommerce marketplace.
In February 2020, Walmart launched Walmart Fulfillment Services. In September 2020, they launched Walmart+, a subscriptions service with exclusive benefits, similar in theory to Amazon Prime, but each offering a different set of perks enabled by their unique positions.
Walmart vs Amazon – Size
Amazon currently controls roughly 38% of the United States ecommerce retail market, according to eMarketer. On the other hand, Walmart only controls approximately 8% of the ecommerce retail market.
It should come as little surprise that Walmart’s physical locations vastly outnumber Amazon’s, given each company’s history. Walmart has 5,353 US stores as of July 2020, while Amazon had 589 physical stores as of August 2020.
How do Walmart shoppers differ from Amazon shoppers?
The answer? Not a whole lot. According to Walmart, Walmart’s and Amazon’s customer demographics are nearly identical when viewed bygenerationsor by income levels.
Walmart’s VP of Walmart Fulfillment Services delved into more Walmart vs Amazon myth busting in our co-hosted webinar. You can watch it for free on-demand.
Walmart Fulfillment Services (WFS) vs Fulfillment by Amazon (FBA)
Speaking of Walmart Fulfillment Services (WFS), let’s take a look at how it compares to Fulfillment by Amazon (FBA).
For the moment, WFS and FBAshare many similarities. Both services allow third-party vendors to ship their product at a fulfillment center, where the product is stored until purchased, then fulfilled. Both will:
Pick, sort, pack, ship, and track products
Handle shipping, returns, and refunds
Provide 2-day shipping
Provide same-day shipping in select areas
One big difference is that Walmart.com allows for item pickup at any of its stores, while Amazon only has a few stores that do online pickup.
WFS vs FBA eBook & Webinar
We offer a comprehensive breakdown of WFS vs FBA in our free eBook. If you’re interested in learning more about WFS, watch our on-demand WFS webinar that we co-hosted with Walmart’s VP of WFS.
Walmartvs Amazon – Marketing Services
In terms of marketing, Amazon and Walmart.com are very similar, but Amazon has many more options to choose from.
Amazon Marketing Services
Amazon marketing products available to sellers include:
This difference in selection is not surprising though. Amazon has been focused on ecommerce for 25 years, while Walmart has only really made ecommerce a heavy focus in the last five years. Over time, Walmart Marketplace will develop new marketing services to match Amazon’s list.
For the time being, online sellers will see far greater returns from marketing dollars invested into Amazon marketing than in Walmart marketing. Amazon’s services offer greater control over audience targeting and more data insights, which, in turn, yield higher profitability.
Walmart Plus vs Amazon Prime
Until recently, Walmart did not have a competitor to Amazon Prime, Amazon’s premium paid subscription service. In July 2020, Walmart announced Walmart+, its own premium paid subscription service. These subscriptions are very similar as both give you access to perks and benefits like two-day shipping and one-day shipping on a host of products.
Walmart Plus Member Benefits
Free 2-day shipping
Early access to deals
Express delivery for groceries and select goods
Fuel discounts at Walmart gas stations
Scan & Go service in Walmart stores
Walmart dropped its minimum $35 purchase requirement for 2-day shipping in December 2020
Planned Walmart Plus credit card
Planned Walmart Plus entertainment package
Amazon Prime Member Benefits
Free 2-day shipping
Early access to deals
Express delivery for groceries and select goods
Free video games
Free access to Amazon library
Ad-free Amazon Music
Amazon Prime costs $119/year, while Walmart Plus costs $98/year. Amazon Prime has 126 million members in the US as of October 2020, so Walmart has a lot of catching up to do.
Walmart vs Amazon – Challenges
Counterfeit Products Plague Amazon
Amazon has the ignominious reputation of being rife with counterfeits and unauthorized sellers. In January 2020, the United States Department of Homeland Security released a report detailing counterfeiting on the Amazon marketplace platform. The company has been slow to face the issues but has been making some strides.
Unlike Amazon, Walmart.com is a gated marketplace, which has helped mitigate the risk of counterfeits and unauthorized sellers.
Walmart Marketplace’s greatest hurdle is that it is starting so far behind Amazon in the ecommerce game. However, Walmart has an extensive infrastructure, capital, and the benefits of learning from Amazon’s successes and failures. As we touched on regarding marketing, Walmart is still well behind Amazon, but they have made admirable progress this year with the launch of Walmart Fulfillment Services and Walmart Plus.
Walmart vs Amazon – Ecommerce Growth
As anyone can see, there are pros and cons for both Amazon and Walmart. Amazon may be the giant in the ecommerce space, but that means they have a large target on their back. Both Amazon and Walmarthave seen tremendous growth in 2020:
Walmart Ecommerce Quarterly Net Sales Growth
Q1 2020: 74% year-over-year
Q2 2020: 97% year-over-year
Q3 2020: 79%year-over-year
Amazon Quarterly Net Sales Growth
Q1 2020: 26% year-over-year
Q2 2020: 40% year-over-year
Q3 2020: 37% year-over-year
Clearly, both companies’ offer huge growth potential. In general, we recommend prioritizing Amazon over Walmart because the sales potential is, currently, so much greater on Amazon. However, Walmart is growing rapidly, and you would be wise to try to get on Walmart sooner rather than laterso you can grow with it.
Want to learn about selling on Walmart.com? Check out our free eBook!
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WFS: Walmart’s Gamble to Challenge Amazon FBA
1. Dropship Vendor (DSV): A business model where sellers list their products on Walmart.com, but hold the products in their own warehouse or a third-party logistics provider’s warehouse.Walmart appears as the seller in the listing. When a customer orders a seller’s product from Walmart.com, the seller ships it to the buyer. Walmart requires the merchandise tobeshipped with a Walmart packing slip. If the customer chooses the “pick up in store” option, the seller must send the product to that Walmart retail location. As a plus, Walmart will cover the shipping cost. Learn More >
2. Everyday Low Price (EDLP): A pricing strategy by Walmart that promisescustomers that Walmart will have consistently lower prices than their competitors. Customers can access these prices without coupons, promotions, or special discounts. Everyday Low Price (EDLP) is one of Walmart’s key customer retention strategies. For sellers, this methodology ties into Walmart’s pricing parity requirement, which says that sellers must ensure that their price is the lowest price on the market or else they risk BuyBox suppression. Learn More >
3. Free & Easy Returns:Walmart allows customers to exchange or return an item within 90 days after purchase. Customers can return their items in-store, by mail, or by pickup at their home. All the customer needs is a receipt. There are some, but not many,expectations to this rule. Learn More >
4. NextDayDelivery: If a customer purchases a product with the NextDay delivery designation, the seller must deliver it by the end of the following day. For the customer, orders over $35 are free. Most products sold on Walmart.com are eligible for the program, but products sold by Walmart Sellers are not. Learn More >
5. Order Defect Rate (ODR): The number of orders with a minimum one defect divided by the total number of orders (both within the same period). Defects include cancellations, returns, delivery defects, and customer complaints. Sellers must maintain an ODR of 2% or lower to meet Walmart’s performance standards. Learn More >
6. Pricing Parity/Reasonable Price Not Satisfied: To ensure a great customer experience, Walmart set automated rules that eliminate non-competitive priced items from the Walmart.com marketplace. Walmart enforces this by identifying identical products on other platforms, such as Amazon, and seeing if they are listed at a lower price than listed on Walmart. The Price Parity rules unpublishes products when the offer price is higher than a competing website. The Price Parity rules are slightly different from the Reasonable Price Not Satisfied rule, which unpublishes products if the offer price is drastically higher than competing websites.
