Image Credit: Hamilton Greene
Selling products online has become a part of just about every business’s operation. This has opened up new markets for product managers to go after. However, it turns out that selling online comes with a number of rules that product managers may not realize when they first start selling online. The biggest company out there, Amazon, has conditioned customers to expect the products that they order online to show up virtually the next day. This can be difficult for smaller firms to do. How should a product manager go about handling this issue?
It’s All About Speed
In this era of fast-moving businesses, product managers are finding themselves under more and more pressure. Because of the success of Amazon, selling online is one thing, but actually getting products to customers fast enough to make them happy is something else. The ability to do this is especially difficult if a product manager is not selling via Amazon, but still feels obligated to match the e-commerce giant’s promises of free and fast delivery. What is going on is that smaller businesses have a hard time matching Amazon’s fast, free shipping. In a normal world when a product manager charges a customer for shipping what happens is that many potential buyers will complain about shipping charges and that products take too long to arrive. Clearly a change to a product development definition is required.
Product managers at America’s small and medium-size online merchants are being separated into winners and losers according to their ability to adapt to changes in how logistics are done driven largely by Amazon and other big retailers. It does not look like this is going is going to get any easier as Amazon continues its hiring binge and warehouse building spree. Both of these activities will facilitate ever-faster, free Prime shipping. As a result, even product managers who don’t sell on Amazon are starting to race to ship products as fast as they can, either eating the extra cost or raising prices and watching their sales decline while at the same time coping with supply-chain bottlenecks. What these smaller merchants don’t have is a warehouse full of humans and robots, moving in a software-optimized workflow meant to drive down the cost of every online purchase.
Amazon was among the first e-commerce companies to turn its supply chain into a competitive advantage for it. Once Amazon created its Marketplace, where anyone could sell wares, and Fulfilled by Amazon, its logistics service for warehousing and shipping the goods those businesses sold on Amazon, that advantage was extended to all sellers willing to pay for these services. Selling your products through Amazon would look good on anyone’s product manager resume. Amazon has been ratcheting up the speed with which most goods sold on its site arrive on the doorsteps of shoppers, offering first two day, then one day, and now frequently same-day delivery, as it rolls its Prime Now service into its main site and app. This has left sellers who want Amazon’s coveted Prime badge which indicates fast shipping and yields significantly higher sales, with a difficult choice.
Problems Caused By Amazon
Product managers can either pay ever-more-expensive fees to Amazon to warehouse and ship their goods from the company’s own facilities or they can ship from non-Amazon warehouses that meet the stringent demands of Amazon’s Seller Fulfilled Prime program. This includes nationwide availability and fast shipping. Some product managers, especially those who deal in large items or ones that don’t typically sell quickly, find this a more affordable option. What product managers understand is that they are going to see a continual weeding-out of firms that can’t solve the supply-chain piece of online sales. Unfortunately for product managers, shipping costs, through carriers like UPS, the U.S. Postal Service and FedEx, are going up between 5% and 7% this year, as demand skyrockets. And since Covid disrupted supply chains world-wide, product managers have to pay more to warehouse a larger buffer of goods. Meanwhile, demand for faster shipping means product managers have to figure out exactly how many items to store in which warehouses spread out in a network that spans the country. Keeping things in Amazon’s warehouses is not really an option because Amazon’s fees discourage retailers from keeping items in its warehouses for long.
To be in Amazon’s Seller Fulfilled Prime program, sellers must stock merchandise in warehouses from which customers can be reached in one or two days’ delivery time, for most views of a product on Amazon’s site and app. Amazon’s success with its marketplace has spawned many companies that attempt to imitate them. Things you buy on the websites of big retailers like Walmart, Target, Wayfair and dozens of other big merchants may be sold and shipped not by those companies, but by smaller businesses that give these retail giants a cut of sales and may pay other fees in exchange for getting the listing. The proliferation of Amazon’s marketplace model, and the way Amazon shapes customers’ expectations, means that the growing demands the company places on Prime sellers ripple across the entire e-commerce industry. These other marketplaces are continually changing their own seller-fulfillment requirements based largely on Amazon’s standards.
For small or medium-size online product managers, keeping up with the latest Prime demands requires what were until recently considered extraordinary measures. This means operating warehouses at least six days a week, and sometimes resorting to pricey second-day or overnight shipping. However, some product managers are thriving in this new world. To survive in this world versus Walmart, Costco, Amazon and Wayfair requires a completely different approach to customer satisfaction and speed of shipping. Some product managers turn to companies such as Productiv, which operates six distribution warehouses. While Amazon relies on its own collection of shelf-moving and package-sorting robots, companies like Productiv are testing systems with “follow-behind” robots that trail a warehouse employee as they walk through rows of shelving, and then ferry to conveyors any items their humans pick from those shelves. As in many other industries, this kind of automation is in part a reaction to rising wages and a scarcity of labor. Demand for warehousing and fulfillment is setting and breaking records by the month, leading to both more competition for these services and a greater variety of them for product managers to choose from.
What All Of This Means For You
Once upon a time selling something to a customer was an easy thing to do. You just laid it out and when the customer came into your shop, they selected it and you could sell it to them. In today’s fast moving modern world, customers can live anywhere and they want to see everything that you have to offer. If they decide to buy from you, then they want their product delivered to them as soon as possible and they don’t want to have to pay to have it shipped. Just exactly how are product managers supposed use their product manager job description to be successful in this type of world?
It’s probably Amazon’s fault. Amazon has been offering their customers fast delivery within one or two days and not charging for that delivery. Now product managers feel like they have to keep up. Smaller product managers are struggling to try to keep up with Amazon. Product managers can sell their products through Amazon and they can have Amazon deliver them too. However, the challenge of meeting all of the requirements of Amazon’s program can be very difficult. Having Amazon warehouse and ship products can be very expensive. There are alternatives. However, other shippers such as the U.S. Post Office, FedEx, or UPS are all raising their rates. Amazon’s success has created a market for other firms to help product managers warehouse and ship their products. This need for alternatives to Amazon has resulted in a growing market of alternative providers. Now all the product managers have to do is to select the firm that will get their products to their customers as quicky as possible at the best price.
Product managers really don’t know if they should thank or curse Amazon. The big firm has opened up markets that were never available to product managers before. However, at the same time the speed at which products have to be delivered has created a number of problems for product managers. The good news is that this has created a business opportunity for firms that do what Amazon does. This means that product managers can select who they want to work with in order to meet their customer’s rising demands.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that having Amazon warehouse and ship your products is the best way to get them to your customers?
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What We’ll Be Talking About Next Time
So I think that we can all agree on one thing: the pandemic changed just about everything. In the world of music performances the change was sudden and dramatic: all concerts were cancelled. Clearly, for the product managers who promote musicians this was a major setback. However, product managers are never stopped for long and virtual concerts that were delivered online were then quickly created. Now that the pandemic has receded, product managers are finding themselves in an interesting situation that they are trying to determine how they will go about making the most of.