Amazon Ramps Up $13.9 Billion Warehouse Building Spree
bloomberg.com
bloomberg.com
Some trends I think will come soon from Amazon FBA:
1) When Amazon perfects daily grocery delivery it will change the whole ballgame for UPS and USPS. Amazon will cut them out of the picture. I think the cost of shipping furniture especially will plummet.
2) Amazon launched FBA Export a while back to let merchants fulfilling through FBA U.S. ship anywhere in the world easily. Right now only a few SKUs are eligible, but they are working to expand this program ASAP. In a year or two, a ton of products on Amazon U.S. will be available anywhere.
3) A lot of mainstream people don't know but Amazon warehouses don't just ship to Amazon customers. Merchants can enable multichannel shipping for a price ($6 compared to $2.50 for Amazon orders), so a lot of eBay sellers, Rakuten sellers use FBA to fulfill.
I worked in one of these facilites many years ago, asked, and got mostly shrugs.
Their 'Global Distribution Centers' offer 24/7, 365 fulfillment, and exclusive 'last minute' access to shipping hubs.
Not to mention, they're a middle man. Amazon gains a lot by cutting out the middle man.
This is why Amazon Grocery is so important - it lets Amazon build out a shipping infrastructure in a way that seems uncompetitive to UPS/FedEx
Technical debt, poisonous power structures, aging entrenched workforces, layoffs, and shifting economic conditions will force places like FedEx to innovate and I've got my money on them not being able to compete in the next economy. It's a case study I've thought a lot about and I really can't wait to find out if I'm wrong.
Re: #2, so Amazon is playing the role of FedEx/UPS?
Amazon still uses USPS/UPS/Fedex to ship goods, and they pass their discounts to merchants who use FBA.
On their website you can add new items that appear on Amazon if they don't already have a listing for it.
When you want to send the items to their warehouse, there are two pieces of info they need. One is a way to identify the shipment when they receive it, another is to be able to identify each individual item in the shipment.
For the shipment part, you list the items you are going to send them using their web interface and then get a document to print for sending along with the shipment, which has a barcode they scan to know what the shipment is when it arrives.
For the items, if they don't already have suitable barcodes that help them know which listing each item is related to, you can create barcode stickers and attach them to the items, also through that web interface.
After they get the shipment, they appear in your inventory on the site. If people buy the items through Amazon, they will ship it for you. They also have an API for dispatching an item to an address you desire. There are some options for removing Amazon box branding too, if you want to just use them to handle shipping for you.
1.A network of automated lockers is being built around the world: amazon, google, few british companies , german mail, and a polish company offering global lockers, which recently got $200 million investment. Highly useful for amazon.
2.Amazon is "secretly" building robots, and ordered a place at an important logistics trade show in 2015. They might launch a global 3rd party logistics , based on robotics then.
3.Amazon offers a financing services for some sellers. By having access to their business internals, it can offer low rate loans efficiently. Could be a killer feature for sellers.
2) They bought Kiva robotics a while back
3) I've seen those lending offers for some time now, they are pushing them to sellers based on business internals as you've mentioned.
I say that somewhat ironically, because of course that's exactly what everyone said about online shopping from the beginning. So it's a safe bet, I think, that online grocery will grow and ultimately own a substantial chunk of the market.
I would love to read more about start-ups in this space. Every interface for ordering groceries, including Amazon's, is just frustratingly bad. It's even harder to get ordering right for groceries than it is for take-out!
"Build a better way to buy groceries online" sounds like a great idea. As long as you're cool with Walmart Labs acquiring you in a couple weeks/months/years.
We've actually stopped buying fresh produce from online groceries because the quality / freshness has been consistently poor or in some cases (meat) even declined.
We've only had the opportunity to try Coles Online (Australia) because they're the only provider that delivers to my suburb. I'm sure others have better experiences, but it's interesting that the initial concerns played out.
We use online groceries for dry foods, nappies etc.
I don't think "good quality produce without touching it" is impossible to solve.
Not building warehouses carries more risk.
If they guarantee delivery in 2 hours and they don't have these costs, they're paying someone else who has these costs, right? How can they really be a competitor to Amazon, then? I have to think that Amazon is operating on such razor-thin margins precisely because they think they can do a much better job than using someone else.
