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AMAZON AT IT AGAIN, THIS TIME WITH A MOBILE APP

  • General News
  • 14th August 2016

Amazon “On My Way” Concept would Use Regular People to Deliver the Goods Using Mobile App; Can Anyone Match UPS-FedEx Low Costs Per Package?

From SCDigest Editorial Staff 

The Wall Street Journal reported last week that Amazon.com is considering a plan in which it will launch a service based on a mobile application that would have regular people picking up packages and delivering them to customers, similar to the way Uber, Lyft and other companies are now providing tax services. In 2011, new rules for large trucks were set for models built in 2014 through 2018, so this is the second round of changes under the Obama administration.

In 2013, reports emerged that Walmart was considering a somewhat similar idea. Under that concept, Walmart shoppers who wanted to be part of the program would tell Walmart where they live. The stores would use mapping technology to see whether there were on-line orders needing delivery that are on or near a given customer’s route back home.
Walmart would offer a discount on the customers’ in-store bill, effectively covering the cost of any extra gas burned and a little more in return for the delivery of the goods.

“This is at the brain-storming stage, but it’s possible in a year or two,” Jeff McAllister, then senior vice president of Walmart US innovations, told Reuters at the time.
There has been no news on the possible Walmart program ever since that time.
Now, Amazon has the idea of enlisting brick-and-mortar retailers in urban areas to store the Amazon packages for some form of fee. A pool of drivers using their own vehicles would be alerted to the delivery needs and pick-up one or more packages and take them to customer residences, in a program Amazon is calling “On My Way.”
When Amazon might pilot such a program is unknown.

This “crowdsourcing” approach for package delivery is not new. Uber itself is already offering such a service in a few markets. There are others joining the game as well, such as Roadie, Deliv Inc., Instacart, Google and others.
The challenge for all these companies will be basic economics. While consumers might happily pay Uber say $20.00 for a ride that might cost double that in a taxi, they won’t pay $20.00 to have a package delivered. And the current cost advantage of UPS and FedEx in terms of delivery “density” will be hard for any company to match, even in urban environments. UPS’ marginal cost to deliver the next package can be as low as just $1.50, for example, and it’s hard to see Amazon, Uber or anyone coming close to matching that.

 

Perhaps an Uber could greatly increase it density by leveraging off taxi riders, combining that service with parcel delivery, but it even then reaching UPS and FedEx’s cost scale seems unlikely.
There are other obstacles beyond cost realities. How Amazon will forward position the goods for pick-up is not clear, and retailers may balk at serving as pick up points for freelance drivers.

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Will local governments start to regulate these drives, as many are looking to do with the crowdsource taxi services, reducing flexibility and adding to cost? A California labor commission ruled just two weeks ago that an Uber driver was a company employee, not a contractor, though the ruling is limited in scope for now. Still, there will surely be additional attempts to end the contractor status of these drivers, which would raise costs for Uber, Lyft, etc., substantially – and indeed threaten the overall business models. Amazon’s program would face similar legal risks.
Of course, Amazon is attempting numerous strategies to for local delivery, including bicycle messengers in New York City and a few other locales, the Amazon Locker program for customers to pick up orders at 7-Eleven convenience stories and other outlets, a trial last year in San Francisco of using local traditional taxi drivers to deliver packages (a test now ended) – and of course potential drone deliveries.
The Wall Street Journal report that the fee structure for On My Way is still being worked out, including whether Amazon would pay with cash or credits to be used on its website.

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