Amazon is just making the next logical step against traditional retail
I’ve now read about a dozen various reactions to Amazon’s patent on their “anticipatory shipping”. (you probably saw, or even read, USA Today’s article recommended on Linkedin). While I don’t dispute the brilliance of the idea, I think it’s worth mentioning that we’re looking at fairly expectable extension of Amazon’s logistical model, with a bit of excellent lateral thinking thrown into the mix.
When you think about it, brick-and-mortar retail chains have been doing the same thing since their inception. “Shipping into a general geographic area” is in their language called “putting goods on shelves” in a particular store. They use exactly the same data analytic techniques to estimate how much to put there to avoid both mark-downs and run-outs. Walmart built much of its success on the ability to know exactly how much to have where and when. Replace the word “store location” (which serves people in particular area) with “general geographic area” (state, county, zip-code) and you are back in Amazon’s world.
With the data it has, Amazon can of course predict orders in a particular area at least with the same accuracy Walmart can determine how many boxes of a particular toothpaste to put on a truck in their DC today so it hits the store just at the right time. It’s not perfect, but it does work very well indeed. Now if you imagine that the “general geographical area” happens to be an area served by a particular UPS depot, then all you need to do is to send the stuff there and then just collect the orders by the time the local delivery vans are being loaded. The better your “prediction”, the fewer items will be left at the depot without addressee that day (which may even be, up to a point, just fine with UPS, given how much business they see from Amazon), and the fewer people will have to wait additional day to get their items. Amazon is effectively distributing their DC closer to the user, using the trucks and planes as their warehouse.
Adrian Gonzales in his post looks at the whole thing from an additional, very interesting angle. The shipments to a particular area can become in a way self-fulfilling prophecies. The one thing traditional retail still holds over the on-line business is the ability to posses the wished item right there and then. While Amazon won’t be shipping to you shelves of items to pick from and send back what you don’t want any time soon, with the package already on the way at the time of your order, they’re coming pretty close. With this (on average) shorter time between order and delivery, with the cost of shipping staying standard unlike with same-day deliveries, Amazon is further strengthening its offering and increasing the reason why people would buy online rather than going to a store. In addition to that, they’re opening doors to impulse purchasing (“we think you probably want this, we have an extra on a truck near you, click yes/no”). Or imagine dutch auction for those not-yet-spoken-for items. Price is dropping until someone says yes and “outbids” the others.
At Keboola, we are working with clients on both sides of this online v. brick-and-mortar struggle. Both principles have place in our future shopping habits, but both of them need to work hard to balance the advantages of the other. Data happens to be the weapon of choice on both sides. While online retailers are trying to eliminate the time-to-value gap of purchases against retail, traditionals are learning more and more about us, individual shoppers, and our patterns. So what will be Bentonville’s answer to Amazon’s challenge? Maybe a shopping cart, waiting for you at the entrance of Walmart, already pre-loaded with the items you are almost certainly planning to buy today. You then just pick up the few unusual pieces and off you go.