Amazon enforces a similar price parity policy, which is one reason it’s so important to maintain consistent strategy, marketing, promotions, and pricing across all online sales channels.
7. Referral Fees: Walmart charges a category-based referral fee ranging between 6%-20% (most common is 15%) for selling on their marketplace.
8. Seller Center/Seller Portal: A Walmart platform,similar to Amazon’s Seller Central, used by Walmart sellers to market and sell products to Walmart customers.
9. Seller Scorecard: The Seller Scorecard,found in Walmart Seller Center,provides an overview of how well your products are performing under the Walmart Seller Performance Standards.
10. TwoDay Delivery: If a customer purchases an item with TwoDay delivery designation,then the seller must deliver the product by the end of the following day. For the customer, orders over $35 are free. Most products sold on Walmart.com are eligible for the program, but products sold by Walmart Sellers are not. Learn More >
11. Walmart 3P Merchant: An independent company that sells products on Walmart’s online marketplace.This can be a brand selling its own products directly or a dedicated wholesale retailer selling products to consumers on a manufacturer’s behalf.
12. Walmart Buy Box:A section on the product page near the “Add to Cart” button that shows from which seller shoppers will be buying. A seller earns sales only when they win the Buy Box. When multiple sellers are in the same listing, each will win the Buy Box for a certain percentage of time. Walmart awards the Buy Box to sellers based on product price, availability, and seller performance.
13. Walmart Enhanced Content: This Walmart.com feature allows sellers to create listings with additional media, such as more images, banners, comparison charts, descriptions, interactive product tours, and videos. These features help capture shopper interest and can lead to higher conversion rates. Learn More >
14. Walmart Fulfillment Center: A physical location to which Walmart sellers ship inventory. Inventory is stored in and fulfilled from the fulfillment center.
15. Walmart Fulfillment Services (WFS): A Walmart service in which third-party vendors keep their product at Walmart’s warehouses. Walmart will pick, sort, pack, ship, track, and handle product returns and refunds for a fee. Learn More >
16. Walmart Marketplace: The official name of Walmart’s online platform.The Walmart Marketplace allows Walmart and approved third partiesto sell goods online to Walmart customers. Learn More >
17. Walmart Media Group (WMG): Walmart’s first-party media branch. Brands who sell on Walmart can work with WMG to promote their products rather than hiring a third-party seller, marketing agency, or an internal marketing team to do it for them. Learn More >
18. Walmart Plus: A Walmart subscription-based service similar to Amazon Prime that gives members access to unlimited same-day delivery for eligible items, discounts at Walmart gas stations, and early access to Walmart deals. The current cost is $98/year, which is roughly $20 less than Amazon Prime. Walmart Plus is expected to officially launch in August 2020. Learn More >
19. Walmart Solution Providers: Third-party providers who offer a wide range of ecommerce services for the Walmart Marketplace. Services can include item setup, inventory, order fulfillment, pricing, marketing, and more. Walmart categorizes Walmart Solution Providers into three categories: Full-Service Solution Providers, Specialty Solution Providers, and Content Solution Providers. Kaspien is a Specialty Solution Provider. Learn More >
20. Walmart Sponsored Products: Similar to Amazon Sponsored Product Ads, these cost-per-click (CPC) ads are used to promote products on com website, mobile platform, and app. Learn More >
Want to learn about selling on Walmart.com? Check out our free eBook!
Download the eBook: “WFS: Walmart’s Gamble to Challenge Amazon FBA”
Today, Walmart released theirearnings report for the 13-week period ended July 31, 2020. Notable highlights from the release include:
Net sales in the US were up 9.3% year-over-year (YoY) to $93.3B
Total revenue was up $7.4B YoY to $137.7B
Walmart US ecommerce sales increased 97% YoY
Walmart US ecommerce sales accounted for approximately 6% of Q2 net sales, around $5.5B
Sam’s Club ecommerce sales grew 39% YoY
International net sales were down 6.8% YoY
Ecommerce sales accounted for 12% of total international sales
Walmart incurred $1.5B in COVID-related costs
Global Ecommerce Growth
As a company that operates in the ecommerce space, we took particular note of Walmart’s online sales performance. Just this year, Walmart has announced Walmart Fulfillment Services, an integration with Shopify, and Walmart Plus – all indicators of Walmart’s growing ambition for their ecommerce presence. As COVID-19 impacted shopping in physical stores, Walmart’s online sales growth boomed around the globe.
Walmart Marketplace Ecommerce Net Sales:
Mexico & Central America: +217%
United Kingdom: +98%
Online grocery sales were a significant contributor to online sales growth in each of the below markets. Pickup and delivery services experienced record-high sales, with approximately 3,450 stores allowing pickup and approximately 2,730 stores offering same-day delivery.
Key Takeaways for Sellers
Walmart’s online marketplace has been building momentum since it launched, but it’s rapidly gaining speed in 2020. We saw with Amazon that brands who entered the marketplace early were positioned to seize and grow a greater market share. As Walmart’s online marketplace matures, a similar outcome is likely.
In addition to general ecommerce growth, the current health crisis has also led to a surge in online grocery shopping. This is a fascinating space that’s likely to continue growing even after shopping in physical stores normalized again. You can learn more about the rapid rise of online grocery in ourpodcast episode with Chicory, a digital shopper marketing platform that specializes in the grocery industry.
Want to learn about selling on Walmart.com? Check out our free eBook!
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WFS: Walmart’s Gamble to Challenge Amazon FBA
In the world of ecommerce, FBA (Fulfilled by Amazon) is one of the most used phrases. Now, get ready to use WFS (Walmart Fulfillment Services) just as frequently.Walmart Fulfillment Services launched in February 2020, putting Walmart in a better position to compete with Amazon. Walmart Fulfillment Services is a fulfillment network owned and operated by Walmart. It allows brands who sell on Walmart to ship inventory directly to Walmart’s fulfillment centers for storage and order fulfillment for goods purchased on Walmart.com.
Before Walmart Fulfillment Services,brands who sold on Walmart.com had to fulfill orders through a dropship model or through a third-party logistics (3PL) provider. The dropship model placed all order fulfillment and customer service responsibilities onto sellers, and the 3PL model could be cost-prohibitive for certain items.
This fulfillment situation made selling on Walmart difficult for some sellers and brands. Walmart Fulfillment Services improves the selling experience for Walmart’s Marketplace by providing sellers a solution for storage,2-day fulfillment, customer service, and return management, all competitive with Amazon’s FBA capabilities.
The Advantages of Using Walmart Fulfillment Services
The Walmart Marketplace is quickly growing, and now is the time for brands to position their products on the marketplace. Marketplace Pulse reportedthat in June 2020, over 3,500sellers joined the Walmart Marketplace, bringing the total number of sellers to 48,332, with most being dropship sellers.
Fast Shipping & Greater Buy Box Share
Amazon’s FBA program set the bar exceptionally high for online shopping convenience, and consumers now expect fast shipping for their online purchases. According to Walmart,consumers are less likely to convert on offers with a 5+ day shipping window, whereas items with a 2-day offer can see a 30% conversion lift. Brands and sellers whocan offer nationwide 2-day shipping on their products can enroll in Walmart’s TwoDay Program, resulting in improved searchability and Buy Box percentage.
Logistically, fulfilling nationwide orders in 2-days can be challenging for sellers and brands. Such capabilities require a vast infrastructure – an infrastructure that Walmart already has thanks to its thousands of physical store locations across the US.
