Modern Merchant Podcast [EP 26]: Scalable Fulfillment for Ecommerce w/ Cahoot’s Manish Chowdhary

Below, you will find a transcript of the episode.

Jamie McCarthy:

Hey guys, welcome to the Modern Merchant podcast. I’m your host, Jamie McCarthy. Today, we have Manish Chowdhary with us, he’s the CEO of Cahoot, and we’re going to be talking about fulfillment today, I’m super excited. Manish, I don’t know if you know this about me, but I love talking about fulfillment. I think, in the ecommerce space, it can sometimes be a little bit of an afterthought almost. Most online retailers are concerned about getting product, and posting their listings, and hopefully, driving traffic to the site is on their radar too, but fulfillment, and having a fulfillment strategy, is so important to the overall health of your ecommerce business. I’m thrilled to have you on to really talk through that, and for you to tell us a little bit more about Cahoot.

Manish Chowdhary:

Thank you Jamie, thank you for having me, really excited to be here. I’m glad that I found somebody else who is just as excited to talk about fulfillment besides myself, super cool. Cahoot is the world’s first peer to peer order fulfillment network. Essentially, Cahoot helps merchants who have warehouses and spare capacity to monetize that space for the very first time, in a very easy fashion, because there is a massive space crunch for industrial space. Think of Cahoot a bit like Airbnb. You’ve got a spare house, a spare bedroom, and Cahoot helps you monetize that without dealing with any of the hassles. The benefit to our sellers, our merchants and brands is, they get a lower cost structure, and they get a higher quality of service through the Cahoot network. That’s what Cahoot is.

Jamie McCarthy:

That’s incredible. I was going to ask you if it’s similar to the Airbnb model, where you say, “Hey, I have this extra space. I might as well put it to good use.” Tell me, how do you get connected to these merchants? Is there a certain process for them to volunteer their space? Do you guys reach out?

Manish Chowdhary:

That’s a great question. Anybody who has warehouse space that has good metrics, they can apply on our website, and fill out the contractor’s form, and we will guide you through that process. There is a very strict vetting process. Cahoot is not a matchmaking service, it’s not like a Craigslist if you will, where somebody will just put up their warehouse space, and somebody else will go and find it. Cahoot pretty much operates a bit like a fully managed network. Think of Cahoot a bit like Uber. When you want a certain ride to be delivered, just like how Uber automatically selects the right driver, Cahoot accordingly selects the right partner, and holds them accountable, ensures that everything is getting fulfilled.

Manish Chowdhary:

That’s why I said, in the beginning of our conversation, that the quality of service, the SLA service level agreement on the Cahoot network, is the highest in the industry. A lot of times, people might think, “Oh, if I’m getting space from another merchant, I’m going to not get the quality, or the service level would suffer.” In fact, the reality is quite the contrary. We offer higher quality service at a better price.

Jamie McCarthy:

I love that. I know that you mentioned, obviously cost and quality. Are there any other major differences between working with someone like Cahoot, where you have that peer-to-peer fulfillment network, and working with, this sounds like an oxymoron, but directly with a 3PL. Any other advantages there?

Manish Chowdhary:

Certainly there are several advantages, one being, with its higher quality of service, Cahoot operates six to seven days a week, unlike a traditional 3PL that only operates Monday through Friday.

Jamie McCarthy:

Right.

Manish Chowdhary:

Our service levels are aligned with Amazon-like experience, Amazon-like fulfillment to FBA, because Cahoot is one of the very few providers that supports Amazon’s seller for full Prime, which has the most stringent requirements with respect to on time shipping, defect rate, six day fulfillment, nationwide one day and two day coverage. What merchants are getting is a highly flexible technology, fully vetted, top quality fulfillment partners, and on top of that, there’s the command and control layer. The Cahoot operations team is constantly looking at every order, to ensure that nothing is falling through the cracks. We believe that this is a better model for the future, because again, we are not limited by a couple of locations. We have several dozen locations throughout the U.S., and soon to be global. It’s essentially the way of the future, rather than working with a typical, traditional 3PL that may have one facility, that cannot cover the entire nation in one or two days.

