• Ashley Zung

How John Esborn's Experience at Wayfair Is Supercharging Perch’s Logistics Network

4 creative strategies for negotiating with carriers that could get you a contract and lower rates in 2022

Something our CEO, Chris Bell, often says is that “every eCommerce company is actually a logistics company.” You can see that in the way we built Perch - yes, while we acquire Amazon businesses, our acquisitions team is relatively small next to our operations and technology teams. We invested in supply chain operations from day one.

That started with our leadership team. Chris and much of our operations team come directly from Wayfair’s supply chain organization. Chris and our COO, Matt Montogmery, for example, designed and built the Wayfair Delivery Network, standing up over 50 fulfillment centers and taking large parcel delivery from 27 days down to 2.

So you could say supply chain is in our DNA.

Meet John Esborn: The Man Who Scaled Wayfair to 75k containers/yr and signed $1.3B in carrier contracts

Perch’s Head of International Transportation, John Esborn

Our latest hire from Wayfair is John Esborn. He’s our new Head of International Transportation, and he’s helping Perch build our international ocean transportation network to support what will eventually become the importing of tens of thousands of containers a year.

Prior to joining Perch, John was the head of Wayfair’s CastleGate Global Logistics, where he really scaled them into the juggernaut that Wayfair is today. John has over 40 years of experience in the supply chain industry ranging from air freight, trade compliance, custom brokerage, hub operations, warehousing and fulfillment operations, ocean transport, and he even built out final mile delivery capabilities.

John was also an inaugural member of the Federal Maritime Commission’s (FMCs) National Shipper Advisory Committee (NSAC), a group of 12 importers with senior leaders from companies such as Amazon, Walmart, IKEA, etc. John’s role has been to provide “information, insight, and expertise pertaining to conditions in the ocean freight delivery system,” that will quite literally inform governmental policy and regulation at the highest levels.

When it comes to ocean freight, few people are more knowledgeable.

Now that he’s at Perch - especially during this wild supply chain environment - John is deploying this expertise to ensure that Perch gets capacity, is always in stock, and is getting the best rates on the market. For Amazon sellers looking to do the same things, here are some creative strategies John is using to make sure we can weather this supply chain crisis without any hiccups.

1. RFPs don’t matter, networking does. Talk directly to carriers to get the best rates and capacity.

Requests for Proposal (RFP) are the traditional way that importers have worked with 3PLs and carriers to get capacity. They’re literally written proposals that highlight your needs, cost structures, etc.

The past year and a half has exposed the short falls and gaps in the global supply chain that were hidden when there was excess capacity. Therefore, you need to approach your procurement strategy of containers differently than you did last year. There are 2 main issues in the procurement process this year that you may not have experienced in the past:

  • Can you even get space? In some cases John has been told by carriers that they aren’t even signing contracts with anyone who isn’t over 500 containers a year. That’s wild.

  • Can you get the space at a good price? While many Amazon sellers were able to get space last year, they did so at a wild price. $20-30k per container is over 10x what many sellers were paying just two years ago.

You need to be focused on buying direct from carriers and not through 3PLs to secure space for the best price during this port and capacity crisis. Carriers are not interested in the RFP (request for proposal) process in today’s environment, so don’t start the procurement process off that way.

Instead, go straight to your contacts and tell them directly what you need. Be upfront and don’t waste your time. This is a relationship-based game. Start talking. Talk to multiple carriers. You can’t only rely on your old relationships. If you’ve worked with one carrier or 3PL in the past, diversify. Play them off each other. Network. John took Wayfair from 0 containers to 75k, and he can tell you first hand that networking matters more than you think, even if you’re small. Perhaps especially when you’re small. You need to be clearly articulating your container needs while backing up your price with knowledge of current industry prices, and you really only gain that through your networking.

2. Spend more to save more (or even get on the ship): end-to-end contracts.

Here’s a wild fact: container lines are on pace to make $100B in operating income in 2021. That’s more than 15x what they made in 2019.

