Lessons Every Retail Store Can Learn from Amazon Supply Chain
It’s no doubt Amazon is the world’s largest online retailer in the world of eCommerce.
They are on the very top of the most popular shopping apps in the United States as of June 2019, reaching over 79.9% of mobile users.
Amazon’s current share of the U.S. eCommerce market is 47%. They have more shares than their biggest five competitors together.
For comparison, eBay has 6.1%, Walmart 4.6%, Apple 3.8%, The Home Depot 1.7%, and Costco 1.3% of market share.
It’s incredible how Amazon – a company that started from a garage, could achieve this great feat.
Many retailers may be wondering how to achieve all of this:
How can our company grow in this fast pace?
What can we do to improve our performance?
What’s it that Amazon is doing that we can also do to achieve this great conquest or even better?
Amazon’s success has much to do with how they operate their supply chain, and here, we will highlight just how the Amazon supply chain works, and some key takeaways on how to use and adapt these strategies to your retail store.
How the Amazon Supply Chain Works
Amazon’s supply chain is one of the critical factors that has contributed to putting it ahead of its competitors in the eCommerce world.
Ensuring customer satisfaction is key to the success of every organization. And that’s precisely the goal that the supply chain of Amazon is geared towards – customer experience is their crown achievement.
Within their supply chain, Amazon is combining warehousing strategies, delivery options, and logistics networks, all aided by the latest technologies along with the use of data analytics to improve the efficiency of all operations.
The effectiveness of every supply chain largely depends on its warehousing strategies.
Amazon’s warehouses are strategically situated mostly near large metropolitan areas and other heavily populated zones. This is somewhat expected.
But Amazon also has smaller warehouses located near small towns to improve the customer experience of customers who are outside of metropolitan areas.
Amazon strives to make sure that the products sold on their marketplaces are accessible anytime from any place on earth, and orders are delivered fast.
Within their warehouses, everything is also carefully structured to make sure operations are as fast and reliable as possible.
Every warehouse has five storage areas that enable workers and pick-and-pack robots to locate and move items with ease and faster.
Different types of inventories are calculatedly distributed amongst the various warehouses to make sure supply can meet demand, thus ensuring efficiency.
One of the significant factors that also puts Amazon ahead of its competitors is the plenitude of delivery options it offers.
Yes, there is a free two-day Prime delivery option. You just have to subscribe at a fee of $119 for a year or $12.99 every month, and you get free two-day shipping on eligible items to addresses in the contiguous U.S. and other whooping benefits.
In addition, there are also special delivery options:
- Release-Date Delivery
- Same-Day Delivery
- Amazon Hub Locker
- Amazon Hub Apartment Locker
- Key by Amazon
- Secure Delivery with One-Time Password
- Amazon Scout
All these delivery options make shopping on Amazon a lot more comfortable and convenient.
You have diverse kinds of options at your disposal. You definitely will find one that’s perfect for you.
Amazon also employs a host of strategies in delivering products to customers. These strategies range from more traditional to super high-tech.
Some drones can land on your roof or even in your backyard with your orders.
There are also deliveries by Amazon-branded trucks and vans and even bikes in specific locations.
This wide range of strategies makes it possible for the company to get orders out faster, easier, and more efficiently to almost every part of the world – even to remote and rural areas.
The varieties of technology Amazon deploys in its operations is also one of the significant factors in its supply chain that has contributed to its great exploits.
The company utilizes numerous automation and robotics solutions, including conveyor systems, pick-and-pack robots – these robots pick and pack items without needing human assistance – and drones as well.
The use of technology in its operations not only up the company’s efficiency but also help fulfill orders as quickly as possible and cut down staffing costs – freeing funds for investment in other vital areas of the supply chain.
Lessons You Can Take from Amazon’s Supply Chain
Every retail store can learn a thing or two from Amazon and make their own store better and more efficient.
Here are a few key takeaways:
One key factor that contributes to the efficiency of Amazon’s supply chain is its ability to manage inventory.
As a retailer, effective management of your inventory is critical.
You don’t want overstock, understock, overprice or underprice. Determine what strategy works best for your store.
You must know what inventory must be purchased at that time, who to buy from and how to stock items in the right warehouse at the right time.
Knowing how to price inventory to produce profit and not scare buyers away is also crucial.
Which of your warehouses get a lot of demand? Make sure you don’t run out of stock in such areas. Ensure there is always enough supply to meet demand.
Amazon’s supply chain is centered on the customer from start to finish.
The quest to give customers the utmost satisfaction – convenience, speedy deliveries, value for money amongst others is one of the factors that has led to numerous technological innovations.
Your customer is the anchor of your company. Your survival as a retail shop dramatically depends on your customer.
Their satisfaction is what makes them come back to you.
Their opinions on your services can make or unmake you.
Therefore, as a retail shop, have your customer in mind when making decisions.
How will this decision affect my customers?
Will they love it?
Will they accept it?
Don’t ever make decisions without the input of your customers.
Yes, of course, you can’t listen to each of the millions of customers you have; but at least you may have had some suggestions from some of them – which, when considered, will truly help.
Having the customer at heart is one key factor that has made Amazon’s supply chain successful.
If there is nothing at all you can learn from Amazon’s supply chain, at least how efficient the supply chain has proven to be over the years is a fact that can’t be denied.
Its supply chain doesn’t waste any resources – all energy, physical materials and even time are optimized to get the desired output with as little resources as possible.
The use of conveyor systems, automation, robots, software, and other technological innovations has helped ensure that a high level of efficiency is achieved across all levels of the company’s supply chain.
As a retail shop, maintaining and improving efficiency is key to your success.
Make sure your stock prices accurately reflect all available information and costs of your company’s operations, as well. Inventory management should be a part of your budgeting.
Adapt some technological innovations that will help you minimize the use of specific resources – freeing some for investment in other significant areas.
The reliability of Amazon’s supply chain being a key contributor to its improved customer retention and loyalty is an undeniable fact.
As stated earlier in this article, your ability to make your customers fall in love with you is key to your success.
How reliable you are is one of the ways you can achieve that.
You must ensure that there is always stock available in reasonable quantities. Your consistency is vital as far as reliability is concerned.
Make sure the delivery options you offer are reliable. You must strive to achieve on-time delivery and avoid making customers feel disappointed. That will be to your disadvantage.
You will be surprised to know that about 50% of all sales made on Amazon marketplaces come from third-party sellers.
You definitely can’t have every product in this world. That surely doesn’t mean you can’t deal with such products.
Amazon, with its FBA program, accepts products from third-party sellers, stores the products in its warehouses, picks, packs, and fulfills orders on behalf of these third-party sellers.
They also handle returns and refunds and provide customer services.
All of these come at a fee.
You may be lamenting over the fact that your shop is too small to adopt this strategy. Well, why not consider the approach of those third-parties selling on Amazon as well.
Sometimes, to be able to get to the top, you may have to collaborate with those at the top and understudy them.
One of the easiest ways to achieve customer retention is by making sure you have everything your customers need.
To achieve this, you can develop a program similar to Amazon’s FBA that will allow other third-party sellers to list their products in your shop.
Think local, and see whether other small retailers who might not have their own eCommerce solution might be interested in selling in your shop.
You may not be able to offer all the benefits the FBA program offers.
Not all Amazon strategies will be applicable to every retailer. To get the best results, you have to determine what would work for you, and which you can afford.
It’s crucial you adapt them to your store and to a bit of A/B testing to tweak and optimize them.
Just remember – always keep customer experience as the main goal of all your strategies.