Items fulfilled through Walmart Fulfillment Services are guaranteed nationwide 2-day shipping. On top of that, products in Walmart Fulfillment Services also capture a larger share of the Buy Box over all other offers, including non-WFS 2-day offers. Products sold through Walmart Fulfillment Services will display “fulfilled by Walmart” on the products, which Walmart hopes will increase consumer trust in product authenticity.
During the onset of the coronavirus pandemic in the US, Amazon’s fulfillment network struggled under the strain, and they were unable to maintain 2-day shipping. Walmart, on the other hand, was. Products fulfilled through Walmart Fulfillment Services maintained the 2-day shipping guarantee throughout the pandemic. While Walmart handles far less volume than Amazon currently, the difference is a promising indicator that Walmart is building a robust infrastructure.
Affordable Storage Fees
Walmart Fulfillment Services offers consistent storage fees that are comparable to FBA, with monthly storage fees starting at $3.45/unit. Walmart also states there are no long-term storage (LTS) fees, a stark contrast with Amazon’s FBA. However, if inventory stagnates in Walmart Fulfillment Service, it seems likely that Walmart would implement LTS fees to incentive liquidation and better inventory forecasting.
This simple fee structure help sellers forecast the profitability of each shipment going into the Walmart Fulfillment Service network. Amazon’s storage fees are more complex, with monthly storage fees increasing in Q4 and LTS being applied monthly to items that have been housed for over a year. For most of the year, Amazon’s monthly storage fees are $0.48-.75 per cubic foot(depending on size) and from October to December, these fees increase to $1.20-$2.40 per cubic foot.
Another notable difference between Walmart Fulfillment Services and FBA is that, for the moment, brands only have to ship to one Walmart fulfillment center. The single ship-to location provides a much simpler process for brands than Amazon FBA, which requires brands to ship inventory to multiple fulfillment centers. This situation will likely change in the future as Walmart’s online operations continue to expand, but for the time being, it’s a pleasant perk of Walmart’s system.
KeyDifferences Between WFS and FBA
We’ve mentioned differences in pricing models and ship-to locations, but how else does Walmart Fulfillment Services differ from FBA?
Read about Walmart’s new subscription service that will rival Amazon Prime, Walmart Plus.
While FBA does offerdeeper reporting to sellers and the extra service of fulfilling orders for select websites off Amazon,Walmart is quickly enhancing their reporting. Walmart has made impressive improvements to their reporting over the last three months, including working closely with their approved sellers on creating dashboards. These dashboards will help sellers understand product performance, as well asidentify which products not yet sold on Walmart have the highest opportunity to perform well on the platform.
Unlike Amazon’s Seller Central, Walmart’s Seller Portal currently does not offer the ability to create box labels or shipping labels required for shipping to Walmart’s fulfillment center. As a result, prepping shipments can be a manual process.
Product Requirements for Walmart Fulfillment Services
Walmart Fulfillment Services’ product requirements are a bit stricter than FBA requirements. Learning from some of Amazon’s missteps, Walmart is working hard to prevent counterfeit items from polluting its platform and keep warehousing to a minimum. Below are a few Walmart Fulfillment Services product requirements and how they differ from FBA.
WFS – Products must ship to Walmart fulfillment centers from within the United States. FBA – Amazon FBA centers will accept international shipments if the correct labeling if applied, including box labels and pallet labels if shipping LTL.
WFS – Country of Origin must be on the retail packaging. FBA – This is not required at FBA.
WFS – Products must have UPCs on the product packaging. FBA – Amazon’s ASIN labels can be printed and applied to products when needed. WFS does not offer labeling options or services.
WFS – Maximum product weight is 30 lbs. FBA – Will accept shipping cases up to 50lbs., along withsingle products weighing over 150lbs.(with additional fees applied).
WFS – Maximum product dimensions: 25″ x 20″ x 14″. FBA – Dimensions up to 25” on any side. FBA also accepts oversized single items that are over 108” on its longest side and over 165” in length+girth.
Sell on Walmart.com
Selling on Amazon has taught brands the importance of keeping channel control. If brands do not sell their products on a marketplace,someone else will, and unfortunately, rogue sellers are not known for providing the best representation for brands.
Walmart is growing quickly, which means that now is the time to position your brand on the platform before someone else does.The Walmart Marketplaceis the secondlargest marketplace in the US, with over 400 million website visits per month. In the second quarter of 2020, Walmart reported that their ecommerce sales grew 97%. By being an early adopter, brands can position themselves in front of a larger audience and ahead of competitors.
If you want to learn more about how Walmart Marketplace compares to Amazon, visit our post “Amazon vs Walmart.” It covers the two company’s history, size, customer base, marketing services, fulfillment options, subscription programs, challenges, and growth.
Accessing Walmart Fulfillment Services
Walmart Fulfillment Services is currently open only to select sellers, and so far, the number of sellers approved to sell is low. Walmart wants to limit the risk of counterfeit sellers entering the marketplace, which is easier to do with a smaller number of trusted sellers. As such, it is unclear if Walmart will move to a less strict approval process for Walmart Fulfillment Services.
We were among the first group of sellers personally invited to sell Walmart.com in 2016, and we are an approved WFS seller. We’ve had an excellent experience with the program. Our account manager is easy to contact, and the Walmart team has provided reporting to helpgrow our product selection. By partnering with Kaspien for Walmart, brands can draw from our Amazon expertise and leverage our proven marketing strategies and software services to help their brand grow on the Walmart Marketplace.
Want to learn about selling on Walmart.com? Check out our free eBook!
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WFS: Walmart’s Gamble to Challenge Amazon FBA
With the unexpected onset of COVID-19, many brands and manufacturers faced a production standstill ranging from weeks to months, jeopardizing and even killing their businesses. The coronavirus restricted supply chains, exposed structural fragility, and revealed a severe lack of emergency resources. In short, many companies just weren’t prepared. Even now, many states are not yet back to business-as-usual.
The impact on supply chains and fulfillment was one of the most pervasive and damaging effects inflicted on businesses. To safeguard against this in the future, brands and sellers alike have been exploring new fulfillment options.
At Kaspien, we’ve spent the last 12 years working with brands of every level, size, location, and structure as a third-party retailer. During that time, we’ve created a robust fulfillment network. From a small processing area in the back of our corporate office to now utilizing 7 fulfillment centers across the United States, we’ve built an efficient and resilient fulfillment network that has protected our partners’ businesses.
In this post, we’ll outline some of the key benefits of and advice for expanding your fulfillment network.
3 Benefits of a Dynamic Fulfillment Network
1) Mitigates Geographic Risks
If we’ve learned anything over the past few years, it’s that the world is unpredictable. Our partners are in every corner of the country, and as such, there are many different environmental and situational obstacles that can impact product fulfillment.
Whether it’s wildfires, hurricanes, or a pandemic, any business is subject to interruption when catastrophes arise. The West Coast Port Strikes of 2015 was one of those situations for us; we didn’t see it coming, and the sudden inability to process imported goods through west coast ports certainly impacted our normal business functions, and many of our partners faced similar issues. Lead times lengthened and we faced out of stocks.
The port strikes showed us that we needed fulfillment centers on the east coast in order to protect our and our partners’ businesses. Now that we have fulfillment and processing centers around the country, including both coasts, we can minimize the impact of geographically constrained events.
2) Lead Time and Freight Cost Improvements
Many manufacturers are facing tighter margins these days, as well as an added sense of urgency to have shipments turned around to Amazon quickly. By diversifying and growing our fulfillment network, we’ve seen a favorable upswing in lead time and freight cost.
