5 Hurdles to Amazon’s Same Day Delivery Dream
Over the last decade Amazon has come to be considered big competition for online and brick and mortar retail giants like Best Buy, Wal-Mart, and Target. To make things worse, Amazon now wants to compete with the “have it now” edge by providing same day delivery. Analysts everywhere are decrying the demise of traditional retail, but their fears may be a little pre-mature. There are a few hurdles to overcome before the dream of Amazon same day delivery becomes reality.
Here are five that come to mind …
1. Distribution Centers – Amazon dropped their widely publicized battle over state sales tax, made amends, and decided to open up new distribution centers in the states it was fighting with. The growth is impressive but may not be enough. According to a post on Supply Chain Digest, Amazon needs to add an additional 12 more fulfillment centers to reach the top 20 cities in the US, thus servicing 37% of the US population. Their current distribution infrastructure can only reach about 15% of the US. Those numbers mean a lot of their customers won’t be able to take advantage of the new service.
2. Delivery – The logistics of same day delivery is a bit of a mystery. Amazon is making use of small local courier services for some products, like grocery delivery with Amazon Fresh, but those are in very limited markets. With the major couriers, FEDEX, UPS, and USPS, the best delivery option is next day. Since Amazon provides them lots of business already, it’s conceivable that FedEx and UPS might work with the e-commerce Goliath on same day options, but the available markets are limited here as well.
3. Customer support – While they aren’t the worst out there, Amazon does have challenges with customer service. According to the Customer Service Scoreboard, their rating is “disappointing” with many complaints of distant CSR’s and long wait time. With Amazon same day delivery, customers will expect to reach a local rep who can help them quickly. This will be a challenge for Amazon’s current model.
4. Advanced eCommerce software – An article in Wired online sees same day delivery as a viable possibility someday, but Amazon needs to find or create an advanced eCommerce software that can handle integrating data for the online orders, the warehouse stock, and real-time info on shipments and deliveries. Migrating data from older eCommerce systems into an advanced system will be equally challenging. While supply chain logistics are crucial for same day delivery, software systems that can support the infrastructure will be equally necessary.
5. Cost – Amazon has impressive financials, but not as impressive as some say they should be. Another Wired article about Amazon says that “compared to other big tech companies, its profits are pathetic.” Analysts say their poor performance is due to Amazon’s over-investment in its infrastructure, which only increases as they try to make the Amazon same day delivery dream happen. Also, Supply Chain Digest recently highlighted Amazon’s rising fulfillment cost percentages, which are getting larger rather than smaller with growth. Amazon already has issues with small retailers complaining as their fulfillment fees go up. Most likely the new venture will add to the rise.
Amazon same day delivery strategy may be the future, but it’s not as close as some may think.