Thought Leadership

PARCELLY P'o'V: AMAZON - STRATEGIC MOVES AND FULFILLING TODAY’S CUSTOMER EXPECTATIONS

Amazon is currently one of the largest innovators in the logistics industry. Their success and impressive growth have been widely documented and historically benefitted logistic allies, with the likes of USPS, UPS and FedEx being some of Amazon’s biggest carrier partners worldwide. 

What Amazon’s next move now seems to be, is to ‘take control of the last mile’ and move logistic operations in-house, driving company growth and supply chain success without third party involvement. Back in September 2018, Amazon decided to strategically quadruple their orders of delivery vans from 4,500 to 20,000. These vans would be operated by contract drivers, with Amazon helping to set up their private delivery businesses and providing access to technology as well as operational support. And in a latest move this month, the company significantly expanded their air fleet of Boeing 767 cargo planes.

Amazon is looking to gain more control over their supply chain, by becoming less dependent on third party logistics. In my opinion, they are not trying to take over the market, but simply looking to build a contingency fleet that can respond to demand fluctuations or other eventualities (i.e. should anything happen to their logistics partners in the short term), and ultimately spread the risk of disruptions to their delivery operations.

Looking at these recent acquisitions, Amazon’s move can be interpreted as a wider risk management plan across their supply chain to ultimately fulfill their Prime customer's promise: they started out by investing in the last-mile of deliveries and are now covering the lead up to the last-mile by acquiring their own fulfilment fleet.

But despite these tactics, Amazon have not upped their game on collect in-store, and PUDO location choices yet. This is an area both Amazon and retail stores in general can look to improve in order to further differentiate the online delivery services they are offering. The more retailers (and Amazon) invest in these services, the more choice and flexibility they will be able to offer to their customers. Charlie O'Shea, lead retail analyst at Moody's, also agrees on this point in USA Today’s article pointing out that "This is an area where Amazon needs to up its game a little bit."

And as seen in Metapack’s 2018 State of eCommerce Delivery Report, ‘convenience-oriented consumers are tempted to try out other delivery options’, whilst '44% are planning to take advantage of pick-up-and-drop-off-points’. Retailers should be aware that 61% of people are of the opinion that 'a good delivery experience incentivises them to order more'. Furthermore, 54% of people consider speed a top priority and key when it comes to customer experience.

I believe fulfilling customer expectations and business growth are intrinsically related; therefore speed remains an unavoidable topic. The Metapack research also quotes that '55% of people expect fast deliveries in urban areas', hence retailers including Amazon need to tackle this challenge which cannot be solved by exclusively delivering to customer's homes. And finally, with fulfulment cost remaining a huge concern for retailers, using third party PUDO networks should be seen as a positive investment rather than a liability, as '70% of customers are willing to pay for more efficient and faster deliveries' even.

The use of alternative fulfilment options such as collection in-store and the use of PUDO locations will be fundamental. Furthermore, leveraging hyper-local warehouse facilities in central city areas supports fast, on-demand deliveries as well as easy parcel returns, bringing items that big step closer to online customers. Ultimately, we still see a margin for speed and efficiency improvement when it comes to the last-mile. Customers will keep demanding fast, reliable delivery options, and retailers will need to innovate and improve when it comes to the time it takes to serve their customers, the efficiency that can be gained in order to reduce costs and the planning on how to respond to future demands.

Ernesto Diez, Senior Business Development & Operations Manager
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