Last mile delivery via drones, a soon to be reality?

Amazon has recently asked the FAA to allow drones to be used for last mile delivery (with limits on where it could be used). Not a surprise for anyone who follows this space. A few years ago the FAA dealt a gut punch to the industry when they implemented some strict rules when it came to drone usage in the United States. Rules such as limitations of where they were allowed to fly and line of site issues, proved to be massive road blocks to what many were envisioning to what drones could bring to the distribution game.

So what does this latest round from Amazon mean for the industry? First and foremost it is a reminder that the way the market and technology are moving are outpacing the government’s views. We all know the trends when it comes to demand on inventory flows throughout our networks. This acceleration of inventory flow is not simply to get the latest impulse buy we made on Amazon be delivered to our home. But we are now seeing companies like CVS offer delivery of prescriptions to our homes, and we have seen an explosion in delivery of food products both prepared foods and groceries. Retailers such as Kroger, Walmart and HEB are even experimenting with driverless vehicles making grocery delivers to the home (Kroger recently announced it will be stopping the program). Consumers’ desires are driving these technological advancements…governments need to catch up.

Look for savvy players to continued to get ahead of the curve, start experimenting on where these drones and other robotic delivery vehicles can bring value to their services. It is not simply Amazon, but look for the likes of UPS, DHL, USPS, FedEX and others to themselves look at drones to enhance the service they provide for the customer. See FedEx’s new advertisement on their robot –

These firms are all jumping feet first into this space. They all know the work they put in now will pay dividends down the road once regulations become more open.

What does this mean for consumers? Look for our insatiable desire for convenience and getting our stuff where ever we want it, to being addressed by these technologies. The ability to deliver not to a physical address but to your GPS location will become an increased possibility. Sitting on the beach with your 11 year old and you forgot the sunscreen? Have a drone deliver it to where you and your cell phone is located. Consumers will start looking for receiving bays or landing pads for these drones when they are house hunting. Looking at an apartment on 45th street in New York? It has a large common room, dog grooming facilities in the basement, a 24 hour door man….and a drone landing pad on the roof for the Amazon drones as well as a covered entrance for the Fedex SameDay robot to pull into.

We are seeing the acceleration of human-free delivery methods. The technology continues to evolve and grow at a rapid pace. As consumers, our acceptance and demand for such technologies will only grow. It is up to regulators to accelerate their understanding and acceptance of these new technologies. Release the handbrake so the autonomous vehicles can reach their full potential!

Amazon – increases the pressure on retail – 1 hour delivery

Amazon announced earlier that in New York City…okay in one zip code of NYC – 10001 – it will offer 1 hour delivery of tens of thousands of items for customers in that zip code. Click here for press release. This service will be for those customers to are Amazon Prime members and cost an additional $7.99 (2 hour deliver is free), another “perk” for paying to be part of the cool kids on Amazon.com. It would appear that the new Amazon store on 34th street will be tasked with handling much of the distribution for these potential customers. While the 1 hour delivery is limited to this area code for now, the retail giant plans to expand to other cities in the near future. I wonder if Boston is on their list of potential target cities…hmmm.

This should come as no surprise as Amazon continues to act as the 800lb gorilla when it comes to retail and supply chain. The idea of such rapid delivery is also not a new one. Anyone remember Kozmo.com? During the dot com boom that cool .com company could be seen in many an office lobbies delivering everything from ice cream to the latest CD from TLC. Alas they could not solve the issues of having to carry such a wide array of inventory with order runs that could not cover the carrying costs, delivery costs etc. So should we expect Amazon to fare better? Maybe. The have a couple of factors in their favor that Kozmo.com did not:

• Years of experience with running distribution centers – unlike Kozmo.com that really started as a company leveraging bike messengers to pick up small orders and deliver them, Amazon is a well oiled machine when it comes to understanding the nuances and challenges of running DCs with large arrays of SKUs. Their move into the 34th street location was seen by some as curious. But for Amazon it was clearly just the ability to place another potential distribution hub closer to its target audience.
• Vast amounts of buying behavior data for those Amazon Prime members in that zip
  

  Just this little slice of the Big Apple

  code…and else where for that matter. Amazon has years of historic data for those that sit in the 10001 zip code (about 20,000 people). And as we all know, Amazon is very good at figuring out what to suggest for our next purchase and even claim to know what to put on the truck before we even order it. Of those tens of thousands of items that could be delivered in that zip code, I have a feeling all the purchase data being analyzed in the Amazon cloud has identified the 1,000s (maybe only hundreds) of most likely items that are most likely to be ordered for those customers.