While that's just fine - I would love to see a service that lowers the cost to me as a consumer for food.
Actually, let me rephrase that: I, personally, need a service that helps me reduce the amount of food I waste. With a family of (5) in my household, we waste a lot of food - and it drives me nuts.
I hope that something along the lines of Blue Apron could help me throw out less/buy less.
I would love to be able to shop based on meals - where I say "on Wednesday night we are going to serve turkey meatloaf with broccoli and salad for 4 people" and understand the ingredients and proportions that match that.
I wind up having stuff rot because I only use a portion of it for whatever I make, and I don't have a set menu so the food is random/too-often-the-same etc...
I want the entire experience to be optimized.
Maybe I have just been too lazy? However, I am not 100% convinced that food is not sold in the wrong proportions.
In the case of a single lime it isn't really possible to buy less (and at least limes are cheap), but with other items I could benefit from more exact planning.
Obviously, as your volume increases, it makes sense to own more steps along the value chain yourself.
I'd guess that they process Prime members shipping before the free shipping. And I'd suspect some of the waiting is time to ship from the manufacturers to Amazon's warehouses. I also wonder if they transfer long tail items between warehouses to consolidate orders. There is speculation that Amazon intentionally delays free shipping orders to push people towards Prime. Maybe they just have capacity problems?
By comparison with other vendors like Walmart I usually see shipping in less than 24 hours.
Amazon forum complaining about slow shipping, people getting Prime stuff a lot faster, no response from Amazon people:
http://www.amazon.com/Super-Slow-Shipping/forum/Fx4HQD057HT5...
Giving credit to Prime members to accept slower shipping:
http://www.geek.com/news/amazon-prime-customers-receiving-cr...
Another random example complaint:
http://www.pissedconsumer.com/reviews-by-company/amazon/very...
The article is claiming massive warehouse investments by Amazon, yet that is somewhat at odds with shipping non-Prime items slowly. It would seem somewhat strange to deliberately ship slowly to push Prime upsells since that hands things to competitors, and is only doable if you are close to a monopoly.
It is possible that trailers (not trucks) are sitting around until full but that takes up space. They also generate the tracking id before it goes into a trailer, and you usually see less than 24 hours before it arrives somewhere outside the warehouse. I doubt there is any benefit to letting trailers fill up over several days. The shippers also use regional distribution centers so there isn't a need to have a full trailer, although full pallets would make sense. However Amazon should be able to fill those in a few hours.
Here is an article from 2008 about a Newegg distribution centre. Note that several trailers a day were filled.
http://www.anandtech.com/show/2531/7
And another from last year explaining how the warehouse is almost empty moving stuff as quickly as possible.
http://www.stores.org/STORES%20Magazine%20May%202012/newegg-...
I've bought from Amazon when I had a Prime subscription and when I didn't. With Prime, the goods were always shipped within a day. Without Prime, they let it sit on the shelf for 5 or 6 days before even shipping it.
Compare that to other companies like Best Buy, newegg, walmart, or even no name ebay sellers where products are always promptly shipped without need for any "subscription" nonsense.
With Amazon, it sits on the shelf for 5 days before it ships and then takes another 5 days to arrive.
With something like walmart, it ships immediately and then takes another 5 days to arrive.
Amazon's in-transit time isn't any faster than other merchants. They all use UPS or Fedex, so no difference there. The only difference is that Amazon takes 5 days to ship while other websites take 1.
Except that there are alternatives to Amazon, hence my use of the word "choice". I'm not saying Amazon doesn't keep its promise. I'm saying when Amazon is compared to its competitors it falls short.
> A super saver shipping promise is 5-7 business days
Actually it's 5-8 business days (http://www.amazon.com/gp/help/customer/display.html?ie=UTF8&...) and usually Amazon milks it to its limit. 8 business days equal 10 to 12 real days.
Compare that to merchants that ship immediately. It usually takes 3-5 days to arrive at my home. That's a lot faster than Amazon's 10-12 days.
It isn't free - the cost of the shipping is baked in the product prices. Walmart's threshold is $45 for no additional charge, shipping to one of their stores is no additional charge, and below the threshold shipping is usually 97c.
