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I think Amazon needs to get into the delivery business soon. Planet Money (an NPR show) created a t-shirt for fans and broke down the cost of each shirt. The

I think Amazon needs to get into the delivery business soon. Planet Money (an NPR show) created a t-shirt for fans and broke down the cost of each shirt. The biggest line item was shipping the finished shirts to customers. http://www.npr.org/blogs/money/2013/12/13/250747279/episode-503-adding-up-the-cost-of-the-planet-money-t-shirt http://www.npr.org/blogs/money/2013/12/13/250747279/episode-... Out of the total cost of $12.42, it cost $2.26 to ship. It cost $1.04 to accept payments. Compare these costs with the actual cost of the product: $0.60 for the cotton, $0.40 to spin the cotton into yarn, $1.00 for sewing. It seems unlikely that Amazon as it exists today will ever rival Walmart in volume and price since they avoid these last-mile delivery costs. Amazon should take on FedEx and UPS and try to disrupt the industry one key city at a time. They've already started delivering groceries in Seattle, so perhaps that's the first step to Amazon Delivery Service.

mgkimsal 13y ago
Or just buy fedex.
mikeash 13y ago
Those last-mile costs exist regardless. It's just that with Wal-Mart, the customer pays the costs in occasional lump sums to the local gas station and garage and very occasionally to the car dealership, rather than paying Wal-Mart. This is, of course, very much to Wal-Mart's advantage. Americans really hate to think about the cost of their cars and really love to drive them, so the perception will generally avoid factoring in the costs of driving to and from the store into the final prices. However, make a big enough difference and people will notice. If Amazon can offer a price that's lower than Wal-Mart's and deliver it for much less than it costs to drive to the store, people will notice. I don't see why they couldn't, eventually. Warehouse logistics are much easier when you don't have to deal with customers wandering around. Transport is subject to economies of scale like anything else, and it should be possible to make it much cheaper to use one truck to deliver to 100 houses than it costs to have 100 people individually drive back and forth. In short, I think I'm agreeing with you that delivery is where Amazon should concentrate if they want to compete in this area.
- r00fus 13y ago
  > This is, of course, very much to Wal-Mart's advantage. Americans really hate to think about the cost of their cars and really love to drive them, so the perception will generally avoid factoring in the costs of driving to and from the store into the final prices. I honestly think that is in flux. Wal-mart's recent inane suggestion that some customers do delivery for others is an example that they're aware of the problem. Their recent downturn in sales is another. The inflection point is coming. Amazon (Amazon Fresh) and Google (Shopping Express) are skating to where the puck is going to be - optimized delivery services as a booster to existing retail storefronts.
  - seanmcdirmid 13y ago
    That is a great idea! It could be like Uber for the delivery industry. Going shopping with your car? Want to make an extra few bucks? Deliver these bags back to about where you are returning anyways.
    - girvo 13y ago
      InstaCart bills itself as uber for groceries, but I think something like TaskRabbit + Uber, where it's "crowdsourced" instead of using hired reps is a great idea too.
- guelo 13y ago
  You forgot the time cost of driving to Walmart.
- seanmcdirmid 13y ago
  However, some people go to Walmart regardless, so the cost is amortized with a trip to get milk. China has a very competitive delivery market, and you can get milk, along with dinner, delivered fairly easy by guys on electric bikes. We bought a VIP card to a food delivery service, and have dinner delivered almost nightly during the week; what is quite funny is that the restaurant we get the food from is in a mall just 10 minutes away by walking.
- protonfish 13y ago
untog 13y ago
I absolutely love Amazon's Locker service. It only works in large urban areas, but it allows them to cut out much of those last-mile costs. I hope it's working for them.
- baddox 13y ago
  But Amazon Locker deliveries aren't any cheaper or faster than normal Prime deliveries, at least when I looked into it a year or so ago in San Francisco. The only use case as far as I could tell was you could have things delivered there if you don't have a secure place at home for packages to be dropped.
- hershel 13y ago
  And they're not the only one deploying lockers. The integer.pl group is starting to invest hundred of millions of dollars to installing 10k+ lockers worldwide. This is will be integrated with amazon's warehouse robots.
mmanfrin 13y ago
They are, what do you think this AmazonFresh push is about?
meritt 13y ago
They are: http://www.dcvelocity.com/articles/20140306-amazon-plans-revamp-of-us-shipping-with-mix-of-private-fleet-regional-carriers-usps/ http://www.dcvelocity.com/articles/20140306-amazon-plans-rev...
- tfinniga 13y ago
  I'm currently living in the UK, and some of my packages are delivered by 'amazon logistics'
vl 13y ago
I don't think they will get into "delivery business". Most likely they will use their own delivery for last mile in the high density areas, but will not make it available as service to competition and will keep it as competitive advantage. I, for one, is happy Prime customer. We got it accidentally with some promotion and renewing ever since, I couldn't justify getting it, turns out it totally worth it because of convenience. My only complaint is inconvenience with deliveries over weekend. Quite often I need something on weekend and right now I have to order it by Wednesday night to get it (to be fair, recently they started to do some deliveries on Saturday). It's very frustrating when I recall something I need to use on the weekend on Friday and there is no way to get it on Sunday. Jeff Bezos, solve last mile and deliver 7 days a week already!
gabemart 13y ago
Thanks for posting the link. I hadn't seen that planet money documentary [1] before and I found it extremely interesting. [1] http://apps.npr.org/tshirt/#/title http://apps.npr.org/tshirt/#/title
rodgerd 13y ago
So your response to an article explaining how Amazon cranking up their prices now they've destroyed their competition in once niche is to... cheer Amazon on in destroying other niches?

