f you are curious about how Amazon manipulates politicians and you as a customer, you must at least skim the work of these investigative reporters.  Their published work reveals details Amazon goes at lengths to hide from the public.

Then ask yourself about the relationship it reveals to the Amazon plans of this 3 million sf monolith in Churchill.

It is 120 pages of text with back links so that you can explore subjects of interest in more detail on your own.

Amazon last mile delivery stations

PLUS Washington Post exposés on Amazon

April 26, 2021

Murray Bilby

 Amazon last mile delivery stations

PLUS Washington Post exposés on Amazon

April 26, 2021


One of the unexpected benefits of the Hillwood proposal for Amazon is learning how the company operates at all levels.  I used to just place my orders and they would show up.  No attention to anything other than knowing it would show up quickly and I would be alerted at each step.


You should at least read the introduction and the first few articles.  It will enlighten you to much that is currently so opaque.


This material does not have a direct bearing on defeating the Hillwood mega proposal for Amazon, but is interesting all the same.  I have saved everyone a lot of time by collecting it here in one place with back links that will allow you to go into more depth as you fell inclined.


It is actually amazing that this same day delivery of almost 2 million products can occur, not to mention the goal of 2 hour delivery being tested right now in several locations.  People have legs, they can walk.  Packages and things need people to move them, and the people need equipment, and logistics at every step for this to happen.


That Amazon has so radically changed the market and our behaviors in responding to those changes is miraculous.  But it is like the sausage saying, don’t ask what is in it.


In researching distribution centers in general and Amazon facilities in particular because of the Hillwood mega project in Churchill, I have uncovered many unsavory and unsettling things about the Amazon business operation that makes me feel like I questioned the sausage contents.


The beauty of searching on the web is that one can go down the rabbit hole and uncover things far removed from the original query intent.  That is what happened here; off subject but related.


As a quick review, Amazon operations and logistics are all divided into sections with specialist handling each part.  In this case I am examining what is called the final mile delivery stations which in many cases are warehouses up to 300,000 sf, what a distribution center used to be.  Understanding where they are and why, will open your eyes to why Amazon had planned its Churchill facility to serve as the hub for several of these “smaller” facilities on the eastern side of Pittsburgh and surrounding area.


But I also got into a series of articles on the Washington Post outlining everything from how Amazon tricks us into buying their brands and how they influence government officials.  That should be no surprise as Amazon is today the largest lobbing operation in Washington DC, three times larger than even the military-industrial complex, such as General Dynamics or Boeing.


So this article is actually 129 pages of tightly typed text covering a wide range of interest related to the final mile delivery strategy of Amazon.


A separate article will be written on the real reason Amazon raised it pay for full time workers, and why the settled on $15 (and how it was a calculated strategy to put pressure on Walmart as it goes after their customer base.)


Also look for one describing working conditions at the distribution centers.


And also an article on the gig workers who actually do the end user delivery of packages known as flex.  And this is probably one of the currently most overlooked aspects of the Amazon delivery system.  It will explain why packages can sometimes show up on your step at midnight, or even 2 AM.


Of the 1500 last mile facilities currently open or definitely planned, several will be strategically located in the Pittsburgh region.  It remains one of last urban areas without the infrastructure to offer same day delivery, or with the goal of 2 hour delivery.


I also read that in Seattle and New York City they are even testing 1 hr delivery.  That means goods are going into the warehouse and out of the warehouse almost instantaneously.  Can you image the number of vehicles required to perform that feat, 24 hours a day?


So even though Amazon is secretive in all planning, we can learn a lot on the subject by looking at how they describe these facilities on their own web sites, (yes they have many different web sites and sub sites) as well as comments after these facilities are announced and in operation.


Of course we all benefit from this constant evolution, but we must also look at the costs, and there is always costs, in terms of regional commercial disruption in jobs, minimum tax revenues compared to traditional businesses, traffic and other municipal requirements.


If time allows, we’ll discuss how Amazon essentially taxes all 3rd person sales with its 15 to 30% commission and fees on every item sold and controls transportation from the containers leaving China to the trains, planes, and semi-trucks hauling merchandise, only a few of which actually carry the Amazon logo.


We cannot ever forget the fact that Amazon is out to rule the world.  To control every step from manufacture to your door.  Their interest is not in you, only in your spend.


Amazon Fresh is their grocery delivery option and with their Whole Foods acquisition they are obviously planning for rapid delivery.  Amazon Go is their Retail store option.  Amazon Key is their in home delivery service.   And the Amazon promise of drone delivery will further cement their leadership in the Last Mile Delivery race. Read more below in the full article.


