Inside Amazon’s Strategy to Redefine Fast Shipping
This WSJ video below is worth a watch. It puts a bit more behind-the-scenes color on what we already know about their Same Day service for their top 100,000 items. They mention examples like iPods, household cleaners and other every day items. The video may also be implying that the product mix may be materially different than their overall business?
The speed of fulfillment and delivery, along with the technology and processes that power Same Day are amazing. Amazon is probably the best and most innovative 1st party, 2nd party, 3rd party, 4th party and 5th party logistics company ever, albeit they are trapped in the body of a retailer.
The video also suggests that their costs go up exponentially with speed, but they have the unique ability to take losses in Same Day through subsidies from AWS and $139 Prime Memberships. What do other retailers and delivery companies do who don’t have that financial luxury?
Last mile delivery for Same Day has to be more expensive since they are using Flex drivers (i.e., “Moms in Priuses”) instead of their DSP network. Delivery cost is all about density which they seem to have less of here. I don’t know what their entire fulfillment and delivery costs are, but delivery to the door has to be higher than DSP and the driving force in their Same Day P&L.
I have so many questions. Do they have to have 100,000 items available? Is there a Pareto principle at work whereby 80% of the volume is from 20% of the SKUs? What % of Amazon’s total volume nationwide are the 100,000 items? What is the business case for Fast, Faster Fastest? In other words, what do you have to believe to believe when Same Day will become accretive?
Faster speed costs money pure and simple – even for Amazon. Do they have the right idea or does speed kill profits for everyone forever? I am not sure, but if I had to bet on someone making it work, my money would be on Amazon. I can’t wait until they launch “Amazon StarTrek” where you have a Prime chip in your brain and you only have to think about you want. Instead of trucks and warehouses, hey dematerialize it and your order magically materializes instantly on your porch. Beam it up Scotty.
Assuming Amazon Same Day is retail Nirvana does that mean they are going to chase everyone else to and through the gates of retail Hell? Maybe they will be kind and stop at retail Purgatory 🙂
That’s what I think. What do you think?
P.S., WSJ is working on comparable video overviews of Walmart and Target fulfillment and delivery. It will be interesting to see the differences and perhaps a glimpse into whether the Big 3 become the “haves” and everyone else are the “have nots”.
