
Amazon, in Threat to UPS, Tries Its Own Deliveries - pmciano
http://online.wsj.com/news/article_email/SB10001424052702304788404579521522792859890-lMyQjAxMTA0MDIwNDEyNDQyWj
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deftnerd
I never understood why Amazon doesn't just get into the drive-through market.

As a consumer with children, it's a major hassle to go to the grocery store
with my kids in tow. It's also unacceptable to wait 2 days to get what I
order.

The ideal solution would be for me to go to Amazon Fresh, pick my location so
I can be assured that everything listed is in stock, and then do my shopping.

On their end, the workers would pick the products from the shelves and toss it
into bins with a barcode on them, just like they do at the Amazon Warehouses
now. There would be 3 categories of bins: Frozen, refrigerated, and room temp.

When my order is ready, I would get an alert on my phone.

Then I would drive to an Amazon Fresh site and park in a numbered spot and
either press a button on an adjacent speaker box or something or enter the
parking spot number on my phone.

I would get a notice that an attendant is on their way. A few minutes later, a
cart would come out with the bagged groceries and the attendant would load
them into my car and I would leave.

This really seems like the best choice for Amazon. It lets them have regional
centers for product warehousing so they don't have to ship cross-country, it
lets consumers get products instantly without last-mile logistics problems,
and it would let them gradually transition to their own in-house delivery for
their regular products and not focus on the products that need instant
delivery. Having their own delivery unit, UPS, and local delivery companies
would encourage competition and keep the prices low for them.

~~~
njharman
> It's also unacceptable to wait 2 days to get what I order.

Holy crap you need a reality check.

~~~
sukuriant
"I really need those cough meds right now."

"Mooooom, we're out of milk, and I want CEREAL!!!"

"Alright, so I have everything for dinner, but it looks like we're a little
low on butter, so I can't make the cake like I wanted to :/"

Now add that you have kids to the scenario, and you've got to drag them along
to what should be a 3 minute shopping trip.

There are a lot of situations where taking that long for something is pretty
unacceptable.

~~~
phreanix
I can see how 2 days can be unacceptable, but those reasons are just plain bad
planning.

~~~
aneisf
People plan poorly. There's a lot of money to be made helping people through
that.

And when these services are widespread, people will be free of the necessity
to expend energy "planning" their access to the essentials of life. Then we
can focus on bigger and better things.

~~~
lttlrck
How would this service solve running out of milk at breakfast? How is this a
problem that must be solved before we focus on bigger and better things?

~~~
jdminhbg
This is bigger and better things. Every cancer research scientist with kids
probably loses hours of potential work time a month dealing with dumb shit
like "we're out of milk" that this would solve. I don't think being super-
narrow-minded about "big ideas" contributes a whole lot to the progress of
society; if it's something lots of people are willing to pay for, you have to
accept the possibility that it's useful and contributes to society in a way
that you couldn't think of immediately.

------
mikegioia
This is such a natural extension for Amazon to move in to. I've never had a
consistently good experience with UPS, FedEx, or USPS. The success rate varies
but all three have caused packages to get lost, sent back to the shipper, or
I'd get a "we don't know where your package is". Needless to say my confidence
in the current shipping industry is low.

Amazon could gain a leg on the current shipping/logistics companies even if
they focused on just a few key areas:

    
    
        * Real-time shipment tracking
        * Cardboard-less / eco-friendly boxes
        * Neighborhood locations to deliver packages to
    

Real-time tracking I think is the easy win. Setting up some form of eco-
friendly packaging could be as simple as shipping your items in a reusable
plastic bin, and then leaving you with the individual items you've purchased.

However, one of the big problems particularly in NYC is reliability. Most
people don't have a doorman and rarely will the postman leave the package for
you. Even if they did, a lot of people don't like the idea of having their
Amazon box sit outside their door for anyone to steal. Amazon already has
their locker system and I think that could be the difference-maker. If I could
ship to a convenience store, or a reliable place then I'd be able to grab my
deliveries on the way home from work. Plus Amazon could reduce the number of
deliveries they have to make in dense cities.

~~~
nolok
> * Neighborhood locations to deliver packages to

In France we have such a system, "Point relais Kiala", not every internet shop
allows it as an option but all the bigger ones do including amazon france. I
can get my delivery to about 5 different places within a 10 minutes walk
radius of me, and the advantage are numerous: no need to be there for an
entire to sign because they can't tell you when it will happen, no "you
weren't there I put the notification paper and you have to get your package at
the post office" (leaving the package in front is not a thing like it seems to
be in the US), real ability to check your package before signing, more
reliable delivery time, .... And cost is the same as a regular delivery.

It just is much better overall. And for Premium subscriber, it's free just
like regular delivery options.