This is a boom and bust industry, and so many of the largest carriers are looking to use the excess profit made over the last two years to invest in end-to-end solutions.

What does that mean? They’ll go beyond port-to-port by including delivery services from the port to your warehouse or 3PL. Full service means that more of your dollars are going to a single carrier, but those are dollars you’ll need to spend anyway. The net result is that by spending more with one provider, you’ll get access to precious container space and better rates across the board.

We’ve looked into some of these end-to-end services, and they’re generally competitive with what you’ll find by contracting another vendor to ship your goods from the port into your warehouse, so it’s certainly worth exploring. In fact, there are carriers out there who will NOT sign new clients this year or increase space for clients this year unless they are willing to buy into their end-to-end services.

3. Multi-year contracts are more flexible than you think.

This might sound counter-intuitive. Prices are spiking, and though they’ve gone down slightly in recent weeks, they’re still WILDLY higher than they were in 2019. But here’s the thing: this container crisis isn’t going to end any time soon.

On top of slow production, we may see potential labor issues or even strikes due to the upcoming expiration of longshore worker contracts on the West Coast. So what does this mean if there is a potential decrease in West Coast labor? Carriers will likely be adding additional east coast services to offset any potential issues in the west. The East Coast is already experiencing port congestion as importers try to avoid the current congestion in LA.

And, we now know all too well how tiny ripples in the supply chain can swell into tsunamis further down the line. Demand will still be high for the 2022 holiday season. And on top of the labor potential disputes, most other supporting industries are having trouble hiring in general.

In the face of that uncertainty, I recommend locking yourself in for a few years to ride things out in stability. Yes, maybe you’ll pay more when things ease a bit. But I’d rather be complaining about slightly high prices in 2023 than not being able to get space for the holiday season in 2022. Take time and analyze the data. If you save $8000 a container now, but end up paying a $2000 premium on future rates you have still negotiated an overall savings.

Also, in some cases, multiyear contracts include a rate check and performance clause stating if the market goes up, rates may increase as well and if the market goes down the rates will also decrease. That way, you have peace of mind without breaking the bank.

Also, consider buying off-cycle. You need to be negotiating contracts for next year now. Don’t wait until it’s too late. Perch was fortunate in that we took a conservative approach, so we’re 80%+ in stock and are overstocked on about 400+ of our HERO SKUs. That’s because we’ve been buying early and often. You should do that same thing!

4. Build a growth narrative that highlights exactly how much they stand to lose in future business by not signing you now.

We all know where eCommerce is going. 2021 has been a tough year, but eCommerce is still only at ~14% of all retail sales. The overall eCommerce market is still growing, your niche is probably growing within that, and your brand is likely gaining share within that niche as well.

Tell that story. Maybe you’re only at a few hundred containers (which is impressive). But where will you be in a year? Two? Are they missing future business by not signing you now?

As an aggregator, Perch can lean into this growth artificially via acquisitions. Our growth narrative certainly is playing an outsized role in getting us below market rates for containers. Carriers believed in the vision, and while you might not be doing as much volume or growing via acquisitions, you’re still likely going to grow a lot over the next 6-12 months. If you position that in the right way, there are savings to be had.

Acquirer or advocate?

We believe there are tailwinds in this industry. Say what you will about aggregators, scale builds legitimacy, and we think there are tailwinds for quality sellers to benefit from our advocacy and relationships - whether that be with B&M retailers that are realizing that social proof is the best way to source new brands in their stores to carriers that are realizing that Amazon sellers represent a huge opportunity for high-growth customers.

Something that excites us about John is that he’s a representative of Amazon sellers at literally the highest echelon of the shipping industry. He’s the guy who is talking to the top industry leaders and regulators.

So let's be advocates. What are your concerns? What are your pain points? John is positioned to make these known. To the government, to the leadership teams at top carriers, and to the broader public.

If aggregators are advocates, everyone in this ecosystem wins. We want every seller to be fully stocked next year. And for less. Follow John Esborn to learn more, or reach out to us if you want to sell to an acquirer who can keep you in stock and on top.

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