According to Kaspien’s Strategic Warehouse Director, Jeff Bernatz, “In 2020, we’ve seen a ~20% decrease in overall turnaround time at our warehouses, directly tied to the increase in available locations and available staff to handle the workload.”
We work with many manufacturers who do not have the capacity or expertise to complete product preparation in compliance with Amazon’s fulfillment center requirements. For them, shipping to one of our processing facilities is essential, and that could translate to longer lead times and higher shipping costs. But, because we have a large fulfillment network, there’s always a processing facility close by, no matter where our partners are shipping from in the US. As a result, our partners pay a lower freight cost and shorter lead times since they’re shipping shorter distances.
For brands seeking to partner with retailers and/or logistics providers, always ask about their fulfillment network. A larger network will position you to get better margins and run a more efficient sales channel.
3) Handle Higher Volumes and Scale
A large fulfillment channel always enables us and our partners to scale faster, pushing more products at a higher rate. “Since expanding to 7+ warehouses, total unit volume through our warehouses has increased ~15% vs the same time YTD period in 2019,” said Bernatz.
More locations and a higher staffing capacity have allowed us to process more orders in less time. With this added capacity, we have room to expand into previously infeasible programs, such as direct to consumer fulfillment, distribution, etc. It also eliminates the backlog we can sometimes see during peak sales seasons, such as Q4 and summer.
The Benefits will Outlast COVID-19
For many companies, this pandemic has highlighted the extraordinary value of a diversified fulfillment channel. However, all the aforementioned benefits of a large fulfillment network will continue even after the pandemic ends. Though the coronavirus may have prompted you to explore new fulfillment options, it’s worth continuing that research so you can position your brand to weather future storms and continuing growing.
We’re always happy to share our learnings from the past 12 years. If you want to learn more or discuss a partnership, get in touch through our contact form or schedule a call with one of our ecommerce experts.
Updated 9/1/2020: Walmart officially announced that Walmart Plus will become available to all members on September 15th.
What is Walmart+ (Walmart Plus)?
Walmart will be launching a new service in July called Walmart+, according to Recode.Walmart+ is a subscription-based service that will provide members access to unlimited same-day delivery for eligible items, discounts at Walmart gas stations, and early access to Walmart deals.
Walmart+ is set to launch in July for $98/year, roughly $20 less than Amazon Prime. The service is meant to rival Amazon Prime as Walmart continues expanding its ecommerce operations.Walmart has yet to clarify whether the service will launch nationally or in select regions to start.According to Recode, a Walmart+-branded credit card will also be introduced after launch.
What Does Walmart+ Signify?
Walmart+ is the latest move in Walmart’s efforts to challenge Amazon for market share in online retail.Earlier this year, Walmart announced Walmart Fulfillment Services (WFS), a Walmart owned and operated fulfillment network for goods sold on Walmart.com. Walmart Fulfillment Services offers many of the same benefits as Fulfillment by Amazon (FBA).
Walmart+ and Walmart Fulfillment Services make it clear that Walmart is taking advantage of Amazon’s successes and failures. They can see which services have proved most useful for online sellers and shoppers, and they are actively working to create comparable services for their own platform.
How Will This Affect Shoppers and Sellers?
Shoppers and sellers alike will benefit from thecompetition between Amazon and Walmart. Amazon Prime was largely unchallenged in the online marketplace space. With the introduction of Walmart+, the two services will vie for sellers’ and customers’ patronage,resulting in better features and deals.
How does Walmart.com Compare to Amazon?
Walmart has made excellent progress this year on their ecommerce platform. Along with Walmart Fulfillment Services and Walmart+, Walmart also offers brands better protection from counterfeiters and unauthorized sellers than Amazon.
Walmart is a gated marketplace, meaning that sellers must be approved before they can sell on the platform. Amazon, on the other hand, is an ungated marketplace, so anyone can create a seller account and begin selling. Amazon’s approach contributed to its staggering growth, but it also made it vulnerable to exploitation. Counterfeiters and rogue sellers have long plagued brands on the Amazon platform, and the problem has even received attention from the Department of Homeland Security.
Walmart also has the upper hand in theonline grocery business. Walmart+ will offer benefits for grocery purchases as well, helping defend Walmart’s position as Amazon works to take control of the grocery sector.
Despite theirprogress, Walmart still has a lot of catching up to do. Walmart’s paidmarketing services do not yet offer the same control as Amazon’s, resulting in lower ROI, nor do they offer the same breadth of services.
Sell on Walmart Sooner Rather Than Later
As Walmart continues building out its ecommerce platform, they are improving their ability to pull market share from Amazon. In their earnings report, Walmart shared that their ecommerce sales are up 37% year over year (partly due to the coronavirus).
Walmart is learning from Amazon’s history; brands should too. Establishing an early foothold on the ecommerce platform will position brands for long-term success.
Want to learn about selling on Walmart.com? Check out our free eBook!
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WFS: Walmart’s Gamble to Challenge Amazon FBA
Continuing our focus on looking for the helpers during the pain and uncertainty so many are feeling right now, we’re dedicating this blog post to some of the biggest helpers at Kaspien: leaders by title and action who are helping Kaspien and our partners navigate through the immediate and long-term impact of the coronavirus.
This expert spotlight features five Kaspien leaders:
Bryce Burchak, Director of Strategic Initiatives
Keri Rhodes, Director of Marketing
Darby Meegan, Director of Business Intelligence & Product Management
Kelsey Gruis, General Manager of Subscriptions
Jed Nelsen, Senior Compliance Manager
We asked these leaders 5 questions about how they’ve been affected by and responded to the coronavirus.
1. How has your team’s work been impacted and how have you adapted?
Bryce Burchak (Strategic Initiatives): To be honest, the biggest change we’ve seen is moving to work from home. My team works closely with our internal departments to accomplish our objectives on time. With our primary objective being to maximize the growth of our partners’ brands, our work has not changed. We have some different strategies to maximize that growth with the new COVID landscape, but we are still, just as always, focused on identifying and executing tailored solutions for each of our partners to grow their brand.
Keri Rhodes (Marketing): COVID-19 has forced us to change our marketing calendar and strategy. Instead of running B2B marketing for tradeshows, spring, and back-to-school, we’ve had to adapt and respond to the coronavirus. We’ve worked with our local and state government to coordinate support for impacted businesses, created new discounts and offers to make accessing tools and services easier for impacted brands, and worked with our supply network to direct PPE equipment to several hospitals.
Darby Meegan (Product Management): We’re now all working remote. The team has had to suddenly become thoughtful about how we do work in a new way – a strange thought, and frankly, something I’ve taken a bit for granted. The team has been super malleable: we’re video chatting more, finding new methods to collaborate and communicate both synchronously and asynchronously, and communicating progress twice as often. The most evident win is that our team understands the vision and show ownership outside of the normal work structure we’re all used to working in.
Funnily enough, several team members have made comments about there not being a good substitute for whiteboards when we’re problem solving as a team – a problem we’ll need to solve as we see our team working more and more remote into the future, not just because of this pandemic.
Kelsey Gruis (Subscriptions): Rightfully so, our partners look to us to be the experts on marketplaces. With the uncertainty and turbulent landscape caused by the COVID-19 crisis, our brands are concernedabout sustainability. While our needto support brands by being the marketplace expertshasn’t changed, I would say the magnitude of marketplace changes has. We’re working really hard to gather answers as fast as we can, and subsequently, adapt as fast as we can. We want to do anything we can to ease our partners minds and give them the breathing room to focus on other priorities.