Amazon usually puts new delivery stations inside existing warehouses or signs long-term leases with development firms like Prologis Inc. to build them to its exacting specifications. Typical delivery stations are about 200,000 square feet—about one-fourth the size of one of the company’s giant fulfillment centers—with large lots where workers can park their personal vehicles and Amazon can stage delivery vans. About 20 tractor-trailers arrive each night to drop off packages, which are loaded into hundreds of vans each morning before drivers fan out to make their rounds. In the afternoons, hundreds more Amazon Flex drivers, who use their own cars, arrive to deliver whatever’s left. A typical hub can generate more than 1,000 vehicle trips each day, often in areas where roads are already congested.

You can also read more about this in another Bloomberg article below.


In reading this material, remember that all Amazon facilities are in industrial parks, old demolished shopping centers, or old manufacturing sites as for steel or car assembly.  Not in residential communities like Churchill.



Amazon confirms two last-mile delivery centers

Jacob Owens March 1, 2021

Amazon confirmed Monday that this building at the Delaware Logistics Park near Delaware City would be its third major investment in Delaware in less than a year. The e-commerce giant is opening two delivery stations here this year.| PHOTO COURTESY OF COLLIERS

Amazon confirmed Monday morning that it is opening two last-mile delivery centers in New Castle County, continuing its First State building spree.

The centers include already-built space at the Delaware Logistics Center near Delaware City, as first reported by the Delaware Business Times in January. The second space includes a smaller warehouse being constructed on the site of its Boxwood Road mega fulfillment center in Newport set to open this summer.



How the deal for Delaware’s largest building got done

Jacob Owens July 21, 2020


NEWPORT – It may look like a looming behemoth of steel beams from nearby Route 141, but the future Amazon plant at the former General Motors Boxwood site will house a thousand workers by this time next year.

It’s comparatively constrained 820,000-square-foot footprint for an Amazon distribution center also belies the fact that at more than 3.8 million square feet across five levels it will be the largest building ever constructed in Delaware when it opens next year, according to state officials. For comparison, it’s like stacking five Concord Malls on top of one another.


A company spokeswoman said that the delivery stations will each create hundreds of new full- and part-time jobs and are expected to open in late 2021.

“We are excited to continue to invest in the state of Delaware with new delivery stations that will provide efficient delivery for customers and create hundreds of job opportunities for the talented workforce,” said Jenna Hilzenrath, an Amazon spokesperson, in a statement. “These new delivery stations represent Amazon’s unwavering commitment to safety, technological innovations, and skilled teams who are obsessed with delivering for our customers.”

Amazon has been quickly growing its network of last-mile delivery stations, operating more than 250 nationwide right now. Packages arrive at these stations from fulfillment or sortation centers and are loaded into vehicles for delivery to customers. Amazon’s increasingly visible blue delivery trucks are manned by third-party contractors while the company’s Flex service hires so-called gig workers to deliver packages out of their own vehicles.

In its Monday announcement, Amazon touted its $3.2 billion investment in Delaware since 2010. It employs more than 4,500 full- or part-time positions. The investments have contributed an additional $2.5 billion to the Delaware economy and have helped create more than 1,900 indirect jobs on top of Amazon’s direct hires – from jobs in construction and logistics to professional services, the company reported.

As Amazon grows out its network of delivery stations, like the two it will open this year in Delaware, its blue vans will become even more common. | PHOTO COURTESY OF AMAZON

The e-commerce giant has been growing insatiably amidst the pandemic, reporting a 43% increase in sales last year and totaling more than $125 billion. In Delaware, Amazon has already leased the 3.8 million-square-foot mega warehouse under development by Dermody Properties at the former General Motors Boxwood site in New Castle as well as a more than 1.3 million-square-foot warehouse being developed by Stoltz Real Estate Partners just a few miles north of the Delaware Logistics Park in the Bear area. Both of those projects are expected to be in operation later this year.

The Delaware Logistics Park delivery center is a roughly 577,800-square-foot warehouse in a logistics park being developed by Kansas City-based NorthPoint Development. The Boxwood Road delivery center is roughly 220,000 square feet on the northeast corner of the Newport property.

“Dermody Properties is thankful to Amazon for its ongoing trust in our firm. The development of this delivery station and the previously announced fulfillment center culminates the decade-long redevelopment of the former General Motors Wilmington Assembly Plant,” said Jeffrey Zygler, partner at Dermody, in a statement Monday. “We are grateful to the state of Delaware, New Castle County and the Delaware Prosperity Partnership for their collaborative commitment to bring this project to fruition.”

With the newly confirmed projects added to its previous projects, Amazon will have added more than 5.7 million square feet in the last year to its real estate portfolio in Delaware, which already includes its original 200,000-square-foot New Castle facility and a 1 million-square-foot Middletown fulfillment center.

