Why Sellers Can’t Afford to Ignore Amazon’s Seller Fulfilled Prime | #245 Manish Chowdhary

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Claus Lauter: Hello, and welcome to another episode of the e commerce coffee break podcast. Today, we want to talk about fulfillment and how you can get your products the fastest way to your customers. Now, obviously delivery is very important. The faster you can deliver, the happier customer will be. And the higher the likelihood is that they will come back and buy more from you.

Claus Lauter: With me on the show and as a returning guest, I have Manish Chowdhary. He's the founder and CEO of Cahoot.AI, the world's first peer to peer order fulfillment network. Manish has founded multiple industry leading companies, starting from his dorm room at the University of Bridgeport. He specializes or his facilities include e commerce strategy, business method, innovation, supply chain, and logistics optimization.

Claus Lauter: He holds 10 US patents for his inventions and holds a doctorate. The highest honor of his alma mater of the university of Bridgeport. So let's welcome him back to the show. Hi, Manish. How are you today? 

Manish Chowdhary: Thank you for having me. I'm doing 

Claus Lauter: great. Manish, there's a lot of changes going on, specifically if we look into Amazon, there were in the use for a couple of reasons and, that will impact a lot of sellers out there, not only Amazon sellers, but in general.

Claus Lauter: Tell me a little bit off. 

Manish Chowdhary: What has happened? That's a very large and a big question. Let's talk about a big change or big event that happened. FTC, the federal trade commissions, along with 17 U. S. States sued Amazon about 2 weeks ago for antitrust behavior and antitrust their entire suit.

Manish Chowdhary: lot of it. In fact, more than half of it is targeted towards the Amazon logistics or how Amazon forces sellers to use fulfillment by Amazon logistics in order to get access to the Amazon marketplace. So that is one big change. And as a result of that, Amazon was anticipating this change. And then they opened up the seller for full prime program to kind of divert the attention away that Amazon is actually being secular.

Manish Chowdhary: So that is, we can talk about that. What are the changes? It's a program that is still very much Favors Amazon very, very difficult for sellers to meet those standards. So we can talk about that. Even the volume for freight or ocean freight coming from overseas, particularly Asia is down, which means the cost to move containers is down.

Manish Chowdhary: Shipping carriers continue to raise their prices. So the last mile rates continue to go up. And then obviously the Q4, we are ready in Q4. So there are some deadlines. If you want to get your inventory into Amazon, you need to get it quick. Otherwise you might miss out on being stock ready for the Q4, the important holiday season.

Manish Chowdhary: Yeah, 

Claus Lauter: all topics that are very important for sellers out there, and I think the pressure is high. So let's unfold, the different topics a little bit. So first of all, oh, Amazon is opening their system a little bit more, making it a little bit easier. Tell me a little bit what kind of impact does that have for merchants?

Manish Chowdhary: It is certainly good news for the sellers. So Amazon introduced Seller Fulfilled Prime in 2015. It was really introduced for a selfish reason because Amazon just did not have enough capacity available to service all the sellers. still have the large selection available to the hundreds of millions of prime subscribers.

Manish Chowdhary: For the very first time, they said, all right, we don't have the space. Obviously, this wasn't the official narrative. This is obviously my opinion. And based on being an industry expert, that how do I still service the needs of the sellers who are joining in millions? Amazon was, bringing on hundreds of thousands, if not millions of sellers each year, and they just didn't have the capacity.

Manish Chowdhary: And so they tried all these different things. The storage fees, the Q4 spike, are putting limits on storage. All of this was basically trying to solve the problem that Amazon had underneath, which was limited capacity. And this is obviously 2015 sounds ancient now, eight years ago. This is.

Manish Chowdhary: Pre covid. So Amazon just did not have the capacity. So they said, All right, Mr. Seller, if you want to access the prime shopper, you can still fulfill from your warehouse. But here are standards. You need to achieve 20 percent 1 day delivery. You need to achieve 55 percent 2 day delivery nationwide.

Manish Chowdhary: And you need to make meet the same strict standards that Amazon has if you want to do to sell a full prime. And if you don't meet those metrics beyond that, you have to ship on the weekend. So you have to pick Saturday or Sunday. You need to have a late cut off time, meaning if an order comes in by 2 p.

Manish Chowdhary: m., it must ship out the same day. And then there were other restrictions. So it was really hard for sellers to meet these metrics. In fact, there are very, very few fulfillment providers and very few sellers that can pull that off. So Amazon allowed the sellers to do it. And then 2019, when they started ramping up their own fulfillment footprint and building warehouses, they say, Hey, how do I feed my own warehouses?

