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Retailers use 3PLs to chase Amazon

Pushed by Amazon to compete with free delivery, often in two days or less, and to provide subscription-based offerings (such as curated box-of-the-month products or routine replenishment of consumables) atop incredibly slim margins, more omnichannel and eCommerce retailers are turning to third-party logistics and fulfillment service providers (3PLs) for fulfillment solutions.

“Just about everybody in retail is being dragged along by what Amazon does,” says Robert Lieb, professor of supply chain management at Northeastern University who has surveyed 3PL CEOs for nearly 25 years.

“They are trying to respond with an omnichannel solution to maintain brick-and-mortar stores, but also be competitive in e-commerce.”

Amazon fulfillment center

How Can Retailers Use 3PLs to Compete with Amazon?

The sheer size and scope of the "behemoth that Bezos built" can be overwhelming for both established brands and startup sellers alike.

“Because a lot of sellers — particularly small ones — can’t afford to put together their own standalone eCommerce business with the geographic and inventory positioning capability to meet same-day/next-day delivery expectations, they’re asking 3PLs to help,” Lieb adds, noting that it has become the fastest-growing part of the 3PL business in the last five years.

3PLs offer some redress to the reach of Amazon, if not its deep pockets and ability to take losses for the greater good of keeping buyers within its ecosystem. Nonetheless, retailers use 3PLs to leverage their location and established relationships with parcel carriers.

Leaning again on data to push home the point that retailers could use some help in this space that Amazon now dominates, Lieb concludes:

“Last year, of the 3PLs I surveyed, almost 14% of their revenue consisted of eCommerce. The year before it was 18%. Retailers are increasingly looking for help from fulfillment partners.”

That help comes by getting closer to customers, reducing delivery times, and securing reduced shipping rates by moving consolidated volumes through the third-party provider. It might not be free same-day shipping, but it helps brands get out of Amazon's pocket and attract customers with services that are close enough to compete.