Terry Darrow: Amazon—Not Just an Online Retailer Anymore

Terry Darrow

From a consumer perspective, not much has changed with Amazon besides the fact that the breadth of products it currently offers on its website has steadily expanded. Behind the scenes, however, there has been a lot of change. Slowly, Amazon has been transforming itself from the “Wal-Mart” of the internet into something very much resembling an online third-party logistics provider (3PL).

Amazon acts as a 3PL by not only by selling its own goods, but also by acting as the go-between to a whole series of smaller retailers through its service called Fulfillment by Amazon. Most customers have no idea when the true seller isn’t Amazon.  Amazon provides an efficient and rapidly growing distribution network to its clients. It handles all the inventory storage, shipping orders, customer service, and handling of returns.

In the company’s latest quarterly earnings call, Amazon’s chief financial officer stated that 39 percent of the product units sold on Amazon were from third-party sellers. That number is up from last year, when it was roughly 36 percent. At this point, it’s too early to determine the long-term implications of Amazon’s new business model. It does help boost the sales channel of small retailers through Amazon’s global brand and growing distribution network.

Most 3PLs are not interested in duplicating Amazon’s model, but as it grows and continues to evolve, keep your eye out for further ramifications in the industrial sector. The immediate impact is Amazon’s growing foot print in new, bulk distribution facilities. Amazon recently signed two 1 million square foot built-to-suit deals in Dallas-Fort Worth—one in the Alliance area and one north of the airport in Coppell. Amazon is also actively seeking additional sites in some other major markets across the country.

As managing director, Terry Darrow leads Jones Lang LaSalle’s Dallas-Fort Worth industrial group. Contact him at terry.darrow@am.jll.com.

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