~~~
_delirium
The German and Danish post offices offer this as an opt-in choice for postal
package delivery. You indicate that you want your packages delivered to a
kiosk instead of your house, and anything bigger than a regular envelope
that's mailed to you will go there instead. That way the stores you order from
don't even have to agree to ship to the kiosk; you can order from
Amazon.co.uk, who don't know anything about Danish postal kiosks, have it
addressed to your street address, and it'll go to the kiosk instead.

------
DanBC
This could be a bad move for Amazon.

Amazon has amazing customer service. It just works. Parcel delivery is hard.
USPS etc don't cock it up because they're lazy or stupid. So currently Amazon
does the stuff that works and lets another company tAke the blame for the hard
stuff. But in future people won't be saying "some company lost my package".
They'll be saying "Amazon lost my parcel".

(There are some things Amazon gets weirdly wrong - I cannot fathom how search
is allowed to be so terrible)

~~~
r00fus
Amusingly for hard-to-reach locations both UPS and FedEx rely on an even
better organization (US Post Office) to do their last mile delivery - as with
the limited margins for USPS (federally legislated), it's cost effective for
private delivery companies to simply farm it out.

Only the USPS has a charter/requirement to actually deliver to every address.

~~~
cdcarter
Additionally-- in large cities, the USPS has a key to most apartment outer
doors, which allows packages to be left in a secured location instead of on a
stoop.

------
mindstab
Good, because UPS needs to die. Of my last 3 orders with them:

1) was reported "left at door" of ... my apartment building? so I never saw it
and I had to reorder at my cost

2) my ouya was again marked "left at door"... of my apartment building and I
never saw it (seems very likely the driver just took it home). Thankfully this
time amazon reissued at their cost

3) after one failed day time delivery the package was left at a nearby ups
pickup place, we called to confirm it would be there on the weekend and then
they called the depot and promptly sent it back to the sender...

UPS's policy of allowing abandonment of packages is not remotely safe because
drivers can just steal and mark it "left at door". It doesn't look good
thought when it's an apartment building and they probably didn't even get
inside.

So yes, UPS needs to die because they have cost me and amazon time and money.

~~~
cowpewter
Everything I order from Amazon I have delivered to work, because I never know
which carrier service is going to get it, and I don't like not knowing if
they're going to just dump it on my doorstep, leave it with my apartment's
leasing office, take it back to some depot on the edge of town, or what.

Though it does mean I think twice about ordering things on Thursday or Friday.
I once had a package shipped via Prime go missing for half a week, because I
ordered it on Friday and Amazon decided to pleasantly surprise me with one-day
shipping instead of two. That backfired immensely. I would have been perfectly
happy with a Monday delivery.

When no one was at the office to sign on Saturday morning, the package went
back to some mysterious depot and they didn't re-attempt delivery until the
middle of the next week. Except they marked the tracking as "delivered" that
Saturday - probably so they wouldn't get in trouble with Amazon for not
meeting the two-day shipping window. I was freaking out about where the
package could have gone, because if it was supposedly delivered, then where
was it? Where could they have even delivered it? No one was here! You can't
even get in the building on Saturday without an access card. Then suddenly the
tracking re-updated on Wednesday to say it was at the depot and I got it later
that day.

I wish I could remember which carrier that was now.

------
specialp
When it comes to groceries and other very time sensitive shipments then yes
they should deliver on their own, but making your own nationwide to door
delivery system would be a disaster. These are not easy businesses and it
would be hard to beat the cost effectiveness of USPS, UPS and FedEx. They
could start in fresh deliveries to limited markets and have those warehouses
store commonly ordered products.

Currently Amazon most often uses a courier for only the final ground leg from
a distribution center. They already have their own delivery to deliver inter-
warehouse. It would not be possible to stock the huge variety of products
available on Amazon in very local warehouses. So I would not be incredibly
worried if I were a package carrier now. This could perhaps take some of the
business in some markets but I doubt Amazon will go private for the majority
of its deliveries.