JedNelsen (Compliance): COVID-related product restrictions have surged as Amazon unleashed its algorithms to address bad actors. We saw a 5x increase in the number of products restricted. Some of these suspensionswere clearly wrong (we saw certainFunko Dolls restricted for having masks on their faces but not being in the HPC category).OurCompliance Team consolidated all the restrictions, prioritized by listings with inventory, and created cases to reinstate products. We had about one week of crazy, but we are beginning to beat the wave back.
2. What are your top priorities to help Kaspien and our partners get through COVID?
Bryce Burchak (Strategic Initiatives): Safety, sustainability, and supply chain, in that order.
It’s important that all of us work to address this situation as safely as possible, and we want to model that for our partners. In doing so, there may be some risks to normal business: most notably, managing an effective supply chain.
Obviously, Amazon has taken some large internal safety measures, and restricted the flow of some products to their fulfillment centers. In addition, some of our partners have shut down their facilities to protect their employees. Given the distribution network that Kaspien has established over our 12+ years, we have multiple means to deliver our partners’ products to their customers. If companies can no longer handle logistics or product prepping, we have a safe and effective means of handling that for them. Of course, not all products are the same, so we are working closely with brands to discuss how we can accomplish this in the most sustainable manner for their business.
Bottom line:We’re here for our partners, and we are working extremely hard to leverage our supply chain to mitigate COVID impact in the safest way possible.
Keri Rhodes (Marketing):Thehealth and safety of our team members, and our unwavering focus on supporting brandsthrough these volatile times. Many brands are being forced to change strategy due to COVID-caused economical shifts, and we have the expertise, technology and resources to help them. Marketing has prepared numerous resources that can help brands adapt quickly, and Kaspien has offered discounted rates to ensure brands can protect their bottom line and sustainability over the next few months. The more that brands can automate and trim fat in their businesses right now, the better positioned they will be as the industry evolves.
Darby Meegan (Product Management): Our team’s wellbeing, prioritizing key initiatives, and ensuring we’re all on the same page by over communicating.
Outside of some of the extreme health impacts of the coronavirus, everyone’s lives have been disrupted. Our coworkers are trying to find work arounds to celebrate weddings, birthdays, new births, and many other things that deserve clinking glasses, tears of joy and hugs. They’re also trying to find work arounds for supporting loved ones, friends who have lost jobs, their favorite gathering places, struggling to make ends meet, or the passing of loved ones. These are events where video chats can’t suffice. First and foremost, we’re making time to pursue human connection and support where we can.
Now more than ever, our team is ruthlessly prioritizing key initiatives. With the hurricane of potential projects and opportunities to jump on, we’ve paused and tried to measure twice and cut once, then review outcomes. We’ve tried to consistently ask our team, “Are we missing something over here on X? Is this really the most important thing we could be working on? What are we not working on that we should be?”
Kelsey Gruis (Subscriptions): For our partners, our goal is to mitigate as much of this crisis as we can, so you don’t have to worry so much about your business. Your focus should be on your employees’and your families’health and safety. We’re here. Our teams are able to work safely and effectively from home, and we’re working to answer your questions and provide solutions.
Jed Nelsen (Compliance): From a compliance perspective, our aim is to provide good advice to our partners about Amazon’s policies(such as don’t mention COVID-19 or coronavirus in your listing, orit will get restricted) and ensure that their products are live and available on Amazon, Walmart, etc.
3. From your perspective, what actions can brands take that will be most impactful right now?
Bryce Burchak (Strategic Initiatives): Be creative and get scrappy. There is not one answer for every brand, as each business is unique. The widely applicable recommendation I can offer is to identify the most sustainable supply chain to your end customer. However, focus should not be limited to this. Brands should review the key functions of their business and get creative in how to best address. Take data–supported action quickly;don’tlet analysis paralysis stymie your pivot.
Actions should be prioritized in accordance with estimated impact. If you’re focused on maintaining revenue, that may drive a different action than a cash flow focus. Spend time digging into each supporting process for your top objective and think creatively about how to adjust. For instance, if you’re focused on consistent revenue, have you updated your marketing spend to align with demand trends and increased lead times? You don’t want to create out-of-stocks.
Keri Rhodes (Marketing): Find ways to scale their current operations in every way, so that they can be nimble and prepared to change as the landscape changes. Brands should be focused on automating and finding the most effective strategies for their advertising, with the goal of increasing sales while cutting costs and time. Brands should also be aware of opportunities to help their bottom line, like recouping as many dollars back from Amazon as possible through tools like Channel Auditor.
Darby Meegan (Product Management): The highest priority is financial stability for your company and your team members.
The Paycheck Protection Program loan went live on April 3rd. If your brandneeds capital to make ends meet (payroll, rent, mortgage, utilities, and other qualifying debts) this is the place to start. Brands are eligible for up to $10MM depending on their circumstances and if they meet criteria. Applications are available on the SBA website.
Second in my mind is ensuring the safety and wellbeing of their employees. Whatever a company does in a time of crisis either pays dividends or wreaks havoc once things recover. Their response today communicates to their customers and team members the unspoken values the brand holds, it communicates to their retail partners the resilience and longevity the brand holds, and it communicates to their suppliers they’re doing business with a trustworthy partner.
Third, expand your logistics network – even if only temporarily – to work with providers who can get your goods directly to consumers. Amazon’s supply chain is feeling quite the strain and many experts believe the worst of the virus is yet to come. There are a few options.Deliverr is my recommendation for best direct–to–consumer option – they can deliver for Amazon, Walmart, eBay, personal Shopify stores, and beyond. We’ve worked with them for a number of years and value their partnership. Walmart has recently announced their own fulfillment network, which is a great option to get on their rapidly growing marketplace, however, there will be some delays getting up and running in their platform (including an approval process).
Jed Nelsen (Compliance): Think holistically and long–term. Can you pivot your business to provide needed supplies for the crisis? Are you maximizing your channels that are still selling (grocery, online, etc.)? Finally, be careful not to be opportunistic (price gouging, hoarding, or bragging). If you exploit the crisis to grow your profits, the blow to your brand will be swift and painful.
4. What actions can brands take that will be most impactful in the long-term?
Bryce Burchak (Strategic Initiatives): This crisis has made many brands realize how overly dependent they’ve become on their Amazon sales. Now is the time for brands to diversify not only their online presence but also their means of distribution. Other marketplaces are working hard to catch up, with some exciting growth coming from Walmart, eBay, Google, and Shopify in the last 6 months, highlights listed below:
If brands limit their distribution and presence to Amazon, they’ll miss substantial opportunities for exposure, sales, and improved margins on these other marketplaces. This pandemic should be a catalyst for brands to re-assess their ecommerce strategy and work to broaden the number marketplaces they are represented on and explore new fulfillment strategies.
Keri Rhodes (Marketing): Find a partner that has the ability to work through these types of crises and has the team to support brands when they need to focus on operations and logistics. A holistic partner helps avoid frequent and reactionary changes in strategy, which can cause distraction and derail progress.
Darby Meegan (Product Management):Same answers as above: safeguard financial stability, protect your employees and reputation, and expand your logistics network. These efforts will help in both the short-term and long-term.
Kelsey Gruis (Subscriptions): Remember that, while we don’t know when, this will pass. It may take time to get back to ‘normal’, but it will. We must continue to be persistent in our presence and brand values, and that means maintaining a strong presence on your online sales channels.Ignoring your ecommerce strategy at this time would be detrimental in the long-term for two reasons: 1) Ecommerce is the current new norm. If people are shopping, it’s online. 2)Whenever this does go back to ‘normal’, brands who maintained their footing will be the best positioned to recover the quickest.
