Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store?
10-20 years, sure, but that's a big spread. What if it takes twenty years for grocery stores to get that stuff and Amazon has it in ten? Given the fragmentation of grocery stores and their focus on actual stores I imagine they will have a hard time catching up technologically, plus businesses with brick and mortar roots don't have a great track record at building ways for customers to bypass the brick and mortar. Imagine the time they'll waste on marketing, astroturf, and lobbying to try to stave off automated home delivery before they give up and actually try to make the technology work. That gives Amazon even more time make money and draw further ahead.
My thought is that the cost of delivery will eventually drop so much from technological shifts (self-driving vehicles, robotics, etc.) that all retailers will enjoy the same cost savings that people are predicting for Amazon.
In other words, I don't think the last-mile delivery problem is going to be solved by Amazon and then enjoyed by them exclusively. It seems far more likely to me that the entire segment of local transportation will be reinvented by independent companies and utilized by all retailers. Think people owning their own self-driving vehicles that can stop and pick up their groceries, or independent local delivery services that utilize self-driving vehicles instead of Amazon-branded delivery vans.
At current cost levels, there's no way that delivering goods can ever be more profitable than selling them in-store. Last mile delivery is simply too complicated and costly. It's pretty much the entire reason that the USPS loses so much money while UPS and FedEx make enormous profits. So the only way that the costs could be made similar is if the costs for last mile delivery dropped to an incremental cost of nearly zero.
There's more than last-mile delivery, though. Amazon is automating its warehouses right now. Managing fragile and perishable goods will be an extra twist for them, but grocery stories will be starting from scratch (unless they're already working on the problem, which would be the right thing but seems unlikely.) Automated hand-off between an automated warehouse and an automated delivery platform is going to be a hard standard for grocery stores to compete with, especially on timeliness.
I thought this "last mile problem" is what Amazon is trying to solve and why they never made a profit for all those years. They are the ones building the "robots" and reinvesting is all this tech to solve such a hard problem.
From what I've seen they've done two things. First, yes, they've basically spent huge amounts of what would otherwise be profits on subsidizing two day delivery. They have dabbled in various methods of last mile delivery, like using their own drivers or drones, but to this day 90+% of my Prime deliveries are delivered by UPS or FedEx. The rest are either Lasership or Amazon delivery both of which have a noticeable drop off in reliability.
The last mile cost is extremely complex and I see no evidence that Amazon will figure out zero cost two or single day deliveries. FedEx nor UPS has been able to, and that's their core business!
I do think that it will be solved one day, but it won't be by Amazon. It'll be due to an advancement of lots of outside technologies that will be enjoyed by all retailers. And if we're being honest, isn't that outcome better for consumers?
The second thing that Amazon has done is subsidize things like free Video, books, and now Thursday night NFL in addition to free two day shipping to create an overall value package that draws people into Prime.
Comments
Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store?
10-20 years, sure, but that's a big spread. What if it takes twenty years for grocery stores to get that stuff and Amazon has it in ten? Given the fragmentation of grocery stores and their focus on actual stores I imagine they will have a hard time catching up technologically, plus businesses with brick and mortar roots don't have a great track record at building ways for customers to bypass the brick and mortar. Imagine the time they'll waste on marketing, astroturf, and lobbying to try to stave off automated home delivery before they give up and actually try to make the technology work. That gives Amazon even more time make money and draw further ahead.
My thought is that the cost of delivery will eventually drop so much from technological shifts (self-driving vehicles, robotics, etc.) that all retailers will enjoy the same cost savings that people are predicting for Amazon.
In other words, I don't think the last-mile delivery problem is going to be solved by Amazon and then enjoyed by them exclusively. It seems far more likely to me that the entire segment of local transportation will be reinvented by independent companies and utilized by all retailers. Think people owning their own self-driving vehicles that can stop and pick up their groceries, or independent local delivery services that utilize self-driving vehicles instead of Amazon-branded delivery vans.
At current cost levels, there's no way that delivering goods can ever be more profitable than selling them in-store. Last mile delivery is simply too complicated and costly. It's pretty much the entire reason that the USPS loses so much money while UPS and FedEx make enormous profits. So the only way that the costs could be made similar is if the costs for last mile delivery dropped to an incremental cost of nearly zero.
There's more than last-mile delivery, though. Amazon is automating its warehouses right now. Managing fragile and perishable goods will be an extra twist for them, but grocery stories will be starting from scratch (unless they're already working on the problem, which would be the right thing but seems unlikely.) Automated hand-off between an automated warehouse and an automated delivery platform is going to be a hard standard for grocery stores to compete with, especially on timeliness.
I thought this "last mile problem" is what Amazon is trying to solve and why they never made a profit for all those years. They are the ones building the "robots" and reinvesting is all this tech to solve such a hard problem.
From what I've seen they've done two things. First, yes, they've basically spent huge amounts of what would otherwise be profits on subsidizing two day delivery. They have dabbled in various methods of last mile delivery, like using their own drivers or drones, but to this day 90+% of my Prime deliveries are delivered by UPS or FedEx. The rest are either Lasership or Amazon delivery both of which have a noticeable drop off in reliability.
The last mile cost is extremely complex and I see no evidence that Amazon will figure out zero cost two or single day deliveries. FedEx nor UPS has been able to, and that's their core business!
I do think that it will be solved one day, but it won't be by Amazon. It'll be due to an advancement of lots of outside technologies that will be enjoyed by all retailers. And if we're being honest, isn't that outcome better for consumers?
The second thing that Amazon has done is subsidize things like free Video, books, and now Thursday night NFL in addition to free two day shipping to create an overall value package that draws people into Prime.