Jamie McCarthy:

That’s incredible. I’m sure everyone feels this way, trying to compete with Amazon, even to an extent, it can be challenging, but it sounds like you guys have it pretty dialed-in.

Manish Chowdhary:

Yes. We support all marketplaces, not just Amazon, and seller fulfilled Prime is of course the feather in my team’s cap. We are one of the very few providers that can help you not only meet, but exceed seller fulfilled Prime metrics. If you go searching for SFP, seller fulfilled Prime fulfillment services, you will very quickly discover that there’s just a handful of them, because that level of quality, and ensuring that no order gets missed is not common in the industry, so to speak.

Jamie McCarthy:

Yeah, exactly. Especially for you guys competing with Amazon, do you think anyone really can get to parity with Amazon, and their current delivery model? They’re doing a lot of, in most cities now, same day deliveries.

Manish Chowdhary:

Jamie, that’s a great question. We don’t consider ourselves, or think of us competing with Amazon.

Jamie McCarthy:

Sure.

Manish Chowdhary:

We are helping Amazon sellers as we are helping other omnichannel, multichannel sellers. Where we come from, we believe in merchant-centric, inclusive fulfillment, meaning, what’s best for the merchant is what’s best for Cahoot, and that’s the way we look at it. If you’ve got a warehouse, we have, by far, one of the best technology out there, that you can coexist on a network. If you were to go to a traditional 3PL, or even a 4PL, that’s either all or nothing.

Jamie McCarthy:

Right.

Manish Chowdhary:

Meaning, either they can do the fulfillment, or you can do the fulfillment. Cahoot’s technology enables the merchant to make the best choice for themselves. Occasionally, sending some stuff to Amazon FBA makes sense, because we’ve got to admit, Amazon is great at many things. Where we come from, it is all about what’s best for the merchant, so we can empower them to achieve the best outcomes.

Jamie McCarthy:

Awesome, I love that. Looking at Amazon as really a model partner more than a competitor I think is key, for sure. As far as partnerships with 3PLs in general, this peer-to-peer fulfillment network, what do you think makes your partnerships so successful? I heard you talk a little bit about, quality control is big for you guys. It sounds like you work really closely with these merchants, to really make sure that you’re putting products in the right people’s hands, who you know are going to take care of it. What’s a key area that really helps facilitate and foster those partnerships?

Manish Chowdhary:

That’s a great question, Jamie. We consider partnerships on both sides, the seller and the fulfillment partners. Again, I’ll use the Uber example, riders and drivers. For Cahoot, ensuring that one, our partners are fully trained on our software. We’ve implemented best in class, patented technology, to reduce the burden in the warehouse. Unlike other traditional 3PLs that make decisions on the fly, an ad hoc decision, tactically, I’ll give you an example: what box to use. If you use too big of a box, the merchant is going to pay more in dimensional shipping cost. A typical 3PL might charge you less, but if they’re making the wrong decision, it is actually going to cost you more.

Jamie McCarthy:

Right.

Manish Chowdhary:

Let’s say, if you get a large order for 10, 20, 30 items, how do you split that in the most optimum fashion? How many packages to send, what services to use? Cahoot who takes all that decision making, and all that burden out of the fulfillment partner’s hands, so that they can focus on the core activity, picking the order accurately, scan verifying to ensure that the right order is going to the right customer at the right time, and ensuring that no order gets missed. That’s the beauty of the technology. Then, working very closely with our fulfillment partners, to make sure that there’s a human there to support them. The advantage of all this for our sellers is, Cahoot is like an Amazon FBA. They don’t have to deal with individual facilities, they simply are dealing with Cahoot in a digital fashion. It’s the simplicity for our sellers. There’s complexity behind the scenes, but it’s super duper simple and easy. All the information is at their fingertips, directly in our digital dashboard.