Jed Nelsen (Compliance): Ensure that you have the right partnerships in place to manage your brand, including marketing, supply chain, legal, etc. When times get tough, who is really adding value to your brand? Also,keep an eye on consumer trends, as tastes and buying behavior will change even once the quarantines are lifted. This pandemic will leave a lasting mark on the economy.
5. What skills and traits matter most during this crisis, for a business and/or leaders?
Bryce Burchak (Strategic Initiatives): Vision and composure.
This situation has understandably shaken both our current and future world. As leaders, it’s important that you are extremely communicative in navigating your teams through these uncertain times. Ensure everybody is often reminded of the vision you have beyond one day, one week, or one month. It’s important to not lose focus on the end goal with daily news bringing many interruptions.
That being said, it’s equally important that your vision is inclusive of changes needed to thrive in the post–COVID world. Now is the time for innovation and adaptability, so if you need to make a pivot, analyze the proposed change, update your vision accordingly, and get the message out ASAP.
Things are not easy right now. It’s understandable that many are dealing with anxiety and fear as they try to adapt to COVID life. Leaders have the opportunity to address this and set the tone for their business and employees. Maintaining composure is crucial. The top priority should be to protect employees and steer for safety, but do so as a voice of reason and understanding. Don’t get caught up riding the highs or the lows; keep an even-keel and let your teams rely on you to be the calm during the storm. Be the champion of composure for whomever you are leading.
Keri Rhodes (Marketing): “Find the helpers during tough times.” A great reminder for brands to seek out and provide support within and without their networks. It’s also important for business leaders to remain calm and search for the positives. Events like COVID will make many businesses stronger in the long-run and develop bullet-proof processes that can aid in times of crisis. Businesses and leaders should also be understanding that everyone in the world is being impacted by COVID, so while we are all in this together, people’s lives are being impacted in very different ways. Extending options and being understanding will go a long way for their protecting a business’s most valuable asset: their employees.
Darby Meegan (Product Management): Vision, teamwork, and ownership.
Vision cannot be beaten. The legendary Peter Drucker is quoted as saying “culture eats strategy for breakfast.” I totally agree, especially if your culture is built on a vision. Regardless of your position in your organization, what is the why behind what you do? If you and your team have a shared sense of purpose, things go smoother. Here at Kaspien, our vision is to be a brand’s ultimate online growth partner. Every team member here is empowered to put brand’s growth first and advocate for it. That vision of what we’re doing permeates our development team that creates tools for our customers and our internal teams, it enables our data and product teams to innovate and dig into data to create new solutions, it gives our operations team some gumption in positioning our partner’s goods the best waypossible, andit ensures our Account Managers and Sales team are true advocates for the brands we work with. If we were just selling goods, I guarantee we wouldn’t approach our work with the ferocity and creativity that we do. Our vision is our true north and the engine behind our competitive edge.
Teamwork is always paramount in a business and a team. It becomes increasingly so in a period of urgency. Whether you’re a contributor or the leader, empower your teammates to utilize data, map out their approach, communicate their actions transparently, and make decisions. If your team can operate as a collective unit with each member bringing their distinct experience and perspective to the table, you’ll see times of crisis as a chance to reformat and empower your team. Teams need good process, but effective collaboration is even more important.
Ownership is next. If you can make decisions based on what is the best thing for your customers, you cannot go wrong. You’ll empower those around you. You’ll form partnerships with your vendors, customers, or suppliers. You’ll create momentum and start seeing others rise to the occasion. The bigger impact of ownership, however, is spreads to others. Don’t jump in and take on every project or solve every problem. Trust your team (ahem, see above), and hand over the reins. Teammates, bosses, and coworkers will rise to the occasion and you may be pleasantly surprised about how many key players have been waiting for their opportunity to shine.
Kelsey Gruis (Subscriptions): Empathy. I think understanding that each person (employee, manager, or customer) handles and deals with things, including crises, differently. My personal belief is that we need to meet people where they are at and acknowledge that how I deal with something is different than how you do – and that’s okay. Customers need to see a brand’s empathy in that way too. We can’t market a brand/product specifically on how I feel about the crisis; we have to take an even-keeled approach that focuses on sustainability and working together.
Jed Nelsen (Compliance): Leaders need to be calm, get good insights from the data, and be decisive. Don’t panic; it only makes things worse. Look to what your data is telling you and ask tough questions that get to the heart of the issues. Finally, if decisions need to be made, make them sooner rather than later and commit.
As of publication, the coronavirusoutbreak has infected over 75,000 individuals and claimed over 2,000 lives. China has quarantined at least 16 cities, 19 countries have confirmed cases of the coronavirus, and governments around the world have restricted travel and transportation to curb the outbreak.
Thecoronavirus has also had an economic impact, disruptingproduction and supply lines.On February 24th, the Dow Jones was down over 1,000 points, contributing to fears that the coronavirus, if it continues to grow and strain global economies, could trigger a recession.
Listen to our podcast episode discussing how the coronavirus affects the retail world.
Factory Production Significantly Slowed
Quarantines across China have resulted in reduced operations at most factories as laborers stay home to mitigate the risk of infection. In a normal year, January and February see slowed production for Chinese New Year. As such, many brands were prepared for delays. However, the coronavirus has lengthened the pause in manufacturing beyond the normal holiday period.
Delays in production were originally forecasted to be minimal, but China has extended the forecasted delays from two weeks to four weeks, and some factories have alerted brands to expect 6 to 8 weeks before operations are back to 100%. If the delays continue much longer, small and large brands alike will face cascading challenges, from out-of-stock issues to serious revenue losses. There are also concerns that as factories work to meet demand with a limited workforce and heightened time pressure, quality control may be lost.
Transportation Rerouted and Restricted
In addition to factories working at low capacities, transportation has also been heavily impacted. Ships have been blocked from ports, required to anchor offshore in quarantine. Airports are shutdown, and those that remain operational receive minimal use as brands and suppliers opt to avoid airports in China and neighboring countries. Air cargo out of China is practically non-existent, presenting a significant threat to lean supply chains and retailers who maintain low stock levels.Truck transportation too is affected, as vehicles must pass through multiple checkpoints and reroute around quarantine zones. All of these changes further delay deliveries.
Unfortunately, the danger to business won’t end with the coronavirus being contained. As companies restart production and play catch up with shipping, there’s a serious risk that transportation could be over-taxed, leading to a shortage as everyone tries to move their goods out of China at the same time.
Most Vulnerable Amazon Categories: Furniture, Footwear, and Consumer Electronics
Experts say that the furniture and footwear categories are at the highest risk to be impacted, as many of their products are seasonal. If they cannot receive goods from China in time, they’ll lose peak season sales. Consumer electronics are also an at-risk category, as they source components from numerous countries, largely in Asia. If one component is delayed, the entire production is delayed.
Amazon Extends Coverage
In response to the coronavirus outbreak, Amazon has ordered an additional three to four weeks of coverage in key categories. Other major retailers like Walmart and Target have not done the same, and they are expected to be hit harder by the coronavirus outbreak because they source such a high percentage of goods from China and they have not adjusted their inventory schedule since the outbreak.
Back to School Sales are At-Risk
The back to school shopping season is a major concern for many brands, as shipments usually ship by end of April. If production is slowed and cannot meet volume in time for the shipment, brands will lose sales.
Amazon is positioned to benefit from this situation, as they typically see the greatest back to school sales in August and September, when brick and mortar competitors are running low and consumers are short on time. If Walmart’s and Target’s run empty this summer, Amazon’s back to school sales may very well occur earlier.
