DEEPER DIVES: 2025 Sucks Right Now For Smaller Brands & Retailers

Good Morning Hawii,

First, as always, thank you for joining.

Second, that’s a bad joke.

Something that came up last week at SIAL with the crew from Monarkonnect 😂

Cost, cost and more cost. That’s what EVERY conversation is about right now. The changes to the commerce landscape (both changes to Section 321 and global tariffs) have everyone upside down.

Anyone that had been successful up to this point simply “outselling” sloppy is feeling the pain.

I’m here to help with that with this week’s leading article.

Then we’re going to get into broader industry discussions and trends.

Here’s what this issue brings:

• Simple and straightforward. It’s my eCommerce Survival Guide for 2025. The goal is to make sure you can get a checklist of all of the different logistics and operational avenues you should be checking to quickly reduce costs.
  

• Amazon is chasing more volume in rural America. It’s a tough market to be in, so why are they looking to do it now (and what it means for providers already servicing those markets).

The First Day Of The Rest Of Your Life In eCommerce

There’s one message that I have shared over and over with the clients I work with.

Don’t bet your future on things going back to the way they were.

Regardless of how the tariffs settle, De Minimis changes or how you respond to the competition, the truth is things have changed.

Mechanisms that were designed to boost global trade have been taken advantage of and every major country in the world is looking to make adjustments to their programs.

So if that’s the new reality, what do you do?

You have to change.

For 20 years it’s been my job to fix things that were broken and to make operations that seemed like a money pit into something that gives back to the business.

Today, I’m sharing with you all of things that I would look at and see to change if I were a D2C brand or small retailer and my cost base just exploded.

We’re going to start from the end, and work our way backwards. For most people, the closer you are to the end of the fulfillment chain, the more opportunity you have to implement right away.

These strategies also need to be paired with clear and transparent communication with your customers. You NEED to explain to them why you are doing these things and how it’s a benefit to them.

The best frame you can use is this:

That the operational changes your are offering or implementing allow you to reduce the costs so that you can minimize the impact that they will see and feel when they hit buy.

(So if it’s not clear - I do not recommend you implement these strategies + jacking up your prices or shifting more cost to the consumer)

Here we go.

RETURNS

• Reduce any extended return windows. If you have a policy that extends returns +30 days, cap it at 30 days. If you can look to drop the available return period to 14 days.
  
  While this sounds scary, for most of what’s sold D2C these days, two weeks is more than enough time for them to know if it’s for them or not.
  

• If you manually authorize your returns, establish a return profile and score for your customers. For customers that abuse the system or have shown a regular pattern of returns, introduce messaging at checkout that returns for their purchase will be subject to a charge.
  
  Build this score on a rolling time window. Explain this to customers so they can see a path forward from past ‘abusive’ behaviour to a fair relationship in the future.
  

• If you are sending pre-paid shipping labels for returns. Stop immediately. This is just bad in so many ways. The immediate impact is to save the cost of printing labels that aren’t being used while also avoiding the psychological priming that “so many customers return” that you had to include the return label to make things faster / easier.

SHIPPING

• Get an up to date view of exactly what you are shipping and how much. You want to know things like your total shipments, shipments by carrier, shipments by type (think dims + zone), shipments by geography.
  

• Understand how you are living up to your volume requirements. What is the minimum amount of packages you need to ship to keep your current discounts. How much do the discounts change if you drop below that threshold.
  
  Now that you have these numbers calculated, you can evaluate how much of your volume is accessible to you to search for alternative carriers.
  

• If you are using regional or alternative carriers right now, how much of that volume would you be able to move? If you have the flexibility, you should get up to date pricing from other options in those target markets. Every last mile regional (including gig) network is looking for volume right now. You have more negotiating power than you think.
  

• Work to improve density in your key markets. With everything going on with tariffs, most eCommerce businesses are simply passing additional costs to consumers. As an alternative, you can offer “slower” delivery (think of it more as reducing the days you deliver on - instead of being able to deliver every day, you only deliver on Mondays, Wednesdays and Fridays).
  
  This allows you to improve the density of your shipments which is better for your last mile provider. Since you are doing the heavily lifting to drive this efficiency, you would want reduced shipping costs per delivery for every package they touch.
  

