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Amazon, in Threat to UPS, Tries Its Own Deliveries

118 points| pmciano | 12 years ago |online.wsj.com | reply

117 comments

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[+] deftnerd|12 years ago|reply
I never understood why Amazon doesn't just get into the drive-through market.

As a consumer with children, it's a major hassle to go to the grocery store with my kids in tow. It's also unacceptable to wait 2 days to get what I order.

The ideal solution would be for me to go to Amazon Fresh, pick my location so I can be assured that everything listed is in stock, and then do my shopping.

On their end, the workers would pick the products from the shelves and toss it into bins with a barcode on them, just like they do at the Amazon Warehouses now. There would be 3 categories of bins: Frozen, refrigerated, and room temp.

When my order is ready, I would get an alert on my phone.

Then I would drive to an Amazon Fresh site and park in a numbered spot and either press a button on an adjacent speaker box or something or enter the parking spot number on my phone.

I would get a notice that an attendant is on their way. A few minutes later, a cart would come out with the bagged groceries and the attendant would load them into my car and I would leave.

This really seems like the best choice for Amazon. It lets them have regional centers for product warehousing so they don't have to ship cross-country, it lets consumers get products instantly without last-mile logistics problems, and it would let them gradually transition to their own in-house delivery for their regular products and not focus on the products that need instant delivery. Having their own delivery unit, UPS, and local delivery companies would encourage competition and keep the prices low for them.

[+] ardemue|12 years ago|reply
In France at least there are a lot of places like this. For example I shop at Leclerc Drive where you order and pay online. It's ready 2 hours later and you have 24 hours to get it at a physical location. Once you get there, you scan a customer card or your nfc smartphone and somebody comes to your car with your products in bags (frozen, refrigerated and room temp being in different bags) in like 2 ou 3 minutes. If you want to, you don't even have to get out of your car as the guy will load it up your trunk, but most people just help out.

I live in a moderately big city and there are 4 Leclerc Drives (www.leclercdrive.fr), and then there's Chronodrive (www.chronodrive.com) and U (www.coursesu.com).

[+] matwood|12 years ago|reply
A few local grocery stores offer this. You order online and pick it up in a drive through area a little while later.
[+] btrautsc|12 years ago|reply
I think this will be an option in the near/mid term.

I've long assumed Amazon would compete more directly with both shippers & big box stores - by combining optional last mile delivery for items as well as potentially pick up points.

Fresh probably can't work very efficiently outside of a few hyper-condense markets. But ordering everything online and driving through to pickup a preselected batch - of groceries, cables, clothing, electronics (whatever)... that is very doable. You just need regional fulfillment centers (check) and then smaller local pick up points... this could be achieved with an acquisition or two.

[+] ISL|12 years ago|reply
If you can afford the markup on their groceries, Amazon Fresh in Seattle's delivery can occur in less than 12 hours (sometimes <6). The only thing that's kept me from using Fresh as a utility is price. Local grocery stores still win on price.

If you're laid up in bed and can't leave the house, Fresh is awesome.

[+] brownbat|12 years ago|reply
I've seen grocery stores offering this.

Giant: http://www.peapod.com/ Ralphs: http://shop.mywebgrocer.com/ Safeway offers same day delivery: http://shop.safeway.com/ecom/home

That's a few different regions, and the Ralphs has been doing it for over five years. I bet the idea has spread to most major cities by now.

I don't know why this hasn't just displaced normal grocery shopping. Lack of knowledge about it or customer comfort, hard to establish new buying trends for basic purchases, no idea.

[+] sgk284|12 years ago|reply
> It's also unacceptable to wait 2 days to get what I order.

In Seattle, there is often an option for same-day delivery. I suspect they'll eventually roll that out to most cities, assuming it's a successful experiment. I had a ~3 hour turn around the other day (ordered something at 11am and it arrived around 2pm) for a total shipping cost of $2.99 w/ Amazon Prime. It was kind of crazy and made me realize I'm living in the future.

[+] askbill|12 years ago|reply
I think this will happen, but with autonomously driven vehicles.

While you're at work, your car will leave and drive through an amazon warehouse at 1mph. Someone picks your order, loads it into the trunk of your slow moving vehicle which then returns to your office. End of the day, your goods are there.

Lots of problems to solve between where we are and there, but I do think that's where we're headed.