Manish Chowdhary: Let's shut down this program and they obviously said the reason for this is because the sellers are not able to meet our high standards. I would argue differently it was because Amazon wanted to divert more of the business to FBA. And that has also become one of the pivotal topics of the FTC lawsuit.

Manish Chowdhary: So this is where 2015, it started 2019, they stopped enrollment. And then just October 1, 2023, just literally 12 days ago. They reopened the Amazon seller for full prime and enrollment. Yeah, I remember 

Claus Lauter: these times when the requirements were really, really high and I'm still running my own shop. So I was dealing with that and I was like, no, there must be a other way than just dealing with that because for a small medium enterprise, as you said, it was very, very difficult get.

Claus Lauter: It done the right way without getting punished. Now, I think also Amazon created a bit of a two sided threat for themselves. We basically said they then pushed people over and into FBA. Now, with the FTC lawsuit, they opening all of this a little bit more. What kind of impact do you see coming now for Q4, which is right in front of us, for merchants?

Claus Lauter: What do they need to change? 

Manish Chowdhary: If you are selling on Amazon. And you have storage limits. you should certainly apply for the seller. You should enroll yourself in the seller fulfill prime program. It could take several weeks before they approve you. Once they approve you, you will have to go through a trial, a trial period of seller fulfill prime to demonstrate to Amazon that you can indeed meet They're very high standards for seller for full prime or prime.

Manish Chowdhary: that's where Kahoot comes in. Kahoot is one of the very few providers that can affordably help sellers to meet this program requirements. Obviously, you need to have the volume in order to distribute your inventory nationwide. You need 4 to 5 warehouses strategically located. You need to have the technology.

Manish Chowdhary: Because even if you ship the order and don't notify Amazon, that itself will count against you. You need to stay on top of these metrics. Certainly enroll for Seller Fulfill Prime, , as long as you have some decent volume. Get in touch with providers like Kahoot, or anyone else who can, who has a track record of supporting Seller Fulfill Prime.

Manish Chowdhary: Seller Fulfill Prime is not something you want to take a chance with. This is not something you ask your local warehouse that... If they've never done solid football prime or haven't heard of it, that's the wrong idea. That's a wrong strategy. So this is an opportunity, but it's also a high risk. It enables you to ship all your orders from the same location, meaning, most sellers are selling on multiple channels.

Manish Chowdhary: So this. It was the whole idea that when the sellers are being forced to move their inventory to FBA or Walmart fulfillment services or some other proprietary platform locked system, it creates a higher cost. Imagine even yourself as a seller, managing and staying on top of your inventory at five different places with each one has its own limitations.

Manish Chowdhary: Each one has its own restrictions. There's still the massive limitations on FBA. FBA may not ship many orders to overseas customers. So I just got an email from a seller. They're like, hey, we just sent a container worth of goods to Amazon and they just wouldn't ship to overseas customers.

Manish Chowdhary: So that is a big challenge. So while you can get access to the prime shopper, the seller for full prime program opens up many of those options that you should consider, obviously one big relief for the sellers if they choose to go this route is they don't have to deal with the storage.

Manish Chowdhary: Limitations that Amazon imposes because Amazon is not a place to store your long term inventory. It is too expensive. Storage fees are three times in Q4 that what they are the rest of the year. So that is one thing they should be looking at. we can talk more about what else can the sellers be doing.

Manish Chowdhary: Obviously, meet the Amazon FBA deadlines to get the inventory in FBA warehouses for Black Friday, Cyber Monday, , think about creating them, talking a little bit on the marketing side, think about creating bundles. How do you get your products average order value up? Because when you add up the cost of Amazon referral bonus or the commission, plus you have to advertise on Amazon.

Manish Chowdhary: Amazon is no longer giving you traffic and sales for free, which is now advertising cost. When you add up all of those, you, , at least the FTC lawsuit or some other opinion. So 50 percent of what you sell, the GMV that you collect from the customer goes to Amazon in one shape, form or another. Most sellers don't have that kind of margin, or they don't have, the margins that would be that attractive for them continue to operate on that platform profitably. obviously there's other ways that Amazon is promoting the offline traffic from Google to Amazon.

Manish Chowdhary: So you get the referral bonus or the advertising bonus, if you will. So make sure you're collecting that if you're sending traffic from other sources to Amazon, make sure you're getting the credit from Amazon. Other than that, this holiday season, I expect a lot of discounting, consumers are stretched.

