Amazon.com is set to launch a new service that will allow its 2 million merchant partners to directly deliver inventory to physical retail stores and warehouses. This move is part of Amazon’s ongoing efforts to expand its logistics network beyond online shopping. The service, called Multi-Channel Distribution, is currently in a pilot test and will be more widely available later this year.
The announcement was made at the Amazon Accelerate conference, which attracted around 2,000 online merchants to Seattle. This new capability for merchants demonstrates Amazon’s desire to have greater control over inventory further up the supply chain. With Multi-Channel Distribution, merchants can send their inventory to warehouses operated by other logistics providers, as well as other online marketplaces and physical stores for display on shelves.
This service will complement Amazon’s existing programs such as Buy with Prime, where merchants can pay Amazon to deliver products to customers who make purchases on non-Amazon websites. Buy with Prime was an expansion of Fulfillment by Amazon, which offers warehousing storage, packing, and delivery services for merchants selling products on Amazon’s website.
Amazon has been steadily expanding its services in an attempt to become a leading logistics company overseeing the entire product flow from factories in China to customers worldwide. The company aims to consolidate various businesses involved in tasks like ocean freight, customs, ground transport, and inventory storage into one seamless service.
Other companies, including logistics start-up Flexport, have also shown interest in this space and announced similar services recently. Approximately 60% of all products sold on Amazon come from independent merchants who pay commissions on each sale, along with additional fees for logistics and advertising. These merchants have become a growing focus for Amazon as the company looks for additional sources of revenue beyond its web store, especially with online sales growth slowing down.
In the second quarter, Amazon’s seller services generated $32.3 billion in revenue, marking an 18% increase from the same period last year and surpassing the profitable cloud services business. However, the fees charged by Amazon to sellers have been increasing, making it more challenging for merchants to generate profits. In the United States, Amazon captures approximately 37.6% of all online spending, according to Insider Intelligence.
Dharmesh Mehta, Amazon’s vice president in charge of worldwide seller services, stated that with Multi-Channel Distribution, sellers will be able to offload more of the complexity of their supply chain logistics to Amazon. This includes products sold on Amazon’s store as well as through other sales channels, both online and physical store locations.