The NorthPoint facility features 64 trailer docks and 148 trailer stalls, but also 314 parking spaces. Plans submitted to the county appear to show 96 parked vehicles inside the facility. Amazon reportedly is outfitting the delivery stations to utilize electric vehicles in the future. It has made a goal of putting 10,000 such vehicles on the road in 2022.



Amazon Needs More Warehouses To Fulfill Last Mile Delivery

by Raymond Pucci

September 16, 2020


It’s become a battle of the last mile delivery. That would be what retailers like Amazon and Walmart are doing to remain competitive in same day or next day delivery.

Expansion of e-commerce puts pressure on a merchant’s delivery infrastructure, especially when many premium subscription-type consumers are signed up for fast delivery. Since the costliest part of a delivery is when packages are hand delivered to homes by van drivers traversing neighborhood streets, retailers need to have warehouses as close as possible to their final destination.

Amazon uses a warehouse based system, which is why the company needs more distribution facilities. It was not surprising to hear that Amazon is reportedly looking to rent out space in Simon Mall locations that have vacant space from former anchor stores. Meanwhile, Walmart and Target aim to fulfill online orders directly from their stores. This fast delivery competition will continue and it also gives credence to the old-time business adage—stay close to your customer.

The following excerpt from a Bloomberg article reports more on the topic:

Amazon.com Inc. plans to open 1,000 small delivery hubs in cities and suburbs all over the U.S., according to people familiar with the plans. The facilities, which will eventually number about 1,500, will bring products closer to customers, making shopping online about as fast as a quick run to the store. It will also help the world’s largest e-commerce company take on a resurgent Walmart Inc.

Amazon couldn’t fulfill its two-day delivery pledge earlier this year when shoppers in Covid-19 lockdown flooded the company with more orders than it could handle. While delivery times have improved thanks to the hiring of 175,000 new workers, Amazon is now consumed with honoring a pre-pandemic pledge to get many products to Prime subscribers on the same day. So with the holidays approaching, Chief Executive Officer Jeff Bezos is doubling down by investing billions in proximity, putting warehouses and swarms of blue vans in neighborhoods long populated with car dealerships, fast-food joints, shopping malls and big-box stores.

A recently opened warehouse in Holyoke, Massachusetts, exemplifies Amazon’s answer to this existential challenge. Located not far from a once vibrant mall, it’s just a short drive from more than 600,000 people. The goal is to creep closer to almost everyone in the U.S. 



Google images of last mile facilities



Last Mile Delivery! What is your Strategy?

Amazon has set the benchmark for Last Mile Delivery.  With massive Distribution Centres within a short distance of every major population centre they are able to offer fast delivery of virtually any product they sell.  The Amazon Prime Now service promises delivery within 1 hour.

Amazon Fresh is their grocery delivery option and with their Whole Foods acquisition they are obviously planning for rapid delivery.  Amazon Go is their Retail store option.  Amazon Key is their in home delivery service.   And the Amazon promise of drone delivery will further cement their leadership in the Last Mile Delivery race.

So how do you compete with that?  What are your options?  And what is your Strategy?

The Amazon Last Mile Delivery Benchmark

First and foremost your Last Mile Delivery Strategy should start with what is important to your customer.  Certainly Amazon is driving to shape the E-Commerce landscape as well as customer expectations around the importance of rapid, last mile delivery.  But is rapid delivery the factor that is most important to your customers?

Amazon Prime provides for free shipping although you must pay an annual fee for this “free”service.  And by having their Distribution Centres close to major urban centres they can delivery quickly regardless.  All of this is part of a very deliberate strategy on Amazon’s part to get customers to believe that they must have fast delivery.   They are basically defining for customers what those customers want.  Further their size and scale position Amazon as one of their very, very few companies who can meet those expectations.

Those customer expectations for fast, free delivery are being reinforced each and every day.  Ten to twenty years ago the promise of fast or free delivery was more of an aspiration.  Now it has become a customer expectation.  For every category that Amazon adds to their portfolio their competitors are now faced with having to offer a similar capability.  When Amazon started offering free delivery on books the book retailers had no choice but to similarly offer a free delivery capability.  This has been repeated for every category that Amazon devours.


The last mile delivery bar has been set very high.  eMarketer reports that 61% of internet users in the U.S. would pay to receive their purchases on the day of order.  Small Business Trends reports that 28% of online shoppers will abandon their purchases if shipping costs are perceived as being excessive.


Yet we also know that Amazon’s shipping costs are 18.5% of net product sales (in their most recent quarter) as compared to their shipping revenues which are 10.5% of net product sales.  Who else can afford to take such an enormous margin impact just to provide free or fast delivery?

What is your Last Mile Delivery Strategy?

Certainly one option that is available for companies is to use the Fulfillment by Amazon service.  For a set of fees you can have your product advertised on Amazon’s website and fulfilled out of their vast network of Distribution Centres.