• Shipping a lot of volume at 5 - 15 pounds? Using a regional or gigwork last mile carrier? Paying some type of dimensional weight for your shipments.
  
  Tell them that needs to be adjusted down.
  
  The truth is that most of these carriers do not have anywhere near the density / volume that anything in that range costs them significantly more money. Negotiate down.
  
  (There are certain situations where heavier products can impact automatic sorting. They probably have benefited from these reduced costs earlier without giving you a discount. If you have physically over sized merch - that’s a legitimate issue)

3PL / WAREHOUSE

• Review all of the transaction fees that you are being charged by your 3PL provider. This is top to bottom from inbounding your goods, to put-away to pick, pack and storage.
  

• Validate and make sure you agree with the way the 3PL has your product set up and the type of location storage fees they are charging you.
  

• Most 3PLs will charge differently for items that have a pickface. Validate by SKU how many pickfaces your 3PL has for your product and the number of days of inventory in each. You can find that they may have too many active locations and your are paying more than you should. Or, you might find that you don’t have enough and are regularly being charged for replenishment fees that don’t align with the velocity of your SKUs.
  

• Use your shipping data to validate versus the DIMs of your product that your 3PL is using the right sized box for your stuff. Sometimes you’ll find that a 3PL uses standard sizes that they buy in bulk (that’s a decent procurement strategy for them, but may not be doing your specific product any favours). Bigger boxes could mean higher shipping charges that could have been avoided.
  

• Storage. Analyze your product sales velocity versus what you are inboudning. If you are storing product for extended periods of time (usually as a result of your MOQs), you want to make a distinction between the pallet storage rates you pay for this inventory versus other product that will need more regular interaction and replenishment. Paying $25+ a month for pallets sitting inactive for longer periods of time, this should be reviewed.
  

• If your 3PL is doing your shipping on their accounts, they are charging you a mark-up. Keep that in mind.

TRANSPORTATION

• If you are regularly moving pallets around using LTL, look to create more consolidation for your product. Many warehouses (either your 3PL or any wholesaler you ship to) charge by truck they receive. More product on fewer shipments should help save you money.
  

• Are you shipping your parcel and wholesale with different carriers or trucks? If you are doing things like zone skipping, you should look at mixing your volume to create a better consolidated shipment and finding a provider that is willing to give a better rate for the additional work and density.
  

• Are you paying for truckload activity but not using the full truck? Often times volume will start to exceed what makes sense for LTL shipments. In these cases, most people will tell you to simply pay for a FTL shipment and get the enhanced reliability and speed of a full truck. This is good advice. But if you have additional capacity on that truck, know that you aren’t the only person probably sending volume down that late. Sell your space to another brand (or brands) so that you both win by a collaborative move.
  

• Additional fees or surcharges should be reviewed. Often times brands will get stuck paying for accessorials because it’s more convenient and easier. When you have the margin for it, sure. When you don’t, look to see how you can change your processes to avoid additional fees.

INVENTORY

• What’s your 80/20? How many of your products are falling into your tail. Apparel and footwear often have VERY LONG tails. This means that you have a lot of product variants that aren’t really moving well. Review removing these from sale (either permanently or temporarily) to reduce storage costs with your 3PL.
  

• Review the shrink or damage that you are seeing from your 3PL. If you are only getting updates on this 1x per year, you might be in for a nasty surprise when you realize you have a lot less potential stuff to sell.
  

• Offer promotions to clear to our old inventory. Brands often hold past season, returned items or slight defects for too long. In a world where consumers are being pinched all over, there’s always someone looking for a deal.
  

• Review your MOQs. If you have been buying into a higher tier for a discount, but then paying it back on the other side to store it longer, it may not be worth it.
  

• Do you have product in more than two facilities? You might find that you can consolidate your inventory back down. You want to review your shipping cost increases versus the fixed and variable costs you have related to fulfillment and transportation for splitting your inventory too much.
  

• Rate your inventory velocity (I usually do this by product type and then also by SKU). Make sure you are not overpaying your 3PL for their bad placement decisions on high moving SKUs.

ODDS & ENDS

• If you are doing kitting or you offer value packs, look to streamline and standardize the offer. Too many custom pack sizes or variations creates additional complexity and cost. Drive economies of scale by doing more things in the same way with the same processes.
  