• A war chest that Kozmo could only dream of. I think it is safe to say that Kozmo.com could only dream of one day having the war chest Amazon can dip into. With over $5b of cash on hand, Amazon can afford to lose money on their delivery model as they work out the details. And unlike Kozmo.com, Amazon is only servicing one part of Manhattan. I bet the bike messengers from Kozmo.com would have appreciated that much more!

What cannot be under-emphasized is the impact this will have with regards to firing another salvo across the bow of the retail world. Just like with other bold moves – think drone delivery – this  move by Amazon is as much to test out a new fulfillment and commerce model as it is to cause ripples through the retail world and beyond. The digital disruption it will create is  disproportional to the actual disruption, but it will force companies and supply chains to once again figure out how to combat Bezos and Amazon.

I wonder how de Blasio will feel once Amazon looks to fly drones up and down 34th street.

 

 

Foot Locker same day delivery – embracing Matrix Commerce

Earlier this week Foot Locker announced it was going to start testing same day delivery for consumer purchases. Click here for the press release. This is an excellent case study of what we at Constellation Research are discussing with Matrix Commerce. It is a prime example of where the consumer voice and needs have converged with the retailer’s supply chain.

Foot Locker will be testing the same day delivery in 5 locations between the San Francisco and the Los Angeles area. In order to address the last mile delivery challenges, Foot Locker will be partnering with Deliv for the logistics of getting the product from the stores to the consumer’s location. Think of Deliv as doing for small parcel shipping to consumers as what Uber did for personal transportation – crowdsourcing last mile transportation. A very interesting challenge and service to say the least.

The voice of the consumer continues to grow when it comes to asking for and seeking the ability to get their products where they want it and how they want it. For retailers such as Foot Locker it is imperative that they determine how they can meet these demands from their consumers. They are already addressing their customer’s needs by allowing for online ordering with in store pick up. This new pilot is the natural next step.

As Daphne Carmeli, CEO at Deliv stated, “Foot Locker who surpass their customer’s expectations by giving them the ability to receive their merchandise when they want it, including same-day…” This is one area where the likes of Foot Locker, who are brick and mortar retailers at heart, have an advantage over eCommerce giants like Amazon. Foot Locker already has a number of distribution centers (DCs) that are located close to their customers – the actual Foot Locker stores. With the likes of Deliv’s services, they can now solve the last mile delivery issue that has made such services a logistics headache.

This success of the pilot project will be interesting to observe. Some questions a retailer such as Foot Locker will have to address:

• Can the staff in their stores be able to not only service the customers that come into the physical store, but also efficiently pick and pack the orders? Store personnel are trained to service a customer in person, Foot Locker will now have to ensure proper training for this staff to have to properly prepare orders for home delivery. Not as easy as it may sound.
• How does a crowdsource delivery offering like Deliv handle customer interactions? Once you start delivering products to consumers’ home you are exposing your brand – the person doing the delivery represents your company whether or not they are on your payroll.
• If your store acts more and more as a DC, how do you handle returns and restocking issues? Again, similar to the first bullet point, your staff is trained to sell products to customers who are in the store, now you are adding tasks to their jobs. How ready are they to handle this added demand?

The ability of companies such as Foot Locker to offer same day delivery is a natural progression when it comes to Matrix Commerce (other retailers such as Macy’s and Bloomingdale’s also announced this week they are running same day delivery pilot projects). That does not mean the challenges aren’t there…on the contrary the complexity remains and may become increased as Foot Locker travels down the learning curve. These companies are making the correct choice when it comes to offering such services, but they need to show patience with the process. There will clearly be some growing pains. However, similar to when eCommerce exploded on the markets in the late 1990s, the genie is out of the bottle. Now it is a matter of how well retailers and their partners meet the ever increasing speed for fulfillment.

As the Foot Locker EVP of Operations, Mike Owens, stated, “We want our customers to experience speed in everything they do, from shooting hoops to on the track.” It is all about speed…just make sure you don’t sacrifice quality for speed!