[+] itsboring|12 years ago|reply
I'm confused, since when does Amazon Fresh take 2 days? I put in an order last night around 11pm and the stuff was on my doorstep at 4am.
[+] msrpotus|12 years ago|reply
Amazon Locker is a little like that: you can pick up purchases from specific locations (though you do need to order them ahead of time).
[+] toomuchtodo|12 years ago|reply
Peapod.com does exactly this in some of their service locations.
[+] njharman|12 years ago|reply
> It's also unacceptable to wait 2 days to get what I order.

Holy crap you need a reality check.

[+] mikegioia|12 years ago|reply
This is such a natural extension for Amazon to move in to. I've never had a consistently good experience with UPS, FedEx, or USPS. The success rate varies but all three have caused packages to get lost, sent back to the shipper, or I'd get a "we don't know where your package is". Needless to say my confidence in the current shipping industry is low.

Amazon could gain a leg on the current shipping/logistics companies even if they focused on just a few key areas:

    * Real-time shipment tracking
    * Cardboard-less / eco-friendly boxes
    * Neighborhood locations to deliver packages to
Real-time tracking I think is the easy win. Setting up some form of eco-friendly packaging could be as simple as shipping your items in a reusable plastic bin, and then leaving you with the individual items you've purchased.

However, one of the big problems particularly in NYC is reliability. Most people don't have a doorman and rarely will the postman leave the package for you. Even if they did, a lot of people don't like the idea of having their Amazon box sit outside their door for anyone to steal. Amazon already has their locker system and I think that could be the difference-maker. If I could ship to a convenience store, or a reliable place then I'd be able to grab my deliveries on the way home from work. Plus Amazon could reduce the number of deliveries they have to make in dense cities.

[+] DanBC|12 years ago|reply
This could be a bad move for Amazon.

Amazon has amazing customer service. It just works. Parcel delivery is hard. USPS etc don't cock it up because they're lazy or stupid. So currently Amazon does the stuff that works and lets another company tAke the blame for the hard stuff. But in future people won't be saying "some company lost my package". They'll be saying "Amazon lost my parcel".

(There are some things Amazon gets weirdly wrong - I cannot fathom how search is allowed to be so terrible)

[+] r00fus|12 years ago|reply
Amusingly for hard-to-reach locations both UPS and FedEx rely on an even better organization (US Post Office) to do their last mile delivery - as with the limited margins for USPS (federally legislated), it's cost effective for private delivery companies to simply farm it out.

Only the USPS has a charter/requirement to actually deliver to every address.

[+] mahyarm|12 years ago|reply
A lot of people blame amazon when their package isn't delivered properly already, even though UPS or similar delivered it.
[+] mindstab|12 years ago|reply
Good, because UPS needs to die. Of my last 3 orders with them:

1) was reported "left at door" of ... my apartment building? so I never saw it and I had to reorder at my cost

2) my ouya was again marked "left at door"... of my apartment building and I never saw it (seems very likely the driver just took it home). Thankfully this time amazon reissued at their cost

3) after one failed day time delivery the package was left at a nearby ups pickup place, we called to confirm it would be there on the weekend and then they called the depot and promptly sent it back to the sender...

UPS's policy of allowing abandonment of packages is not remotely safe because drivers can just steal and mark it "left at door". It doesn't look good thought when it's an apartment building and they probably didn't even get inside.

So yes, UPS needs to die because they have cost me and amazon time and money.

[+] cowpewter|12 years ago|reply
Everything I order from Amazon I have delivered to work, because I never know which carrier service is going to get it, and I don't like not knowing if they're going to just dump it on my doorstep, leave it with my apartment's leasing office, take it back to some depot on the edge of town, or what.

Though it does mean I think twice about ordering things on Thursday or Friday. I once had a package shipped via Prime go missing for half a week, because I ordered it on Friday and Amazon decided to pleasantly surprise me with one-day shipping instead of two. That backfired immensely. I would have been perfectly happy with a Monday delivery.

When no one was at the office to sign on Saturday morning, the package went back to some mysterious depot and they didn't re-attempt delivery until the middle of the next week. Except they marked the tracking as "delivered" that Saturday - probably so they wouldn't get in trouble with Amazon for not meeting the two-day shipping window. I was freaking out about where the package could have gone, because if it was supposedly delivered, then where was it? Where could they have even delivered it? No one was here! You can't even get in the building on Saturday without an access card. Then suddenly the tracking re-updated on Wednesday to say it was at the depot and I got it later that day.