~~~
richardking
Had a similar debate with my girlfriend when she suggested Amazon would take
over their entire delivery process. Warehouse to warehouse, and warehouse to
major city don't really seem like they would be a problem. The middle-of-
nowhere deliveries would cause the most headaches, and be the least cost-
effective. I guess the question is how much of their total deliveries do those
comprise of.

------
pvnick
I expect them to receive a lot of resistance from federal and state
governments. I have a friend that works for UPS, and the union-enforced
inefficiency stories he tells me would blow your mind. It's literally the
gangster behavior that unions are notorious for. And those guys are no
strangers to getting politicians to bend to their will.

Given a truly fair, free-market, Amazon (and the other companies the article
listed) would blow traditional delivery services out of the water over the
next decade, no question. Companies like UPS are just too bogged down with
union bureaucracy. But that's something the delivery unions will fight tooth
and nail. This war will involve just as much lobbying as innovating.

~~~
pessimizer
>union-enforced inefficiency stories he tells me would blow your mind

Vacation, breaks and a mild improvement on minimum wage? Limits to what
they're expected to lift? What are these horror stories?

UPS is an awful job with awful wages. Of course you could make them work
harder for lower wages if you made sure they lacked representation, but I
wouldn't refer to that as a fair, free market.

~~~
pvnick
I'll have to ask him for specifics when I see him again because I wouldn't
want to regurgitate inaccurate information, but it's not nearly as bad a job
as you might think, and nobody's making near minimum wage. Everybody has hefty
pension plans. The drivers tend to make more than the web developers working
for startups in my area. Way more.

Nobody gets a promotion based on competence. It's pure seniority. The people
that are there the longest get first dibs on better positions. And if somebody
can't hold their own and doesn't contribute, you can forget about letting them
go. It's almost impossible to fire someone who isn't worth the union wages
they're making.

Now that's fine and dandy, I hope lots of folks get nice retirements after
working at UPS their whole life. But Amazon is more efficient and will replace
these high-wage manual laborers with robots and algorithms, and the union guys
will try and use the power of government to stop them.

------
jjallen
As Amazon becomes larger and larger, it makes more sense to vertically
integrate.

Assume half of AMZN's 2013 net shipping costs of $3,538 occurred in U.S. and
profit generated thereon was ~10% of revenues (UPS 2013 operating margin was
~13%), AMZN has a guaranteed (and growing) chunk of change to go after. Not to
mention the custom delivery options and probable long-term improved delivery
metrics. Of course, this is a somewhat capital intensive business (relative to
our estimates of the existing core businesses at least), but still could
generate attractive long-term returns.

A much more interesting thought experiment is to do the same calculations on
credit card exchange fee savings AMZN would generate if the company processed
its payments itself. The savings would be into the billions of dollars and
would be incomparably less capital intensive than any physical delivery
system.

~~~
milesskorpen
I'd guess that Amazon gets very very low fee rates for payments. Amazon's not
going to start competing with Visa, and it seems unlikely they'd be a bank, so
I doubt there's a huge amount of profit to be made in taking over their own
payments processing.

~~~
jjallen
Why wouldn't they compete with everyone that is a material cost to them? 10
basis points on their revenues is already approaching $100M/year. My guess is
they pay quite a bit more than 10 basis points too (spent a while looking for
reliable source to corroborate this but couldn't find one).

AMZN seems to want to do everything they can to expand and lower their costs;
I don't know why credit card fees would be excluded from this.

They could develop a completely novel solution over time. My guess is they
will become much more serious about payments over time because of articles
like this[1] and this[2].

[1] [http://recode.net/2014/04/12/jeff-bezos-to-amazon-
payments-t...](http://recode.net/2014/04/12/jeff-bezos-to-amazon-payments-
team-go-faster/) [2][http://techcrunch.com/2014/01/29/amazon-wants-to-include-
pee...](http://techcrunch.com/2014/01/29/amazon-wants-to-include-peer-to-peer-
payments-in-its-real-world-paypal-competitor/)

------
christoph
I've noticed this in the UK in the last couple of weeks...

