DEEPER DIVES: What All The Majors Know About eCommerce

Good Morning,

First, as always, thank you for joining.

Some weeks are slow. And some weeks have so much information you don’t know where to start.

I’m sitting on a mountain of ideas to share, but not enough time!

If you have specific needs for your business, and want to get some 1:1 time to see how these trends could impact your business, connect with me here. With Q4 underway, no one has enough room in the budget to miss the mark.

(Drop “newsletter” in the Discussion Topics field and I’ll make sure to prioritize the call)

Here’s what this issue brings:

• This article is going to make people mad.
  
  Infrastructure investment is everywhere. Covariant and Nimble made huge headlines this week. I’m sharing why you will be hurting your business if you stay with your small, manual 3PL operation - no matter how well they have done up to now
  

• Sustainability isn’t only for cities and over-the-road activity. France is a front-runner when it comes to bringing change to the seas.
  

• Follow-up. Amazon and the National Labor Relations Board are at it again. New Teamsters activity and lawsuits … its going to get wild!

Racing To Automate. How Robotics Are Transforming E-commerce Logistics

You might have noticed lately that I’m frustrated.

On LinkedIn and with other consultants, all you hear about is diversification.

And while I support a diversified strategy, I absolutely think that a lot of the “recommendations” out there are bullshit.

It’s clear that these recommendations are coming from a place of personal gain, and not what is best for the retailers or brands.

The area that caught my attention this week is the 3PL warehousing space.

We’ve talked about automation and robotics before, but the pressure keeps mounting.

Both Amazon and FedEx had major announcements this week as both made strategic moves to bolster their fulfillment execution.

FedEx x Nimble

FedEx made a strategic investment in Nimble (though the amount was not disclosed).

The alliance allows FedEx to leverage Nimble's fast and cost-effective fulfillment centers, powered by next-generation intelligent general-purpose warehouse robots and AI technology.

FedEx hasn’t hid the fact that they are heavily focused on eCommerce fulfillment (so much so that they were/are considering dumping its LTL business).

Their motives are pretty straightforward: Optimizing its physical and digital networks to deliver more for customers and consumers, addressing the need for automation to cut costs and boost efficiency and strengthening its capabilities to attract more e-commerce and SMB customers.

If you aren’t familiar with Nimble, here’s what you need to know.

It operates as a robotic 3PL (third-party logistics) provider, offering e-commerce and omni-channel pick, pack, and ship fulfillment services. The company has built and operates a (national - they have 3 owned facilities) network of autonomous warehouses using next-generation AI robotics.

Nimble's systems can autonomously pick, pack, and handle products for brands selling apparel, footwear, electronics, and other items.

A big part of its value proposition is on the space required to operate. Nimble boasts about their storage density to help reduce fulfillment costs, citing a 73% drop in the required space.

They also claim to achieve an 88% drop in the amount of human labor required compared to traditional 3PL models.

Amazon x Covariant

Amazon announced an "acqui-hire" deal with Covariant.

Here are the key details you should know:

1. Amazon hired Covariant's founders - Pieter Abbeel, Peter Chen, and Rocky Duan - along with approximately 25% of the company's staff

2. Amazon secured a non-exclusive license to use Covariant's robotic foundation models

3. The acquired team will join Amazon's existing Fulfillment Technologies & Robotics division

4. The move aims to enhance Amazon's warehouse automation capabilities, building on its previous investments like the 2012 acquisition of Kiva Systems

5. Covariant will continue to operate independently under the leadership of Ted Stinson (new CEO) and Tianhao Zhang

Covariant is an AI robotics company that specializes in developing advanced software solutions for warehouse automation. Its core technology is the "Covariant Brain," an AI platform designed to enable robots to perform various warehouse tasks with human-like adaptability.

Their tech has been well-received in the market, with companies reporting significant improvements in efficiency, error reduction, and cost savings.

Some of their larger customers (prior to the Amazon deal) were Otto Group, Radial, and McKesson Corp.