Manish Chowdhary: I don't know what the economists say, but I certainly think that the economy is somewhat dampened and which means the consumers are going to be concerned. They're going to be careful with that discretionary spend. So you need to get ahead of that and not wait till end of January to do massive liquidation because you thought you were going to sell X, so stay lean on the inventory.

Manish Chowdhary: Yeah. Amazon 

Claus Lauter: as great as it is as a selling platform is a very , expensive selling platform. And now with the podcast, we're focusing on Shopify and I always say Amazon should be one of your sales channels because people go with a purchase intent to Amazon, but as a small merchant, small, medium enterprise merchants, as you said, you probably don't have the profit margins to take everything that.

Claus Lauter: Amazon has to offer basically the listing, the marketing, the fulfillment, FBA, and all of that, , it will just become too expensive. Now, 1 thing that you said before that has become cheaper is, shipping from abroad from China. Tell me a little bit more about that. 

Manish Chowdhary: Yeah, certainly, I think volume has plummeted or has gone down compared to the COVID times.

Manish Chowdhary: There was a time in, the height of the pandemic. Late 2021 holiday season. Our customers have paid upwards of 20, 000 to move a container from China to Southern California, Long Beach. some customers have paid even more. Many customers were having to resort to air freight. Air freight is many multiples higher.

Manish Chowdhary: Than ocean freight. And now the customers I'm seeing are paying somewhere around 1800, sometimes even less what they were paying. So freight rates have come down almost 80 90 percent which is good news for the seller. So you can move inventory, but. That is not a reason to stock up on excess inventory, especially in an uncertain environment.

Manish Chowdhary: And the other big change clause was Shopify made a deal with Amazon to support sellerful or buy with prime on Shopify. So that's a big development. For Shopify that you could now, previously Shopify was blocking buy with prime and now Shopify has made a deal. It's not totally safe to use it on the Shopify platform when it wasn't few months ago.

Claus Lauter: Right move. I think that's, brings a lot of people from Shopify. Using Amazon prime, on their own platform. I think it's a very broad because I'm not sure what the numbers are, but there is a very high percentage of Amazon shoppers that have Amazon prime. Now tell me a little bit about the Kahoot.

Claus Lauter: How do you support merchants with getting the products faster to their customers? 

Manish Chowdhary: that's a great question plus. So Kahoot is one of the very few providers that has a nationwide network comprised of 100 plus facilities, 100 plus locations in the U. S. which makes Kahoot one of the largest in the U.

Manish Chowdhary: S. with respect to the geographic footprint. Kahoot is also very versatile that we're not limited to just small and light items. We support all kinds of items are inventories including hazmat, so a lot of products that fall into the if you have lithium ion battery that requires special handling.

Manish Chowdhary: Special shipping requirements. So Kahoot supports that. Kahoot works with all platforms, all selling channels. we are one of the top rated apps on Shopify, bar none. Because the Shopify merchants can take advantage of Prime like shipping through Kahoot. Kahoot is a full service provider, so we don't just do B2C, but we also do FBA forwarding.

Manish Chowdhary: We also do wholesale fulfillment. For example, one of our clients sells a lot of their wonderful Children's books on Nordstrom. So we would be sending pallets and pallets off inventory to Nordstrom following they're not Nordstrom specifications to make sure that the product get there. Issues or whether you're selling on other channels beyond the popular ones, whether it is Macy's or whether it is Home Depot or some of the other channels that you might be interested in.

Manish Chowdhary: So Kahoot pretty much acts as your full service fulfillment partner. We can go. support seller for full prime, like one day, two day delivery nationwide for standard items, distribute your inventory across the country. Or if you choose that, Hey, I need to focus on cost cutting or cost reduction and focus on economy shipping.

Manish Chowdhary: That is also possible through Kahoot. 

Claus Lauter: Who's your perfect customer? Who do you usually work with? What kind of size company size? 

Manish Chowdhary: We are a large network, so it is also highly scalable. So we welcome customers who are, who've at least got a couple hundred orders already to fulfill to start with.

Manish Chowdhary: And then obviously the upper limit is you could be, 10,000 orders a day if that's where you are at, we can save you, we can save our sellers quite a bit of money. And also it's very hassle-free. The technology is super solid. So we have advanced integration with Shopify. Orders automatically flow into Kahoot.