In any event this isn't about "can you pay more for faster shipping" which is the case virtually everywhere, but that it seems like Amazon is holding back on their lowest tier before the actual shipping which none of their competitors seem to do.
There is an obvious benefit to them in Prime upsells. Actual logistical reasons seem at odds with the story about huge spending on warehouses.
WSJ actually just published an article on how Amazon is frequently underpriced by other sellers: http://online.wsj.com/article/SB2000142412788732342380457902...
There's no one seller that is consistently the lowest price. But Amazon is consistently the slowest in shipping.
Newegg offers a different, more proactive approach that might sit better - you can pay $2.99 for rush processing to get them to get stuff out to you quickly, otherwise it might take a day to ship.
If the higher priority orders are very lumpy then it does make far more sense to process them first and have variability in the response time for the super saver orders.
Without some sort of crowdsourcing effort we can't tell what everyone's actual experience is. The anecdotal data so far is delays in Amazon's lowest tier happen that don't exist at their competitors. The story is about them spending more on warehouses, so something doesn't add up.
From everything I've heard, they're an aggressively frugal company, so I would guess that they don't have the packing capacity to handle their peak days of the week, but they do have enough to handle the total week's load. Their competitors are probably overprovisioned to improve their consistency, but that leads to higher prices.
'The Market' seems to agree, as warehouse buildout (and purchasing) is booming right now - as it seems more economical to produce things in large runs and then hoard them in port cities like LA,New Orleans, Memphis, etc...
I'm fairly confident that general purpose automated manufacturing will become a reality and will be transformative, but I doubt it will completely take over the market. I'm pretty sure there'll be room for both.
The kind of build-on-demand system that could print an iPhone then a DVD then a pushchair then a fitted shirt then a delicious tomato then a bottle of olive oil is a long way off. I'd happily bet $10 that such technology won't be commonplace by 2040.
This is all possible because of flexible tooling and processes. We get our raw material from all over the country, and a small portion of the parts are sourced internationally. I would bet/hope the future looks somewhat like the path we are on. Many consumers seem to want similar things as everyone else, just a little different and custom.
As for depreciation, on a small scale the Section 179 provision works quite well for us. The IRS will let you deduct $500,000 per year in the same year the equipment was put into service(1). As long as I don't spend more than $500,000 that year on equipment, then no depreciation schedule needed, just take it all that year. An operation the size of mine can't spend that much anyway!
I own a few 3D printers, and after using them I am not worried about my future. I think the most likely outcome of better machines in the 'push button, make stuff' area will just be more and more complex items that are built on shorter runs. Infrastructure is good enough to get products shipped around easily. So I think in the future will be small operations like mine making semi-custom stuff more complex than you can make yourself. It will be like printing, the desktop printer brought the ability to make nice printouts home but it didn't kill high speed offset printing. Now we get high speed offset printing with each copy able to have each print with a different picture and wording. As domestic tools get better, so do industrial tools. Someone using a tool everyday can afford much better tools than a hobbyist.
Also consider time - A 3D printer might take 8 hours to print that Yoda figurine, and Amazon is trying to get you the molded one in a couple of hours. As long as you live in an urban area, you would still be faster with Amazon.
0. http://en.wikipedia.org/wiki/Just_in_time_(business) 1. http://en.wikipedia.org/wiki/Section_179_depreciation_deduct...
Note - If Amazon gets licensed for beer and can deliver it in hours, game over for a lot of players!
Lower prices here and there, raise them elsewhere to offset the cost. Their accounting department definitely has to be kept on their toes, especially to make sure things don't fly off the handle too much.
They've really delivered. I've tried to not like Amazon, but they keep impressing with their fast service, availability, low price.
I went to Amazon that night, and with Prime, I got it in 2 days, for about $10 less than the local brick and mortar stores.
How can anyone compete with that? Especially if they build out their same-day service?
For instance, I ordered a new monitor a couple of weeks ago. On the day it was delivered I noticed that Amazon had the monitor for $20 cheaper. So, I opened a chat window with a service rep basically saying "Hey, can I get that $20 back?" and a few minutes later I get "Sure, you should see the credit show up in a couple of days."
I mean, it's that type of interaction that makes it really hard to use other retailers.