This company is helping to make shopping on Walmart.com more like Amazon
- Walmart has made massive in-roads on e-commerce, but it still trails behind Amazon Prime in the number of items it sells with free two-day shipping.
- Companies like Deliverr are supercharging third-party sellers - on Walmart and on other marketplaces - by offering them a service that mimic's Amazon's own fulfillment network.
- The end result could be a democratization of free two-day shipping.
It's no secret that customers love free two-day shipping.
It's the main reason why customers love Prime, Amazon's $119-a-year - or $12.99-a-month - membership that offers the shipping perk on more than 100 million items shipped by Amazon or by approved quick-shipping partners.
Walmart, seen by most as a rising competitor to Amazon's e-commerce dominance, started offering free two-day shipping on all orders over $35 in 2017. At the time, it was only offered on the few million items that Walmart sells directly on its website.
It's this selection gap that fuels a large part of Prime's growth, much of which can be attributed to third-party sellers using Amazon's Prime shipping programs. But it also presents a huge opportunity.
"For the other marketplaces, if they can enable the same amount of selection for free two-day shipping that Amazon has on Prime, why would users stay on Prime?" Michael Krakaris, cofounder of Deliverr, said in a recent interview with Business Insider.
Read more: Amazon will soon lose the biggest reason to pay for Prime
Deliverr uses a network of leased space in warehouses around the country to allow other marketplaces, like Walmart, Shopify, and eBay, to mimic the services of Amazon, according to Krakaris.
One of the ways Walmart is closing its selection gap is by allowing third-party merchants to sell on Walmart.com with a green two-day shipping badge. The initiative started in October, and the retailer said it hoped to expand it over the following months. Previously, only items sold directly by Walmart were given the green tag.
That green tag is important, as it functions the same way that Amazon's Prime tag does, indicating to sellers that shipping will be free, fast, and painless.
But not all merchants are equipped to handle the grueling demands of two-day shipping, especially without massive warehouses spread throughout the country like Amazon's. Companies like Deliverr can provide a way to catch up in a hurry, however.
A more nimble solution
Krakaris said Deliverr also works with some of the top 10 Amazon sellers, such as Etailz. The benefits Deliverr offers to third-party merchants can sometimes even eclipse what Amazon offers, Krakaris said. Since Deliverr does not own its warehouse network like Amazon, it can be more nimble and expand capacity - and, therefore, selection - much more quickly.
It also charges a flat rate for shipping around the country for each product, just like Amazon does with its Fulfillment by Amazon program.
"One thing that really inspired us from [Fulfillment by Amazon] was that it was one rate regardless of where you're shipping to the US," Krakaris said. "No other fulfillment provider does this."
That makes it easier for retailers to predict fulfillment costs, like retailers can do with FBA.
Krakaris says that in 2019, "more parity [will] come to the space, where a retailer now can offer free two-day shipping anywhere they sell" through outside companies like Deliverr.
He said his business with Walmart is "really rapidly scaling." Krakaris hopes that Deliverr could soon grow to account for 40-50% of Walmart's third-party sellers offering two-day shipping.
That will also result in a huge uptick in the number of items sold on Walmart.com with a free two-day shipping badge, potentially making Prime's most important asset less unique.
Amazon probably realizes this is a potential weakness for its Prime membership, and that its lead in offering two-day shipping won't last forever. That is likely a driver in its adding things to Prime, like original content for Prime Video and Prime discounts at Whole Foods, which have been costly to implement and maintain, Krakaris said.
"I don't think it's something they've cracked yet," he said. "I don't know if it's going to be something they'll be able to crack in time because Walmart and these other marketplace are going to expand free two-day shipping very fast."
Are you an Amazon employee or customer with a story to share? Contact this reporter at dgreen@businessinsider.com.