I wish I could remember which carrier that was now.

[+] lobster_johnson|12 years ago|reply
At least UPS is better than USPS, which will pretend to deliver the package. When you look at the tracking info, it will say "tenant not home, notice left". However, what really happened was that no notice was left. Instead, the package went directly to the post office, a grimy dimly-lit place from the 1970s which closes early and where you have to go and stand in line for 25 minutes among weird grubby people with Tourette's. Then you get snapped at by a grumpy employee who sits behind bullet-proof glass, who shuffles off (slowly) to find the package and then hands it to you through this special "airlock" where one side has to be closed in order to open the other side. And then you have to carry it home.
[+] scrame|12 years ago|reply
Funny, just this last week, Amazon's carrier either left a package for us on the sidewalk, or just didn't deliver it. They marked it as delivered, but didn't ring a bell, or leave a note, and we never saw the package. We had to get it re-ordered and it came through fine with UPS.

UPS is actually the best carrier for Amazon stuff to us, though. We've had problems with their other shippers.

[+] specialp|12 years ago|reply
When it comes to groceries and other very time sensitive shipments then yes they should deliver on their own, but making your own nationwide to door delivery system would be a disaster. These are not easy businesses and it would be hard to beat the cost effectiveness of USPS, UPS and FedEx. They could start in fresh deliveries to limited markets and have those warehouses store commonly ordered products.

Currently Amazon most often uses a courier for only the final ground leg from a distribution center. They already have their own delivery to deliver inter-warehouse. It would not be possible to stock the huge variety of products available on Amazon in very local warehouses. So I would not be incredibly worried if I were a package carrier now. This could perhaps take some of the business in some markets but I doubt Amazon will go private for the majority of its deliveries.

[+] richardking|12 years ago|reply
Had a similar debate with my girlfriend when she suggested Amazon would take over their entire delivery process. Warehouse to warehouse, and warehouse to major city don't really seem like they would be a problem. The middle-of-nowhere deliveries would cause the most headaches, and be the least cost-effective. I guess the question is how much of their total deliveries do those comprise of.
[+] pvnick|12 years ago|reply
I expect them to receive a lot of resistance from federal and state governments. I have a friend that works for UPS, and the union-enforced inefficiency stories he tells me would blow your mind. It's literally the gangster behavior that unions are notorious for. And those guys are no strangers to getting politicians to bend to their will.

Given a truly fair, free-market, Amazon (and the other companies the article listed) would blow traditional delivery services out of the water over the next decade, no question. Companies like UPS are just too bogged down with union bureaucracy. But that's something the delivery unions will fight tooth and nail. This war will involve just as much lobbying as innovating.

[+] pessimizer|12 years ago|reply
>union-enforced inefficiency stories he tells me would blow your mind

Vacation, breaks and a mild improvement on minimum wage? Limits to what they're expected to lift? What are these horror stories?

UPS is an awful job with awful wages. Of course you could make them work harder for lower wages if you made sure they lacked representation, but I wouldn't refer to that as a fair, free market.

[+] tomasz207|12 years ago|reply
As far as I know, FedEx operates without unions. Not quite sure how that has effected the industry.
[+] dzlobin|12 years ago|reply
I'm not disagreeing, but what would UPS/USPS/unions fight them on? Is starting a delivery service regulated in some way?
[+] amiune|12 years ago|reply
I guess we need to wait for the drones and self driving cars then.
[+] jjallen|12 years ago|reply
As Amazon becomes larger and larger, it makes more sense to vertically integrate.

Assume half of AMZN's 2013 net shipping costs of $3,538 occurred in U.S. and profit generated thereon was ~10% of revenues (UPS 2013 operating margin was ~13%), AMZN has a guaranteed (and growing) chunk of change to go after. Not to mention the custom delivery options and probable long-term improved delivery metrics. Of course, this is a somewhat capital intensive business (relative to our estimates of the existing core businesses at least), but still could generate attractive long-term returns.

A much more interesting thought experiment is to do the same calculations on credit card exchange fee savings AMZN would generate if the company processed its payments itself. The savings would be into the billions of dollars and would be incomparably less capital intensive than any physical delivery system.