Why Automation And Robotics Are A Must For Your eCommerce Execution

I’ve talked about this before, but it’s the fundamental piece driving this need.

The eCommerce volume and mix is changing. And retailers/merchants continue to expand out their product offerings to try to capture as much of the market as possible.

Today, almost 85% of eCommerce shipments fall into the 5 pound or less category (with 29% of those being in the 1.1 pound or less segment).

This means that you have increasing activity with a lower overall value per package.

Since you are making less per item shipped, your profitability per order is being impacted.

With the projected grow of eCommerce (see below), the problem will only get harder to manage in the next few years. This is why Amazon, Walmart, UPS, FedEx, etc, are all rapidly investing in infrastructure and automation.

What’s also important to understand is the dominance of product categories when thinking of these sales trends.

Apparel, shoes and beauty still dominate.

These are all also categories with a ridiculous number of skus and variants. This means that 3PL providers are facing increasing demands on their operations to handle and pick from a growing number of bins in their facilities.

It also means that this complexity needs to be replicated at each facility, and be able to accommodate brand inventory variability in all of their sites.

I hate that customers have been trained to believe that “shipping is free” when making a purchase.

The reality is, fulfillment was never free, even when a purchase was made in a store.

It took the consumer’s time, effort, and resources (e.g. fuel, wear and tear on their vehicle, etc) to actually get what they wanted.

When people order for home delivery, those things still need to happen, but retailers used free delivery to expand their market share (since giving it away for free - which is a type of discount - increased the value of their offer).

Even though shipping is often not charged to customers (or not charged once they hit a relatively easy minimum order value), the cost of the fulfillment activity is still baked into retail pricing.

This is why all of the majors are investing billions into robotics and automation. They know that by lowering those costs, they will be able to increase their profitability as dollars used to cover operating costs.

Once those savings are realized, it does one of two things.

It either gives them a better cash position to enable different strategies or investments in their business, or it will allow them to use that margin to drop prices and put pressure on competitors that don’t have the same advantages.

And that’s why it is an impact for smaller brands using old, and manual 3PL services.

They won’t be able to get the costs out.

Since they can’t get the costs out, they won’t be able to support the lower prices you need to compete.

Like it or not, this will then leave your brand in a disadvantaged position versus your competitors who are getting these benefits.

In addition to the costs benefits, R&A provides a ton of benefits when it comes to overall quality of fulfillment, execution speed, and consistency.

Warehouses using these technologies will be operating 24/7/365, with minimal human supervision.

This level of activity allows for a consistent flow of goods, and delivery promises that will continue to shift consumer expectations.

Will this change happen overnight?

No.

But it’s coming.

Faster than you probably think.

It’s essential when looking at service providers and your fulfillment options to be strategic and think in steps of maturity. While a smaller regional player may make sense for you today, you need to know for how long that structure will serve you, and what you plans are for expansion in the future.

Here’s a short video from Jonathan Briggs talking about how Nimble sees the future of their business.

Winds Of Change. A Bigger Sustainability Is Coming Cargo Shipping

You see a lot when it comes to sustainability about electric vehicles.

Company after company is talking about their ESG goals and looking to get more packages onto electric delivery vans.

But this isn’t the only area where sustainability is influencing innovation.

Massive container ships running on fossil fuels is the backbone of commerce.

But this is starting to change with two recent breakthroughs.

The wind-powered TOWT’s Anemos and the hybrid MV Canopée.

These new vessels showcase the growing commitment to sustainable practices in ocean logistics, offering both environmental benefits and new business opportunities.

TOWT's Anemos

In August 2024, the cargo ship Anemos started on a transatlantic journey from France to New York, marking the first time in nearly 100 years that a large cargo vessel crossed the Atlantic, powered almost entirely by wind.

Designed by French startup TOWT (TransOceanic Wind Transport), the ship is part of a fleet that could significantly reduce the shipping industry’s reliance on fossil fuels.