Jamie McCarthy:

I love that. Ecommerce retailers especially, they’re focusing on selling their product, their brand. They’re not warehouse, they’re not shipping experts, and a lot of that can be challenging. I think, from what I’ve seen, just in my experience working with online retailers, seeing those retail store owners, ecommerce store owners really try to take that on, on their own, is super challenging, and there’s a big learning curve. It’s probably one of the more impactful areas that can really affect your overall margins. Like you mentioned, if you’re not packing those orders correctly, or if you’re getting hit with a bunch of re-weighs, because you didn’t weigh it correctly to begin with, all of that really compounds.

Jamie McCarthy:

Sure, maybe it’s a re-weigh here and there, on a one off package, but over time, if you’re looking at your quarterly sales, you’re looking at your annual sales, that’s really something that, as you scale and grow, you might not want, as a retailer, to take on anymore. You want to hand it over to the people who really understand what they’re doing, and that’s cool, because I think that’s really where your technology comes in. You’re eliminating that human error from the picture, and really just allowing Cahoot to determine the best method to get a product out the door.

Manish Chowdhary:

That’s exactly right. Just speaking of examples Jamie, let’s say Cahoot has a 2:00 PM daily cutoff, meaning orders received until 2:00 PM local warehouse time gets shipped out that same day, and we are very dogmatic. In fact, Cahoot is looking to push that SLA later and later. If I can ship orders out until 5:00 PM, 6:00 PM, I’ve got an extra day advantage, which means the end customer is receiving the product faster, which is helping the brand, because customers are going to be happier. They’re going to write better reviews, your sales rank is going to go up, if you’re doing it on Amazon.

Manish Chowdhary:

I’ll give you another example, the strength of our technology. Technology, people, process, all of those things have to work in tandem. Our integration with all our native channels is very strong. For example, we pull in an order, the order comes in at 1:58 PM, and it needs to go out the same day.

Jamie McCarthy:

Right?

Manish Chowdhary:

In the meantime, if the customer cancels that order, our technology can sense it, because most other 3PLs don’t have that level of integration, where you can auto sense those things, and you end up shipping that item that’s going to cost the retailer a lot of money. The brand is going to cost them a lot of money. That’s just one example of the many examples of things that we do to ensure that, when fulfillment is happening through Cahoot, you can rest assure that it is super high quality.

Jamie McCarthy:

Yeah, that’s incredible. Touching on that, you mentioned cancellations, but I know returns have actually been a big talking point in this space, especially recently. I feel like I say this all the time now, but it’s just hard to ignore, it’s the elephant in the room, with costs everywhere just skyrocketing. Returns are really a pain to deal with. You talked about the SLAs, and your processes, how does Cahoot help with returns? How do you guys deal with those returns?

Manish Chowdhary:

Yeah, returns are tricky. We typically advise the clients, depending on if they have a warehouse of their own, we recommend that they bring the returns to their warehouse, because the item needs to be re-inspected, you cannot sell the item as new. Those are things that can easily create further problems. If you were to ship an open box item as new, that can really destroy the brand’s reputation.

Jamie McCarthy:

Sure.

Manish Chowdhary:

There are certain partners that specialize in returns. Don’t take returns loosely, that’s our mantra, depending on the vertical that you’re in. Some companies, as you may have heard, like Target, have been implementing return less refunds, meaning, they allow them to keep the item, because supposedly, it costs $30 to process a single return.

Jamie McCarthy:

Right.

Manish Chowdhary:

If you had an item that was $10, $12, $15, it’s going to cost more to process that. Returns are tricky, and it needs to be dealt with on an individual basis.

Jamie McCarthy:

Got it. Again, I think that conversation’s coming up more and more, as people are just realizing how much of an impact all of this has on their overall revenue. Cool, we’ll keep that in mind. As far as new and exciting things in ecommerce fulfillment, let’s not talk about returns anymore, because that’s sad, but anything new happening in the industry that gets you really excited?