• Component Standardization . Share inserts, labels, or fasteners across products to buy larger lots and cut “change‑overs”.
  

• Review your tech stack, top to bottom. As companies grow, you've probably picked up all kinds of apps and tools along the way. The ones that are charging by use or by seat can get very expensive as your team grows. Cut what you aren’t using and remove access if there are team members that have seats and don’t need them.
  

• Miscellaneous and travel expenses. Most organizations don’t do a great job of tracking all of things they pay for. From conferences and shows to business lunches, it all adds up. If you’ve been sending two people, send one. If you are lunch meetings every day, see how you can shift these to a less cost intensive opportunity.
  

• If you were thinking of testing something new, hold off on it unless you are sure of the demand or (practically) have a PO in hand. Line extensions and new product offering can create additional complexity and unplanned costs. Streamline and contain first, then invest. Don’t bet on a new product or SKU being a home run that will deliver all of the additional margin you need.

Amazon’s Spending $4B On Its Rural Delivery Network… Why?!?

Rural deliveries are hard.

In most situations there simply isn’t enough density to run profitable operations in those areas.

It’s the main reason why companies like UPS and FedEx hand off to the USPS (or Canada Post here in Canada) in those regions.

So if that’s the case, why would Amazon be pouring $4B dollars into a network that seems like it can barely pay for itself?

Two reasons.

First, Amazon needs the growth. As a public company they are always pressured to find ways to increase revenue.

Second, the incumbents are so weak in most of these areas, “simple” innovation will go a long way.

In addition, Amazon is being (in my opinion) Amazon in that it’s playing a long game with more than just delivery in mind.

Let’s start with the practical things first.

The easier that Amazon makes it for anyone in a target market to buy online, the better off they’ll be.

A lot of people will still opt for certainty of getting something at the store today, versus waiting 2-4 days to get it.

Rural residents also don’t usually have the same “to your door” service that we enjoy in major metros. This usually means that they end up having to go into town or over to the next neighbouring town to get their package anyways. So why not just buy it while they are there anyways.

By offering better delivery options, the easier it is to covert buyers.

Second, Amazon is using their product offering to get entrenched into the communities they serve.

Programs like Amazon Hub for example allow local businesses to be a consolidated delivery point for Amazon to make a drop density deliveries.

Once dropped at the store, it’s actually store staff that then execute the last mile deliveries. Amazon pays the businesses for the delivery service, which allows them to earn additional revenue for doing activity while their store sales and traffic is slow.

Next is Amazon Logistics.

Since they will now have activity into those regions, they become a direct competitor to the post office that is almost always been the only game in town with it comes to doing the last mile delivery to these regions.

For regional carriers or gigwork networks, Amazon can offer their logistics service and collect revenue for using their infrastructure to do other people’s deliveries.

Amazon has seen really interesting growth in two areas over the last little while.

The first is luxury and the second is every day essentials.

Essentials (household items, health and personal care, pantry, etc.) grew more than twice as fast as the rest of Amazon’s business in Q1.

Rural communities are a huge gateway to continue to offer these products to a decent population base with the potential of a lot of subscribe and save activity (especially considering that Amazon boasted about being a generally cheaper option that other retailers.

Now, even with all of those things stacked together, it’s still tough.

This is where I see Amazon being Amazon and really working the long game.

The other notable tidbit that goes with their rural delivery expansion is Project Kuiper.

If you don’t know what Project Kuiper is, it’s Amazon’s broadband satellite project (i.e. their version of Starlink).

On their earnings call last week, CEO Andy Jassy highlighted Kuiper’s mission to connect “hundreds of millions of households in rural areas” where broadband is still inaccessible.

So now Amazon will provide the means to access the internet with reliable broadband service and then have the wheels to actually get you your stuff.

I would not be at all surprised to see some type of “Prime” offer that connects Kuiper and delivery benefits for qualifying geographies.

The point with all of this is that delivery will continue to get harder if you are a regional player.

Billions of dollars are being invested into the space and ALL of the large organizations that are pushing in their chips are doing it in ways where they have a complementary ecosystem.

These parallel advantages will make it harder and harder for shippers to use other services that can only offer delivery, since the likes of Amazon and Walmart can continue to set price and service expectations that can’t be paid for through delivery revenue alone.

That’s it for this week. Thanks for being here.