Amazon.com has announced a new service that will allow its 2 million merchant partners to deliver inventory directly to physical retail stores and warehouses. 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 Amazon Accelerate, a conference that attracted around 2,000 online merchants to Seattle.
This move by Amazon demonstrates the company’s efforts to expand its logistics network beyond serving online shoppers. By offering merchants the ability to control more inventory deeper in the supply chain, Amazon aims to streamline the process before products are sold.
Merchants can utilize Multi-Channel Distribution to send inventory to warehouses operated by other logistics providers, other online marketplaces, and even physical stores for shelf placement. This service will complement Amazon’s existing programs, such as Buy with Prime, which allows merchants to pay Amazon for product delivery to customers who make purchases on non-Amazon websites. Buy with Prime was an extension of Fulfillment by Amazon, a service that provides warehousing storage, packing, and delivery for merchants selling on Amazon’s website.
Amazon has been steadily expanding its services in order to establish itself as a leading logistics company overseeing the global flow of products from factories to customers’ doorsteps. 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 expressed interest in this space and announced similar services. Approximately 60% of all products sold on Amazon come from independent merchants who pay commissions and additional fees for logistics and advertising. These merchants have become an increasing focus for Amazon as the company seeks 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, up 18% from the previous year and surpassing the profitability of its cloud services business. However, the company’s charges and fees for sellers began consuming about half the cost of each sale, making it more challenging for merchants to turn a profit.
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 this new service will allow sellers to offload more of the complexity of their supply chain logistics to Amazon, benefiting both their products sold on Amazon’s store and through other sales channels. The goal is to help sellers save money, drive business growth, and have more time to focus on creating innovative products for customers.