Manish Chowdhary:

There’s a recent event, or development, that Amazon announced in April, about two months ago, buy with Amazon Prime, which I think is a leading indicator of what’s to come. Essentially what this program is, it’s enabling any website to allow the shopper to check out with their Prime account, with their Amazon Prime.

Jamie McCarthy:

Okay.

Manish Chowdhary:

If you have a Prime account, of course the inventory has to be placed with Amazon, like FBA, it’s essentially a form of multichannel fulfillment. Think of it like a checkout button you may have seen, like checkout with PayPal, it would be very similar. When the user logs in, the Prime shopper logs in, they will qualify for all the Prime benefits, like one day, two day free shipping. Amazon address book would launch, and you’ll be able to check out, and the order will get fulfilled from an Amazon warehouse.

Manish Chowdhary:

That’s a new development, and what’s going to happen is, the expectation of Prime-like delivery is going to now become even more pressing, because you’ll see certain merchants adopt this. Consumers that were used to Prime benefits only on Amazon will very soon expect Prime-like benefits everywhere else, which means there’s a mandate for brands and retailers to get on board, and have their infrastructure ready and set up, and get ahead of that, as opposed to waiting for that event to take place. I think two day delivery nationwide free is already the expectation, was the expectation, now it’s moving to more one day delivery. I think this is a big event, although it’s being rolled out slowly, it’s a buy in location only program, but keep your eyes out for that.

Jamie McCarthy:

I’m really excited for that. That’s interesting, because I’m guilty of it. If I need something, and especially if I need it quickly, I go to Amazon. It’s just by default, I have the app on my phone. Will this really allow other ecommerce retailers to really just expand their sales, expand their reach by partnering with Amazon?

Manish Chowdhary:

That’s the Amazon sales pitch for sure.

Jamie McCarthy:

Sure.

Manish Chowdhary:

I think, to some extent, yes, it may be true. However, this program is still in its infancy. We know very little about it, there’s very little public information. However, it’s probably not the best thing for the brands and retailers to do, because the whole point of selling on a DTC site is, you want to own that customer, and Amazon is not really willing to share all that data about the customer, because you lose control right from the shopping cart.

Manish Chowdhary:

Previously, most brands are used to offering free shipping above a certain minimum threshold, like $49, or $69. As a Prime shopper, there is no minimum, so one could check out with just one item, maybe $10, $15, it’s going to have a big impact on the entire shopper, the customer journey. We have a whole video on that. I spoke on this topic last month, in Salt Lake City. I invite people to come check out, go to the event section of our website, www.cahoot.ai, buy with Prime, and you can get all the details of the benefits, the challenges, and frankly, all the things that you need to be aware of, and what it means in general for DTC.

Jamie McCarthy:

Yeah, that’s huge. I’m definitely going to keep my eyes peeled for that. I’m going to go straight to the site as soon as we hop off of here, because it’s super interesting to just see how, more and more, they’re just moving into other areas that previously didn’t seem like were even options. Anything else, as far as ecommerce is concerned? Any news, or headlines, anything fun like that?

Manish Chowdhary:

I think this is Prime Day. I think Prime day kicked off today, Amazon Prime Day.

Jamie McCarthy:

It did.

Manish Chowdhary:

Some early reaction is, Amazon is not as aggressively pushing Prime Day promotions this year.

Jamie McCarthy:

Yeah, I noticed.

Manish Chowdhary:

We don’t expect the year over year growth for sales on Prime Day to be as large as they were in the past. There’s not a lot of great so-called deals, but most of the deals are limited to Amazon devices. There’s no exclusive promotions that are happening right now.

Jamie McCarthy:

Right.

Manish Chowdhary:

Electronic discounts, on average, are expected to be about 30%, but they hover around that the rest of the year anyway.

Jamie McCarthy:

Sure, yeah.