mgkimsal 13y ago

Or just buy fedex.

mikeash 13y ago

Those last-mile costs exist regardless. It's just that with Wal-Mart, the customer pays the costs in occasional lump sums to the local gas station and garage and very occasionally to the car dealership, rather than paying Wal-Mart. This is, of course, very much to Wal-Mart's advantage. Americans really hate to think about the cost of their cars and really love to drive them, so the perception will generally avoid factoring in the costs of driving to and from the store into the final prices. However, make a big enough difference and people will notice. If Amazon can offer a price that's lower than Wal-Mart's and deliver it for much less than it costs to drive to the store, people will notice. I don't see why they couldn't, eventually. Warehouse logistics are much easier when you don't have to deal with customers wandering around. Transport is subject to economies of scale like anything else, and it should be possible to make it much cheaper to use one truck to deliver to 100 houses than it costs to have 100 people individually drive back and forth. In short, I think I'm agreeing with you that delivery is where Amazon should concentrate if they want to compete in this area.

r00fus 13y ago
> This is, of course, very much to Wal-Mart's advantage. Americans really hate to think about the cost of their cars and really love to drive them, so the perception will generally avoid factoring in the costs of driving to and from the store into the final prices. I honestly think that is in flux. Wal-mart's recent inane suggestion that some customers do delivery for others is an example that they're aware of the problem. Their recent downturn in sales is another. The inflection point is coming. Amazon (Amazon Fresh) and Google (Shopping Express) are skating to where the puck is going to be - optimized delivery services as a booster to existing retail storefronts.
- seanmcdirmid 13y ago
  That is a great idea! It could be like Uber for the delivery industry. Going shopping with your car? Want to make an extra few bucks? Deliver these bags back to about where you are returning anyways.
  - girvo 13y ago
    InstaCart bills itself as uber for groceries, but I think something like TaskRabbit + Uber, where it's "crowdsourced" instead of using hired reps is a great idea too.
guelo 13y ago
You forgot the time cost of driving to Walmart.
seanmcdirmid 13y ago
However, some people go to Walmart regardless, so the cost is amortized with a trip to get milk. China has a very competitive delivery market, and you can get milk, along with dinner, delivered fairly easy by guys on electric bikes. We bought a VIP card to a food delivery service, and have dinner delivered almost nightly during the week; what is quite funny is that the restaurant we get the food from is in a mall just 10 minutes away by walking.
protonfish 13y ago

untog 13y ago

I absolutely love Amazon's Locker service. It only works in large urban areas, but it allows them to cut out much of those last-mile costs. I hope it's working for them.

baddox 13y ago
But Amazon Locker deliveries aren't any cheaper or faster than normal Prime deliveries, at least when I looked into it a year or so ago in San Francisco. The only use case as far as I could tell was you could have things delivered there if you don't have a secure place at home for packages to be dropped.
hershel 13y ago
And they're not the only one deploying lockers. The integer.pl group is starting to invest hundred of millions of dollars to installing 10k+ lockers worldwide. This is will be integrated with amazon's warehouse robots.

mmanfrin 13y ago

They are, what do you think this AmazonFresh push is about?

meritt 13y ago

They are: http://www.dcvelocity.com/articles/20140306-amazon-plans-revamp-of-us-shipping-with-mix-of-private-fleet-regional-carriers-usps/ http://www.dcvelocity.com/articles/20140306-amazon-plans-rev...

tfinniga 13y ago
I'm currently living in the UK, and some of my packages are delivered by 'amazon logistics'

vl 13y ago

I don't think they will get into "delivery business". Most likely they will use their own delivery for last mile in the high density areas, but will not make it available as service to competition and will keep it as competitive advantage. I, for one, is happy Prime customer. We got it accidentally with some promotion and renewing ever since, I couldn't justify getting it, turns out it totally worth it because of convenience. My only complaint is inconvenience with deliveries over weekend. Quite often I need something on weekend and right now I have to order it by Wednesday night to get it (to be fair, recently they started to do some deliveries on Saturday). It's very frustrating when I recall something I need to use on the weekend on Friday and there is no way to get it on Sunday. Jeff Bezos, solve last mile and deliver 7 days a week already!

gabemart 13y ago

Thanks for posting the link. I hadn't seen that planet money documentary [1] before and I found it extremely interesting. [1] http://apps.npr.org/tshirt/#/title http://apps.npr.org/tshirt/#/title

rodgerd 13y ago

So your response to an article explaining how Amazon cranking up their prices now they've destroyed their competition in once niche is to... cheer Amazon on in destroying other niches?