WHAT TO DO NEXT
The coronavirus will have an economic impact. The question is, to what degree? Brands affected by the coronavirus or those that wish to protect themselves from future outbreaks or natural disasters should look into alternate manufacturing partners. Sourcing from a single partner is always a risky tactic, and the coronavirus has made that risk all the more evident.
Brands can and should also look into shipping directly to Amazon, instead of a US warehouse first. This cuts out an unnecessary middleman and shortens lead times.
Finally, brands seeking to mitigate future risk should maintain enough inventory on-hand to survive future slow-downs or other inventory complications. It may tie up more cash, but the protective measure serves as an insurance or safeguard against unforeseen challenges.
Listen to our podcast episode discussing how the coronavirus affects the retail world.
Managing a supply chain that is halfway around the world is a challenge. It takes experience, courage, cultural sensitivity, and the guts and know-how to manage the complexities of production and quality. There is significant investment in inventory, and it must all be paid for up front (at least in the beginning). Learning to navigate the potential pitfalls is the only way to protect your investment and have some measure of success.
10 Key Considerations for Sourcing Product Internationally
1. Work on products you know well.
You must know what the correct cost is, understand what level of quality you can afford, and what you will need to pay to get the quality that you want.
It’s a fine balance. You get what you pay for, but will your customer appreciate what you’ve built? In a digital world, will an Amazon customer appreciate better quality, or are they looking for a bargain? It’s very easy for a vendor halfway around the world to take advantage of you by cheapening materials or shortchanging you on specifications.
To safeguard against this, you must know your product inside and out. Know the fibers, the material thickness and weights, and the required testing standards.
2. Document everything.
Document all elements and expectations for your product in a tech pack. Dimensions and tolerance (if any), materials, color standards, care and content labels, trims and packaging requirements, instruction booklets, registration cards, testing standards – all should be documented in a technical specification package. Be sure you understand what governmental regulations are required for compliance for sale in the USA. That relates to labeling.
Understand and know that vendors will take shortcuts to save money and increase their own margins. This is a given, so it is important that you know your product well enough to catch these things. Some shortcuts won’t affect the salability, quality, or use and could be good ways to make a compromise with manufacturers in order to hit your required target. Other shortcuts matter. It’s up to you know the difference and to identify shortcuts.
4. Relationships are everything.
Develop good relationships with factories. Only then can there be mutual trust and your business can then thrive. If you are changing factories every season or for each new order, you will not have consistency of product quality. The learning curve is steep and the lead times are long. The longer you work with a vendor, the more they understand your needs, and vice versa. They will know what to recommend in order to improve lead time and prices, without sacrificing quality. This only happens after working with vendors for some time.
5. Get multiple quotes and samples.
Finding vendors can be tricky. Depending on what you are looking for and the volume, you can start on Alibaba. RFQ’s help to get multiple quotes at one time, then you can request samples and have conversation to discern which vendor suits you best. Working with vendors who speak English as a second language often leads to much misunderstanding. Providing tech packs and samples for vendors to follow helps minimize this communication gap.
6. Sourcing agents can help.
Another way to find vendors is to go through a sourcing agent, of which there are many. Agents can either represent the factory (selling agent) or the customer (buying agent). The difference is whose interest they are looking out for, and that is, of course, dependent on who is paying them. Agency fees vary by volume and how much you can negotiate. In general, expect to pay 6-9% of FOB value to the buying agent. Agency fees are not dutiable (in the USA) if you are using a “buying” agent. If the factory has a “selling” agent, that cost is built into the FOB and it is dutiable.
Why Use an Agent?
They can help you negotiate cost
They can do product inspection on your behalf to ensure quality
They protect your investment by staying in touch with the factories and keeping you informed
They can push to keep product ex-factory on time which can be critically important with seasonal product
Volume. An agent like Li Fung will require a minimum FOB value per year to dedicate staff to your account. Small sellers will never be able to work with an agent.
7. Know how to purchase.
There are several options for purchasing, and it’s up to you to know the differences between each. Below are brief overviews of the three main options:
EXW (meaning ex-works): You are purchasing directly from the factory and the cost of transportation from factory to port is born by you (not the factory). Export docs are usually not done by the factory in this case. You will need to find a freight forwarding agent to help with the export. You are the importer of record at US Customs. You are liable for all duty and freight.
FOB port (freight on board): The vendor (factory or trading company) pays to get the product from the factory to the freight forwarders consolidation point. You are the importer of record at US Customs. You are liable for all duty and freight.
DDP or LDP (Landed duty paid or delivery duty paid): The vendor (factory or trading company) is the importer of record for US Customs, and they pay all duty and freight. DDP is delivered to your door. LDP is delivered to the port you select and you pick it up at the port.
Beware – if you purchase DDP or LDP, you are still liable for any mistakes, accidental or otherwise, on import entry docs. One way that vendors shipping DDP get more margin is to undervalue shipments for US Customs purposes. This means that less tariff is paid. This is fraud, it is illegal, and if you purchase DDP or LDP from a vendor who does this, you as the buyer, remain liable. It is up to you to check documents and confirm the value declared for each shipment.
8. Weigh your options.
Should you work with a trading company or directly with a factory? You will find that working with a trading company is often easier. Their English tends to be much better for one. You might also find that they can do “everything.” They are not specialists and they work with many different factories. They may not have in-depth understanding of the product that you want to make. They will have to rely on the factories to know those details, which can be hit or miss. They will have a variety of factories in their portfolio and the pricing and quality can vary greatly. They also are not in the factories often, which can allow mistakes to persist and quality to suffer. However, it is an easier way to start from scratch.
Keep in mind that in both trading companies and factories, the merchandisers get year-end bonuses based on the volume of orders they bring in and the margins they can get for the trading company or factory. In other words, you have opposing interests from the outset. The merchandiser is looking out for him or herself and for the factory first, and for you second. You will find that your negotiation skills will be tested. They don’t want to lose the order, but they want to get the highest price they can. This is where and when shortcuts are taken on the factory side to get more margin for themselves. We said it earlier, but we’ll say it again: Relationships are everything. The longer they work with you, the more reorders and new projects, the better you will be able to negotiate, and a more consistent quality will be forthcoming.
9. Get product samples.
Product samples are essential. It is key to document what you are getting every step of the way. You need first samples to confirm that you’re getting what you think you are expecting.
Next are Pre-production samples, which document all labeling, colors, trims, packaging, and product quality. Without this pre-production approval step, you cannot be sure that there is a genuine understanding between you and the factory. You should request 2 such samples, one to keep for your records and one to sign and send back to the vendor as their reference of exactly what you are purchasing. Remember, you will be paying in full for product before it leaves their factory. If it’s wrong, it is very difficult to get the factory to compensate you.
Last are TOP (top of production) samples. These will document every color and size, and they should be the same as the production sample in every way, but with a larger selection. Product should not ex-factory without approval of TOP samples.
Testing. It’s important to work with a 3rd party lab who can help you navigate the ever-changing testing regulations for your market and product. Note that regulations differ by state. A 3rd party lab will be your best resource for all regulations related to your product.
To name a few reliable sources: Bureau Veritas, SGS, and Interek. These third-party labs can do more than just test product. They can also perform final quality inspections and run human rights compliance checks on the factory itself.
10. Testing is essential.
Testing is expensive, but it’s indispensable. If you choose to use a third-party inspection company – whether one of the labs or another third-party inspection – you will have the peace of mind knowing that when you make a final payment for the goods, you have relative assurance of the quality. Inspection companies will want to know your inspection standards. Most go by AQL (Acceptable Quality Limit) standards and will need to know which level of AQL your company adheres to. You can find AQL tables online and determine which suits you best from there.