Incorporating elements from racing sailboats, its carbon fiber masts support sails twice the size of traditional designs, allowing it to capture more wind than other vessels previously designed.

The ship maximizes its ability to capture more wind and uses custom routing software and satellite communications, to plot a course that makes its wind propulsion reliable and efficient.

The company states that the ship can run entirely on sails (up to 95% of the time), with backup diesel-electric engines used only when necessary.

While the ship’s (current) capacity is far smaller than modern container ships (it can carry around 1,000 tons compared to the 20,000 containers some giants handle (a TEU holds about 28 tons per unit), the Anemos makes up for it by offering faster turnaround times at port and a cost structure that appeals to eco-conscious businesses as a result of TOWT’s own unloading technology.

Brands like those shipping wine and spirits from France to the U.S. see the added value in climate-friendly logistics, promoting their efforts with QR codes on products that highlight the CO2 savings for each shipment.

ArianeGroup’s MV Canopée

On the other side of the Atlantic, the MV Canopée (another wind-powered innovation), recently made its mark by delivering a crucial component for NASA’s Artemis III mission.

The Canopée is a hybrid propulsion cargo vessel.

It uses a combination of wind and traditional fuel to power its movement.

Launched in 2022 by ArianeGroup, the ship features four rotating wing sails that optimize wind capture, resulting in up to 30% fuel savings.

It was designed as a specialized cargo vessel to transport components of the Ariane 6 rocket from European ports to the Guiana Space Center in French Guiana, South America

The Canopée’s recent U.S. visit to Port Canaveral carried the European Service Module (ESM-3) for NASA’s first crewed lunar mission in decades.

This mission, part of the Artemis program, represents the next chapter in human space exploration.

The ship’s hybrid propulsion system made it an ideal choice for this critical delivery, aligning with NASA’s goal of integrating sustainability into all facets of its operations.

Opportunities and Importance of Sustainable Shipping

These innovations represent a growing trend towards sustainability in global logistics.

The shipping industry accounts for around 3% of global CO2 emissions. While this seems small, it’s not. If shipping were a country, it would be the 6th largest CO2 emitter in the world, ahead of Germany and South Korea.

Reducing the sector’s reliance on fossil fuels is essential in the fight against climate change.

Wind-powered and hybrid propulsion ships can make a significant impact, potentially lowering emissions by as much as 30-50% per trip.

As consumers become increasingly concerned with the carbon footprint of the products they purchase, the ability to market goods as "delivered by wind" can enhance brand reputation.

TOWT is already planning to expand its fleet, with six more ships in development.

The startup envisions a future where hundreds of wind-powered vessels are crossing the world’s oceans.

In the coming years, we can expect to see more partnerships between shipping companies and brands who want to lower their carbon footprints.

Amazon Is Getting Frustrated With The NLRB

Two weeks ago, I shared a story about Amazon being found a joint employer for 4 delivery drivers working for an Amazon DSP (Battle Tested Strategies).

Well, Amazon and the NLRB are back in to the news.

The company is facing allegations of joint employer liability in another case, highlighting Amazon’s relationship with contractors and how they influence labor practices.

This time, an NLRB prosecutor found that Amazon, alongside another DSP (MJB Logistics), discouraged delivery drivers in Atlanta from unionizing.

This includes accusations of unlawful threats and surveillance, which could violate federal labor laws.

A formal complaint may be filed if the company does not settle.

These challenges align with a larger legal tensions surrounding the NLRB’s authority.

Amazon and other corporations, including SpaceX and Trader Joe’s, are contesting the agency’s constitutional structure.

Amazon has argued that the NLRB's administrative proceedings violate the U.S. Constitution.

Despite Amazon’s efforts, the NLRB recently upheld the union's election win at the Staten Island warehouse, marking the first unionized facility in the company’s history.

As these cases progress, they signal a broader struggle over labour rights and corporate influence in the gig economy.

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