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Big retailers' same-day shipping challenges small shops

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Amazon.com's roll-out of same-day delivery may be welcome to the online behemoth's customers, but it makes life harder for local entrepreneur Sandra Gunthorpe.

"It really has hurt us," said Gunthorpe, co-president of Oompa.com, a vendor of toys and children's products based in the Carlisle area. "It changed the dynamic of our entire business plan."

Oompa sells its products on Amazon under the name Oompa Outlet, with Amazon handling all the order fulfillment — that is, packing and shipping.

Amazon offers same-day "Local Express Delivery" service in 10 cities, including Philadelphia and Washington, D.C. The company is now building new distribution facilities, at a cost of nearly $1 billion, so it can expand the service, according to news reports.

Wal-Mart Stores Inc. is experimenting with same-day delivery and is even considering outsourcing some of the work to customers, according to Reuters.

To make same-day shipping feasible, Amazon has required vendors like Oompa to preship inventory to Amazon fulfillment centers all over the country, Gunthorpe said.

Once there, identical products from various retailers and Amazon itself are commingled, she said. A toy sent to Amazon by Oompa could be used to fill a competitor's order or an Amazon order, or vice versa.

Couple that with Amazon's wooing of Oompa's vendors to sell directly through Amazon and Amazon's other fulfillment conditions, and you have a tough situation for an independent retailer, Gunthorpe said.

"It's great for Amazon and it's great for their profit margin. But it's killing us," she said.

In response, Oompa is beefing up its own website, which is fulfilled through another company, and it is downsizing what it has Amazon fulfill, Gunthorpe said. Most orders placed through Oompa.com arrive within two days, she said.

Amazon did not respond to requests for comment. But Gunthorpe's complaints about the company echo those by other critics.

One merchant told Salon.com in an April article that Amazon unilaterally promised his customers faster delivery than he was set up to handle.

A common complaint, detailed by the Wall Street Journal last summer, is that the company monitors the small businesses in its marketplace and poaches their best products, selling them under its own name for less and placing its wares first in search results.

Brian Frailey, who sells used and rare books at DogStar Books in Lancaster, said he's frustrated by the way Amazon promotes its print-on-demand service.

When a customer searches on Amazon for an out-of-print book, DogStar may have a copy, he said. But often, instead of returning that result, Amazon will instead offer a more expensive print-on-demand reprint, he said.

You can find DogStar's offering if you look hard enough, but you really have to hunt, he said.

"They bury you," he said. "They make the real book all but invisible."

Amazon's market power represents a challenge for all retailers, including the very largest, said Vidya Mani, assistant professor of supply chain management at Penn State's Smeal College of Business.

Amazon and Wal-Mart are so big that their primary growth strategy isn't getting new customers as much as it is getting more revenue out of existing customers, she said.

Both companies have great supply chain and fulfillment infrastructure, she said. Translating those advantages into customer convenience lets them position themselves as "your one-stop shop for everything," she said.

It would be hard for other department store chains to follow their lead. Building warehouses isn't that expensive, but optimizing a supply chain and keeping the information technology up to date is tremendously costly, she said.

As for small retailers, she recommended competing on service — offering a personalized relationship with customers and a maximally enjoyable one-of-a-kind shopping experience. Savvy niche and specialty stores can still retain customers, even in the age of Amazon, she said.

Retailers who sell on Amazon can follow Oompa's lead, she suggested: Have a presence but limit it, keeping higher-value items on your own website.

Gunthorpe said she doesn't see Amazon letting up.

"It's not just the brick-and-mortar (stores) that are suffering," she said.

Write to the Editorial Department at editorial@cpbj.com

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