Know your product.
Get multiple quotes and samples from the vendors.
Get to know your supplier – look for long term players.
Document everything – leave nothing to chance.
Research all labeling and testing requirements – ignorance is costly and there are no allowances for this in the law.
Purchase FOB and engage a freight forwarder for clearance and brokerage.
Document everything with actual samples.
Testing is required – never take a shortcut here.
3rd party inspections keep vendors honest and protects your investment.
Check all import docs – you are the importer of record. You are liable for “mistakes.”
Be sure that you understand ALL costs. FOB is just the beginning. Freight and duty, inspection and testing, trucking to your warehouse, clearance, and marketing costs all add up.
Over the last 11 years, we’ve developed a wide range of excellent services for our partners, and in the fast-paced world of ecommerce, some partners may have missed a few of those opportunities.
That’s why we’re dedicating this post to providing an overview of Kaspien’s various offerings, including our array of ecommerce services, our proprietary software for marketing optimization, brand protection, and inventory management, and our two divisions for ecommerce partnerships.
The Kaspien Platform
We take pride in our flexibility, offering multiple partnership pathways that support your individual goals while utilizing the same high level of service and expertise. Kaspien can partner with brands as a software provider, equipping brands with industry-leading software for marketing, brand protection, and inventory management; as an agency, providing anything from complete Amazon channel management to a la carte; or as a traditional wholesale retailer, representing your brand across online marketplaces.
Your One-Stop Shop for Everything Ecommerce
When you partner with Kaspien, you gain access to one of the largest catalog offerings in the industry. Click on a service below to read a blog post about it.
Dedicated Partner Support
You’ll have a dedicated point of contact who is always reachable by phone or email. Anytime you have a question, big or small, we’re here to answer it. Our shared success is grounded in strong communication and support.
Dedicated account manager familiar with your brand’s goals, obstacles, and needs
Tailored, outcome-oriented strategies with actionable steps
Our partners receive complimentary listing creation and optimization services, including the creation of enhanced brand content, aswell as access to unparalleled paid marketing services at exclusive rates. At Kaspien, we don’t charge a marketing management fee. Instead, your monthly marketing budget goes entirely to fueling your selected services.
Our compliance team is versed in government and marketplace regulations for selling in online marketplaces. We’ll work with you to prevent listing suppression and to get them back online anytime there is an issue.
We’ve developed and used proprietary technology to become a top Amazon seller. We can deploy this same array of exclusive software for our partners to protect your brand, enhance efficiency, and maximize your sales.
Our global presence is always growing. We’re active in Amazon US, Canada, United Kingdom, Germany, PAN-EU, and now India. We can also sell your products on Walmart and eBay.
Want to Learn More?
Reach out to your Kaspien account manager or use ourcontact form for questions or to inquire about services you’re interested in!
Trust is paramount to the success and longevity of any relationship, including the relationship between brands and their customers. Brands rely on customer trust for stability and growth, and right now, that trust is weak. According to the 2019 Edelman Trust Barometer, only 34% of consumers trust most of the brands they buy.
This can be partially attributed to a shift in culture. Edelman’s research shows that consumers now expect brands to take a larger role in society, with consumers expressing interest in brands combatting fake news and misinformation, taking stands on societal issues, and brands expressing shared values. A 2017 study by Cone Communications found similar results, reporting they would purchase a product because the company advocated for a value they share.
This shift makes sense when considering the rise of corporate giants like Amazon, Facebook, and Google, whose influence on our daily lives is undeniable. Consumers are increasingly concerned with brands’ greater impact on society, giving much attention to how brands handle and protect customer privacy and their impact on the environment, public health, and human rights.
Brands should take note and respond to this shift. Beyond just general decency, proactively addressing these concerns can help brands earn consumers’ trust, which, surprise surprise, pays dividends for a business.
The Benefits of Earning Customer Trust
Earning shoppers’ trust fosters brand loyalty, with repeat customers facilitating growth. Shoppers are more than twice as likely to patronize a trusted brand before a competitor, continue purchasing from that brand, and even act as brand advocates, promoting and defending the brand, if they trust it.
Edelman also found that consumers pay significantly more attention to advertisements from brands they trust compared to those that they do not fully trust. With 74% of consumers using at least one method to avoid advertising, that extra attention can provide a significant advantage over competitors.
Trust is Earned by Demonstrating Competency and Sincerity
According to Kevin Sanders, a marketing thought-leader with 25 years of experience at Kellogg’s, The Coleman Company, Timberland, and founder of Becoming Trusted, trust is earned through the combination of two factors: competency and sincerity.
Companies have become exceedingly proficient at communicating how well the product performs, the quality of materials, and its dependability. Collectively, these factors represent competency: a product performs the desired function well. While competency is certainly important, it is only half of the puzzle for earning trust.
The other half is sincerity. Sincerity is a measure of honesty and fairness, or general goodwill. It means that brands aren’t trying to deceive or mislead their customers and that they’re charging fair prices. It means that they care about their customers’ experience, even after they’ve made a purchase; that customers are more than a number. Many companies struggle to earn customer trust because they fail to communicate sincerity. In most cases, this is not because they lack it, but because they don’t proactively communicate sincerity in their messaging.
Why is that?
In the past, brands had the luxury of time to prove them honest and fair. Shoppers couldn’t order online; they had to go to stores, and they made relationships with these businesses. Over time, opportunities would naturally present themselves for a business to demonstrate its sincerity, so it only had to promote its competency in its marketing materials. With globalism and ecommerce, that reality is gone. If brands want to earn trust, they cannot afford to be passive. They must learn to actively communicate competency and sincerity.
Communicating sincerity is not as difficult as it sounds, so long as you’re willing to match words with actions. Use the following three steps to proactively communicate your brand’s sincerity and build trust.
1 – Define your mission It’s easier to rally your employees and your audience if you have a clear mission to work towards. Start with a long-term vision, but then set achievable short-term goals that will bring you closer to it. By defining your mission, you create a topic that allows you to organically highlight your brand’s sincerity. Share why this cause is important to your company, and report on how your brand helps support it through its goals.
2 – Invite your audience to aid in your mission Once you’ve defined your mission and set short-term goals, invite your audience to help you achieve them. Rallying behind a common cause promotes engagement and builds rapport. REI did this spectacularly during the 2019 government shutdown. As reports came in of littering and vandalism at unstaffed national parks, REI asked its audience to help them clean the parks. It was an opportunity for the company to back up its words with actions, demonstrating its sincerity to earn respect and trust with its community.
3 – Use social media to engage directly with your audience Social media is the vehicle for communicating your brand mission and inviting audience engagement. In the place of in-person interactions, brands can use social media to showcase their products (highlighting competency) as well as their efforts to support their employees, help customers with issues, and their actions in wider societal issues (demonstrating sincerity).
It also represents a great application of behavioral economics. If brands can cultivate a distinct brand personality that strikes a cord with shoppers, they can create an emotional impetus that encourages purchases or sparks conversations. One need look no further than Wendy’s infamous Twitter account to see the engagement they’ve generated from their fiery interactions with customers and competitors. Readers loved the strong personality and word quickly spread across the internet of Wendy’s twitter account.
The fact that consumers prefer to patronize brands they can trust should come as no surprise. The difficulty has been in learning how to prove worthy of consumer trust in an increasingly skeptical, fast paced world. While challenging, brands should make dedicated efforts to earn customer trust for both the well-being of their communities and the longevity of their business.