Manish Chowdhary:

This maybe a good opportunity to offload inventory, that is what we would recommend. We’ve heard om the news, Target, Walmart, Gap, they’re all struggling with excess inventory. A lot has changed. The supply chain issues that we saw in the pandemic are slowly easing across the board. The cost of moving a container, trans-specific container shipping, has come down dramatically from the peak. Inventory is building. I think, there are definitely fears of recession among Main Street and retailers, so this is a good opportunity to, if you have got excess inventory, try to offload them on Prime Day, if you can.

Jamie McCarthy:

That’s awesome advice. Yeah, absolutely. It’s great to hear that there’s finally some relief at the ports, too. I think, all of 2020 was a peak season. Things are finally kind of going back to normal in the transportation world, which is awesome to hear. Last question I have for you Manish, I know we talked about, briefly, the advantages of using your peer-to-peer network like this, but for a traditional ecommerce retailer, when should they start thinking about leveraging a fulfillment network like yours? Is there a certain point, where they’re hitting maybe X amount of monthly order volume, or they’re doing X amount in sales? Is there a sweet spot where you want them to start thinking about that?

Manish Chowdhary:

We invite even 3PLs to join our network, because essentially, we are creating the connective fabric for collaboration between sellers and fulfillment companies, and fulfillment partners. If you are a 3PL, we invite you to join. If you’re a seller, you can take advantage. We have clients who are large, multi-billion dollar companies, but there is also the small guy, the little guy that is just getting started. It’s very similar to Amazon FBA. Nike can send inventory, perhaps not Nike anymore, Nike is not doing much with Amazon, but the point is, the biggest brands. The platform is so scalable, Cahoot, we can help the small guy, and we can also help the very large merchant who is looking for multi-node, national distribution, and so on.

Manish Chowdhary:

We are also doing something very special right now that might be of interest to your audience, we are also performing savings analysis. Essentially, if you send us some data, we can actually analyze that data, and give you a recommendation on how your shipping costs are, how your fulfillment fees are, how should you be distributing inventory to reduce your costs further. There’s some great benefits to be had, and there’s no obligation. If anybody’s interested, they should just drop a line on the “Contact us” form on cahoot.ai, and we’d love to help them out.

Jamie McCarthy:

That’s incredible. I think it’s super important, at least I would say, maybe once or twice a year, to audit your shipping operations in general, just to make sure you’re not overpaying, you’re not getting hit with a ton of relays. Again, like we’ve mentioned earlier, it’s something that creeps up, and once you realize it’s a problem, you’re scrambling for a solution. Awesome advice, really appreciate that. I know you’ve mentioned cahoot.ai is the website, where can people find you on LinkedIn? Are you on LinkedIn, where anyone can connect with you?

Manish Chowdhary:

I’m very active on LinkedIn, just search my name, and with Cahoot, I’ll pop up. I post frequently, so please follow me if you like. I share some good content, so I’d love to connect with you, and help you out, and certainly take advantage of this free savings analysis by anybody who’s interested. I’d love to contribute, and this is our way of giving back to the entrepreneurial community.

Jamie McCarthy:

Love that. We’ll be sure to also post a link to the site in the show notes as well, so people can find you easily. I’m excited to check out the Amazon buy with Prime feature that you’d mentioned on the site, super excited to do that. Really, other than that, again, thanks so much Manish for coming on, and sharing all of your knowledge and wisdom. It was immensely helpful, I think, especially for online retailers who are trying to navigate the market today.

Manish Chowdhary:

Thank you Jamie, thank you for having me. I’m glad that we are partnering with Flxpoint to help our joint clients, and also anybody who’s listening to the show. We’d love to connect, and if we can offer any advice, we’d love to provide our two cents.

Jamie McCarthy:

Awesome, thanks so much. All right guys, thanks again so much for tuning in to another Modern Merchant podcast episode. If you want to learn more about us, check us out at flxpoint.com. That’s flex point without the E dot com. We’ve got our Modern Merchant blog up there, it’s full of the latest ecommerce information and news. Also, go ahead and subscribe to our YouTube channel, and follow us on socials at Flxpoint. We’ll see you again next week with another episode.