[+] milesskorpen|12 years ago|reply
I'd guess that Amazon gets very very low fee rates for payments. Amazon's not going to start competing with Visa, and it seems unlikely they'd be a bank, so I doubt there's a huge amount of profit to be made in taking over their own payments processing.
[+] jliptzin|12 years ago|reply
They should also start burning their own coal and splitting some atoms in their own power plants. They could save millions by not forking over the utility company's greedy margins.

So much for division of work.

[+] christoph|12 years ago|reply
I've noticed this in the UK in the last couple of weeks...

Normally a "next-day" package would be delivered by a number of different UK courier/delivery firms (Royal Mail/DPD/Yodel/etc.).

Nearly everyday, we've had deliveries to our office from unmarked white vans. I know this because our office is hard to find, and they generally phone me to say they can't locate us. Whenever I've gone outside to meet the delivery driver, I've seen the van full of Amazon packages and asked if he does deliveries for anyone else. They've have told me they "only" deliver for Amazon and won't really be pushed on the matter.

I think pretty soon those vans are going to have Amazon branding on them and a few courier companies will be wondering where their business went...

[+] dingaling|12 years ago|reply
> They've have told me they "only" deliver for Amazon and won't really be pushed on the matter.

Amazon Logistics UK

They bought-out APLE in Milton Keynes, which had previously worked as a contract courier for Amazon and others.

http://www.aplemk.com/ContactUs.php

Not a company that had a stellar reputation.

[+] matznerd|12 years ago|reply
Amazon has messed up my last few next day orders, seriously breaking down my confidence with them. I made a purchasing decision based on price with next day vs price in store right now. I went with amazon and 1 out of 3 items got there the next day. The other two items listed with delivery by 8pm, which I waited late at the office until after 8pm and I got an email telling me they would be there 2 days later and that they were refunding me. I don't care about the refund on shipping, the items were business sensitive and needed ASAP, so amazon really lost my confidence that next day actually means next day (this was not the first time either). So I think amazon definitely needs their own shipping because these third party companies don't give a shit about amazon customer service. I know Lasership especially in NYC has straight up lied to me about delivering a package that they forgot and just went home.
[+] DanielBMarkham|12 years ago|reply
I'm betting that at some point in the near future, you're going to see housing developments built on top of a distribution center.

It makes sense. A big DC could use the same robots that pack shipments to deliver goods direct to your door. One-hour delivery.

If they did this, then you could also get into renting items instead of purchasing them. Do you really need that big screen TV? Or could you just rent something a couple Saturdays each month? I could easily see a future where you're out by the pool and decide to have a party. Speaking a few commands into your smart phone, when you get home a couple hours later you have all sorts of things purchased/rented/installed and ready to go.

10 years out, maybe?

[+] smackfu|12 years ago|reply
1. Start collecting state sales tax.

2. Build warehouses in state close to customers.

3. Use your own delivery trucks for shipments from those warehouses, since same-day local deliveries are the simplest part of the delivery chain.

4. Profit!

[+] massysett|12 years ago|reply
> same-day local deliveries are the simplest part of the delivery chain.

Was this a joke...you think splitting thousands of tiny parcels up for delivery in a city is simpler than sending some semis for a cruise down the interstate?

[+] trhway|12 years ago|reply
your margin is my opportunity... Considering that government is a very high margin business...
[+] djhworld|12 years ago|reply
Amazon already (sort of) do this in the UK for some of their deliveries, with deliveries often coming from an arm of their business called "Amazon Logistics"

I don't think it's a pure courier company though, I think they've just paid a bunch of different couriers to deliver parcels under the Amazon brand. For example if you are out, they'll leave a card with Amazon branding over it

[+] clarkdave|12 years ago|reply
I've recently had a few of my Prime deliveries come via "Amazon Logistics" and it's lacking compared to DPD who used to do most of them.

Amazon Logistics has no depots (that I can see - they don't tell you who the courier is), no real time tracking, no delivery windows... If this is their attempt at doing it on their own it's a terrible start.

[+] jebblue|12 years ago|reply
It's a free country, if they can pull it off, more power to them!
[+] simonlebon|12 years ago|reply
Pretty soon Amazon will have it's own wine brand, a pinot noir.