I am sure it is a very niche part of Amazon today, but who knows, it may get real traction in the future.
To paraphrase Carol Tome, maybe bigger is better in this context. The only challenge is how to strap this mega parcel to the roof of an Amazon delivery truck
Even Amazon is upping the ante on non-Prime order value to qualify for free. They charge more for same day in some cases which seems to corroborate that faster costs more.
Is this the beginning of the e-commerce industry tip-toeing away from free? Maybe, but curb your enthusiasm.
My guess is retailers will trim around the edges of what consumers “pay” for delivery. Why? In part because no one wants to go first, but someone will.
What about returns? That warrants a separate discussion of its own for another day.
The only way I can think of to significantly reduce shipping costs is to slow delivery down. I know this is heresy to some, but why not deliver one less day per week to force density? Of if you really want to get froggy, do two less days?
The majority of the variable cost of getting your spiffy new Taylor Swift sweatshirt (store.taylorswift.com) is after the parcel arrives at the destination delivery facility (a.k.a. the last mile). It is not pick-up cost, not line haul cost, and not sorting cost. Together, they are far less than delivery.
Forcing more volume into the same geography means less distance between stops, more “package marriages”, and savings opportunity for somebody in the value chain. I know of one parcel carrier that does not deliver on Mondays.
ShipMatrix research proves the vast majority of e-commerce packages are not opened day of delivery. It therefore stands to reason most items ordered online do not need to be delivered next day, or even second day.
If you buy that slower saves money (and OBTW is greener) maybe the savings could be shared. One example is Carol Tome’s “1/3rd to shipper, 1/3rd to UPS, 1/3rd to shareholder”. (That sounds like 2/3rds to UPS’ benefit, but whatever.) At least someone at a high level in the industry is thinking outside the box.
I believe most consumers would prefer free, slower, time-definite delivery, but time-definite are the key words in the sentence. If I order on Monday and you tell me it will be delivered Thursday, you damn well better not deliver it on Friday – or Wednesday.
As many companies are returning to work, why not incentivize delivery to offices where delivery density and packages per stop are higher?
Time-definite and Just-In-Time have been part of B2B forever. Think machine parts vs. Adidas sneakers. Maybe its time for a B2C version of JIT?
None of this is a silver bullet and for sure not easy, but why not test more? As they say south of the Mason-Dixon line, “Don’t worry about the mule going blind, load the damn wagon”. Translation: as Nike would say, “Just do it.”
Let me know what you think – especially if you disagree.
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”.