Normally a "next-day" package would be delivered by a number of different UK
courier/delivery firms (Royal Mail/DPD/Yodel/etc.).

Nearly everyday, we've had deliveries to our office from unmarked white vans.
I know this because our office is hard to find, and they generally phone me to
say they can't locate us. Whenever I've gone outside to meet the delivery
driver, I've seen the van full of Amazon packages and asked if he does
deliveries for anyone else. They've have told me they "only" deliver for
Amazon and won't really be pushed on the matter.

I think pretty soon those vans are going to have Amazon branding on them and a
few courier companies will be wondering where their business went...

~~~
dingaling
> They've have told me they "only" deliver for Amazon and won't really be
> pushed on the matter.

Amazon Logistics UK

They bought-out APLE in Milton Keynes, which had previously worked as a
contract courier for Amazon and others.

[http://www.aplemk.com/ContactUs.php](http://www.aplemk.com/ContactUs.php)

Not a company that had a stellar reputation.

------
matznerd
Amazon has messed up my last few next day orders, seriously breaking down my
confidence with them. I made a purchasing decision based on price with next
day vs price in store right now. I went with amazon and 1 out of 3 items got
there the next day. The other two items listed with delivery by 8pm, which I
waited late at the office until after 8pm and I got an email telling me they
would be there 2 days later and that they were refunding me. I don't care
about the refund on shipping, the items were business sensitive and needed
ASAP, so amazon really lost my confidence that next day actually means next
day (this was not the first time either). So I think amazon definitely needs
their own shipping because these third party companies don't give a shit about
amazon customer service. I know Lasership especially in NYC has straight up
lied to me about delivering a package that they forgot and just went home.

------
DanielBMarkham
I'm betting that at some point in the near future, you're going to see housing
developments built on top of a distribution center.

It makes sense. A big DC could use the same robots that pack shipments to
deliver goods direct to your door. One-hour delivery.

If they did this, then you could also get into renting items instead of
purchasing them. Do you really need that big screen TV? Or could you just rent
something a couple Saturdays each month? I could easily see a future where
you're out by the pool and decide to have a party. Speaking a few commands
into your smart phone, when you get home a couple hours later you have all
sorts of things purchased/rented/installed and ready to go.

10 years out, maybe?

------
smackfu
1\. Start collecting state sales tax.

2\. Build warehouses in state close to customers.

3\. Use your own delivery trucks for shipments from those warehouses, since
same-day local deliveries are the simplest part of the delivery chain.

4\. Profit!

~~~
massysett
> same-day local deliveries are the simplest part of the delivery chain.

Was this a joke...you think splitting thousands of tiny parcels up for
delivery in a city is simpler than sending some semis for a cruise down the
interstate?

~~~
smackfu
My thinking was that a 1:n delivery system is easier to manage than an n:n
one. But you are right that the last mile is not the simplest part.

------
djhworld
Amazon already (sort of) do this in the UK for some of their deliveries, with
deliveries often coming from an arm of their business called "Amazon
Logistics"

I don't think it's a pure courier company though, I think they've just paid a
bunch of different couriers to deliver parcels under the Amazon brand. For
example if you are out, they'll leave a card with Amazon branding over it

~~~
clarkdave
I've recently had a few of my Prime deliveries come via "Amazon Logistics" and
it's lacking compared to DPD who used to do most of them.

Amazon Logistics has no depots (that I can see - they don't tell you who the
courier is), no real time tracking, no delivery windows... If this is their
attempt at doing it on their own it's a terrible start.

------
cm2012
This was inevitable; I posted about this almost a year ago:
[https://news.ycombinator.com/item?id=6245975](https://news.ycombinator.com/item?id=6245975)

They were already shipping some items in their grocery trucks around that
time.

------
infocollector
2 Weeks back on HN ->
[https://news.ycombinator.com/item?id=7572809](https://news.ycombinator.com/item?id=7572809)

------
jebblue
It's a free country, if they can pull it off, more power to them!

------
simonlebon
Pretty soon Amazon will have it's own wine brand, a pinot noir.

