Ecommerce Giants Move to Lock Merchants in Their Own Fulfillment Networks

This year has seen a flurry of fulfillment announcements from all of the biggest players in ecommerce. As Amazon, Shopify, and Walmart seek to expand their networks, they also must seek returns from their massive investments. They want to use fulfillment to lock merchants into their platforms, ensuring that they’ll capture lucrative payments and other services revenue. As they prioritize themselves and their own ecosystems, merchants face growing obstacles, sometimes even dealing with restrictions like the Walmart merchant manual block.

In this article, we’ll shed light on what changes are happening, why they’re happening now, and most importantly, share advice on how merchants can avoid getting trapped in bad deals by the big guys.

Top Players Launch Big Fulfillment Initiatives

As they often are, Amazon was first to move. In April, Amazon launched a new service: Buy with Prime, which will enable direct-to-consumer (DTC) merchants to offer Prime checkout & shipping on their websites. Over 2020 and 2021, the ecommerce giant spent tens of billions on its supply chain – more, in fact, than it had spent over the preceding decade.

With a huge threat from Amazon aimed directly at them, Shopify didn’t take long to respond. In May, they announced their new fulfillment strategy: they’re acquiring Deliverr, a 3PL network. Many will remember that Shopify has its own fulfillment solution already: Shopify Fulfillment Network. As recently as early this year, though, they were admitting in earnings calls that they needed to cut locations due to lack of performance. They hope that the Deliverr acquisition will reverse their own inability to build a fulfillment option for their merchants.

Meanwhile, Walmart is pushing hard to upgrade Walmart Fulfillment Services. Following Amazon and Shopify, they announced four “next generation fulfillment centers” in June to modernize their ecommerce supply chain. Walmart already has an enormous logistics network, of course, but up until recently it was mostly oriented towards keeping its physical stores replenished. Now, they announce, “Today we use our 31 dedicated ecommerce fulfillment centers and 4,700 stores located within 10 miles of 90% of the U.S. population to fulfill online orders at exceptional speed. But we’re not stopping there.”

Why is this happening now?

It’s More Than Fulfillment: It’s Also About Tying Merchants to Platforms

Hundreds of millions use Amazon Prime to get online delivery in two days or fewer, so Buy with Prime must be about fulfillment, right? Only in part.

Here’s how it will work: the service will let direct-to-consumer (DTC) merchants use Fulfillment by Amazon (FBA) for orders from their own sites. On top of that, Buy with Prime will put the Prime badge on DTC websites next to items eligible for free 2-day and 3-day shipping. Finally, Amazon Pay will power the checkout experience.

The last part is the key to understanding how Amazon, Shopify, Walmart, and others see these initiatives. Online retail, logistics, and fulfillment all have fairly small margins. In contrast, payments are extremely lucrative.

Right now, Shopify, not Amazon, gets that lucrative payments revenue from DTC sites.

Payments, in fact, are Shopify’s lifeblood. Shopify’s Merchant Solutions revenue, which includes revenue from Shop Pay, is growing much more quickly than their Subscription Solutions revenue. In their Q1 ‘22 earnings guidance, Shopify noted that Merchant Solutions grew to make up 71% of their total revenue, far surpassing Subscription Solutions’ 29%.

Amazon, Walmart, and Shopify are all ecommerce “landlords” that want to charge rent to their “tenants”, ecommerce merchants, everywhere they can. In this instance, they’re trying to use fulfillment to get merchants to “move in”, and then they make their rent on payments. Not to mention, the payment processor gets access to first-party data, the lifeblood of modern digital advertising. For example, sellers using Walmart fulfillment services face strict guidelines in the Walmart merchant manual block, which prevents fulfillment for non-walmart channels.

So, these big fulfillment moves from Amazon, Shopify, and Walmart are more about keeping sellers happy and on their platforms, where other services rake in the profit.

To Scale, You Need Flexible Fulfillment

In a perfect world, fulfillment competition between Amazon, Walmart, and Shopify would be an unqualified good – they’re improving fulfillment options for merchants. Just one critical detail undermines this: they’re tying their ecommerce order fulfillment networks to their own channels at the expense of multi-channel fulfillment.

Here’s how they limit you.

Sellers can use Fulfillment by Amazon for their DTC site with Amazon Multi-Channel Fulfillment and Buy with Prime, but MCF is >50% more expensive, and it shares inventory limits with Amazon volume. On top of that, your DTC orders will be delivered in Amazon packaging, and many marketplaces, like Walmart, don’t allow you to use MCF. The Walmart merchant manual block enforces strict guidelines to ensure Walmart-only fulfillment and restrict multi-channel flexibility. 

Walmart is even less flexible: Walmart Fulfillment Services only fulfills orders sold on Walmart.com.

Meanwhile, Shopify appears to be making Deliverr pivot to prioritize their platform. Shopify Fulfillment Network (SFN) never grew past an invite-only platform available only to Shopify sellers. Given the relative small size of SFN and Deliverr, we’re not surprised that Deliverr’s recent product release announcements have been mostly tailored for Shopify sellers.

These giants’ desire to lock you to their channels with their fulfillment services runs directly counter to modern multi-channel ecommerce strategy.

If you sell primarily on one of these channels and use their fulfillment, the realization that they can’t support you halts your growth plans in their tracks. Adding multiple fulfillment providers adds complexity and failure points, and it adds significant cost due to duplicate inventory. You should consolidate inventory to enjoy economies of scale, but Amazon, Walmart, and Shopify want to deny you that edge.

So, sellers must move past convenient but un-scalable solutions. You need a flexible fulfillment service (like Cahoot) that enables Amazon-like speed at low cost on every channel. Don’t let the giants lock you down – scale everywhere you sell with merchant-first fulfillment.