Manish Chowdhary: They get routed. They get shipped. Tracking information gets written back to Shopify and other sales channel. So shopper or the customer, the merchants can be relieved that, we are freeing up that valuable time to focus on sales, marketing, and product development and other more strategic initiatives than to ensure whether the products are getting there, getting out to customers on time or not.

Claus Lauter: Yeah, fulfillment and 3PL is a very specific business where you need to have a lot of experience to make it work. If you're a merchant, probably you don't want to build up that experience, rather focus on selling your products. How does the onboarding process work? What kind of homework does a merchant need to do before they can get started?

Manish Chowdhary: So our onboarding is very simple. Once you get through the sales process, meaning we'd like to talk to the seller to understand what their requirements are, what their needs are, to ensure that there is a good fit, because for Kahoot to help them succeed, we need to know.

Manish Chowdhary: The nuances and every seller may have some nuance. So it's important to understand that because we want to avoid costly mistakes on both sides. But once that process is done, which is very quick they simply send the inventory to Kahoot we give them access to our platform. They connect the Shopify app, which takes about a couple of minutes tops.

Manish Chowdhary: The beauty of the technology is Kahoot automatically imports even the product catalog from Shopify. So you don't have to do any manual work to get you started. You just pretty much Kahoot turns on the faucet. All your product catalog shows up in Kahoot. And then you send your inventory inbound half an hour of training.

Manish Chowdhary: We have recorded materials as well. And then you're off to the races 

Manish Chowdhary: your 

Claus Lauter: pricing structure? How 

Manish Chowdhary: does that look like? We are one of the most affordable services out there for the quality that Kahoot offers.

Manish Chowdhary: It's a very affordable service. the typical three P. L. Cost would apply storage fees. Which is charged on a cubic foot basis, just like Amazon does, but we obviously don't have any penalties or surcharges like Amazon for Then you have the pick and pack fee, which is usually based on per item or per order.

Manish Chowdhary: The rest is warehouse services, like if you need any barcoding or if you need any special services, those usually get billed by the hour or they get a fixed fee per unit. But it's a very simple, a pricing structure that the sellers understand. We typically like to show the sellers, what money they can save with Kahoot if they are an established seller.

Manish Chowdhary: It's a lot of transparency, this way, both parties can move confidently to ensure they have a long term partnership. Yeah, 

Claus Lauter: that sounds good. Before we come to the end of the coffee break today, is there anything that you want to share with our listeners that we haven't covered yet?

Manish Chowdhary: This is going to be a interesting holiday season. There's a lot of the seller fulfill prime. There is a lot of content on the Kahoot website. I would encourage you to check that out. And also we've written A really good content as an educational content on the difference between a peer to peer network, a fulfillment network like Kahoot versus a traditional 3PL, most sellers may not have the knowledge or the experience because they are focused, they're entrepreneurs, they're not running logistics 25 years of fulfillment experience.

Manish Chowdhary: And even that it's changing so fast in the US, at least, or even worldwide, That sellers would benefit from reading that article just so you understand that, you don't have to if you don't have to change providers in 6 months or 12 months or 18 months. So I'd encourage you to look at that, obviously connect with me on LinkedIn.

Manish Chowdhary: You can look me up by name. like to stay connected. if you haven't, enabled fast shipping badge on Shopify, you can do that without Autojaxdimension. org. The help of, Amazon buy with prime is nothing but you still have to send your inventory to FBA.

Manish Chowdhary: So you still have many of the same challenges. However, if you are working with a partner like Kahoot. I would encourage you to offer the same fast shipping on your Shopify store, but you need to market it. It's not just sufficient to offer the shipping on checkout. Use that as a conversion tool. Use that as a marketing tool.

Manish Chowdhary: Imagine if your conversion rate were to improve. You have to spend less money on advertising. So think of shipping, not just as a cost center, as a back office system, but leverage it in form of sales and marketing to drive the customers down the funnel. Improve conversion because fast and free shipping definitely has a major impact on customer conversion.

Claus Lauter: Yeah, that's true. Fast shipping. I think it's the number one thing that people should have in mind, merchants should have in mind as a benefit for their customers. As that, if you can deliver the goods fast to your customer, they will come back and buy from you. And I think that's the whole goal of what you should do as a merchant.

Claus Lauter: I will put the link in the show notes to your website and to your blog. Then people can go there and have a look. And I hope a lot of people will swap over to Kahoot to get goods delivered as fast as possible to their customers. Thanks so much for your time today. Thank you, Klaus.