I have written several articles for PARCEL about tech firms that are approaching the supply chain in new ways.
Amazon’s overall strategy is becoming clearer and is by no means just in test phase. Jeff Bezos founded the company in 1994 and is President, CEO and Chairman of the Board with over $61 billion in annual revenue for 2012. Bezos is also in the process of buying the Washington Post.
They have successfully disrupted multiple industries in both product and service sectors. Their approach is a two pronged strategy of cheaper and faster for both products and services.
In addition to dominating the book business in print, e-reading, and audio, Amazon owns the hearts of customers with its “prime service.” There are now 10 million prime customers spending $79/year for unlimited and free guaranteed two business day delivery, free usage of thousands of videos (movie & TV) and free access to hundreds of thousands of books.
Everything they do to improve and expand includes the idea of selling that service too. Providing e-commerce for others to sell products, warehousing and fulfillment, cloud services, storage lockers and e-commerce services all took this path.
They invented and patented the “one click system,” invented the Kindle, were voted the most trusted company in America this year, and have 89 warehouses in the one million square foot range (with many more planned, like three in Texas, for instance).
Electronic commerce purchases passed $1trillion in sales last year. They have only a six percent share, by looking through the telescope the other way, they have 94% upside potential. If anything, growth is accelerating with predictions of dire effects for shopping malls. In 1995, when Amazon got under way, right after the web was first available, its sales were non-existent.
Amazon has introduced Amazon Fresh in Seattle and LA offering same day delivery of 100,000 grocery products by uniformed Amazon drivers. Amazon Fresh is just like other Amazon services that provide a dual reason for existing; in this case it gains the density to offer same-day delivery for items that are much more profitable than groceries. For groceries, it incorporates an easy-to-use reorder system for items that one always needs to buy again.
It is rumored that some venture capitalists are even asking new startups exactly how they will not be flattened by the Amazon juggernaut as a key question to considering investment.
Amazon’s success is going to have an effect on every single player in the supply chain.
Your customers are considering three points:
a. Can Amazon help me by replacing your service? (Yes, YOUR service.)
b. Can we make money being a service provider or product seller with Amazon?
c. What should we do to compete with Amazon?
Jeff Bezos has been asked if he is going to buy UPS, USPS, or FedEx. He says no and my personal opinion is they will not make a big carrier purchase because they are building same-day services that will innovate and compete with all carriers.
Same day delivery providers may have the most risk here. Some points worth considering:
1. Are you offering enough value to keep your customers from switching to them? Ask your sales people to select key customers for a roundtable discussion. Consider making those customers permanent advisors. You will need a lot of good input.
2. How do you figure out who to talk to at Amazon to offer your product or service? Go to Google, input services.amazon.com for contact info and reach out to them. There may be a lot of possibilities for carriers and product sellers. Be careful with your margins and work hard for the right terms.
I have been an Amazon Prime customer for years and have to say, it is a very strong offering. I now consider Amazon for many, many items that I previously had no idea they offered. While its two-day free delivery is strong, the offering for free movies, TV shows, and books on Kindle is very attractive.
We are lucky to live in the USA where capitalism has created the greatest competitive environment of all time. Creativity and innovation are becoming more and more important.
Rob Shirley is President of ExpresShip, a strategic consultancy in the global supply chain; contact him at rsxpship@gmail.com or visit www.xpship.com.
Amazon’s overall strategy is becoming clearer and is by no means just in test phase. Jeff Bezos founded the company in 1994 and is President, CEO and Chairman of the Board with over $61 billion in annual revenue for 2012. Bezos is also in the process of buying the Washington Post.
They have successfully disrupted multiple industries in both product and service sectors. Their approach is a two pronged strategy of cheaper and faster for both products and services.
In addition to dominating the book business in print, e-reading, and audio, Amazon owns the hearts of customers with its “prime service.” There are now 10 million prime customers spending $79/year for unlimited and free guaranteed two business day delivery, free usage of thousands of videos (movie & TV) and free access to hundreds of thousands of books.
Everything they do to improve and expand includes the idea of selling that service too. Providing e-commerce for others to sell products, warehousing and fulfillment, cloud services, storage lockers and e-commerce services all took this path.
They invented and patented the “one click system,” invented the Kindle, were voted the most trusted company in America this year, and have 89 warehouses in the one million square foot range (with many more planned, like three in Texas, for instance).
Electronic commerce purchases passed $1trillion in sales last year. They have only a six percent share, by looking through the telescope the other way, they have 94% upside potential. If anything, growth is accelerating with predictions of dire effects for shopping malls. In 1995, when Amazon got under way, right after the web was first available, its sales were non-existent.
Amazon has introduced Amazon Fresh in Seattle and LA offering same day delivery of 100,000 grocery products by uniformed Amazon drivers. Amazon Fresh is just like other Amazon services that provide a dual reason for existing; in this case it gains the density to offer same-day delivery for items that are much more profitable than groceries. For groceries, it incorporates an easy-to-use reorder system for items that one always needs to buy again.
It is rumored that some venture capitalists are even asking new startups exactly how they will not be flattened by the Amazon juggernaut as a key question to considering investment.
Amazon’s success is going to have an effect on every single player in the supply chain.
Your customers are considering three points:
a. Can Amazon help me by replacing your service? (Yes, YOUR service.)
b. Can we make money being a service provider or product seller with Amazon?
c. What should we do to compete with Amazon?
Jeff Bezos has been asked if he is going to buy UPS, USPS, or FedEx. He says no and my personal opinion is they will not make a big carrier purchase because they are building same-day services that will innovate and compete with all carriers.
Same day delivery providers may have the most risk here. Some points worth considering:
1. Are you offering enough value to keep your customers from switching to them? Ask your sales people to select key customers for a roundtable discussion. Consider making those customers permanent advisors. You will need a lot of good input.
2. How do you figure out who to talk to at Amazon to offer your product or service? Go to Google, input services.amazon.com for contact info and reach out to them. There may be a lot of possibilities for carriers and product sellers. Be careful with your margins and work hard for the right terms.
I have been an Amazon Prime customer for years and have to say, it is a very strong offering. I now consider Amazon for many, many items that I previously had no idea they offered. While its two-day free delivery is strong, the offering for free movies, TV shows, and books on Kindle is very attractive.
We are lucky to live in the USA where capitalism has created the greatest competitive environment of all time. Creativity and innovation are becoming more and more important.
Rob Shirley is President of ExpresShip, a strategic consultancy in the global supply chain; contact him at rsxpship@gmail.com or visit www.xpship.com.