Alternatively you could partner with Logistics partners so that you can position your product close to the geographic markets that you choose to serve.   There will be more work required to manage these partners and your inventory and orders across their myriad locations.

But beyond trying to physically position your inventory across the geographies you choose to serve do you have other options?  While rapid, low to no cost delivery has been set as a benchmark for last mile delivery is their the possibility of differentiating yourself from this market expectation?

If your product design, functionality, demand or brand is uniquely different from what consumers can get anywhere else then you may have a window of opportunity to sell your product on that basis without the need for rapid delivery.  Certainly customers will not wait indefinitely for your product but if you can provide delivery comfortably within 1-2 weeks then your unique product differentiation strategy may buy you that time.

Additionally what is just as important to customers is last mile delivery INTEGRITY!  If you make a commitment to deliver to a customer on a certain date, and you meet or beat that commitment, that can be more important than rapid delivery.  According to Retail TouchPoints on time deliveries will cause 72% of consumers to make repeat purchases.    Alternatively eDelivery finds that 38% of consumers will stop purchasing from a retailer if they have a negative delivery experience.


So delivery integrity should be a key part of your last mile delivery strategy.  Your extended supply chain, from your Distribution Centres through to your Logistics carriers, needs to have robustness in the business  processes to ensure that you can meet this commitment every single time.  A SINGLE negative customer experience will be communicated far and wide in the age of social media.

Further considerations in your last mile delivery strategy can be to provide differentiation by way of the services you provide.  Depending on your product you may provide a white glove service.   If your product requires in home set up, installation, trouble shooting or repair then you can add this to your last mile delivery strategy.  Delivery status and visibility can also be unique offerings.  If customers can stay updated online as to where their product is and when it will arrive (on time) they may be less concerned in having it delivered immediately.


Last mile delivery is a critical competitive background in the age of E-Commerce and online ordering and delivery.  Amazon has set an enormous benchmark, and customer expectation, with their capabilities in providing rapid and free delivery.

To effectively compete in this space you must have a last mile delivery strategy.  It is not always critical to have rapid and free shipping.  There may be ways to differentiate yourself from this customer expectation based upon the uniqueness of your product and brand, your ability to delivery on time and meet your commitments, and your ability to offer unique delivery services.

But don’t be complacent.  Amazon will continue to drive customer expectations for increasingly fast, and free, delivery.






DEC. 10, 202012:29 PM EST

Amazon confirms last-mile delivery center in Imeson International Industrial Park

The North Jacksonville location is one of 10 Amazon facilities built or in development in the last three years.

by: Katie Garwood Staff Writer

Amazon.com announced Dec. 10 it signed a lease at 250 Busch Drive in Imeson International Industrial Park for a last-mile delivery station and will hire “hundreds” of employees.

The North Jacksonville facility will help to speed up deliveries for customers in the Jacksonville area. It is expected to open in 2021, according to a news release.

The city issued a permit Oct. 13 for Threecore LLC in Sarasota to build-out a 477,946-square-foot warehouse at a cost of $15 million.

Building and related permits show the e-commerce facility will cost that amount and there likely will be further investment as conveyors and other equipment are installed.

This is the first time Amazon has confirmed the construction of the delivery station.

Construction plans for the project called it DJX3, an Amazon code.

These facilities “power the last mile of our order process and help speed up deliveries for customers,” the release said. Packages are shipped to the delivery station from nearby fulfillment and sortation centers, then loaded into delivery vehicles.

“Jacksonville’s location and logistics network that reaches 94 million same-day consumers combined with the accelerated growth of the e-commerce industry mean Amazon’s expansion efforts here will be successful for the company and our region’s residents,” JAXUSA Partnership President Aundra Wallace said in a statement.

“This investment made by Amazon will add hundreds of steady job opportunities for our workforce at a critical time,” he said.

JAXUSA is the economic development division of JAX Chamber.

Baker Barrios Architects Inc. of Orlando is the architect. EnVision Design + Engineering LLC is the civil engineer.

JEA and city Planning Department documents show the property will have 102 loading bays, 337 parking spaces and 133 spaces for trailer parking.

The release did not specify how many people will be needed to staff the facility, but said “hundreds” would be hired for full-time and part-time positions. Jobs pay at least $15 an hour.

“Amazon continues to demonstrate its confidence in Jacksonville’s strength as a logistics capital for the southeast with their continued growth in our city,” Mayor Lenny Curry said in the release.

“This new facility will employ hundreds of people, supporting local families and our economy.”

The Imeson International Industrial Park center is among the retailer’s 10 Northeast Florida projects built or announced in three years.

Amazon operates two area fulfillment centers — JAX2 at Pecan Park Road in Northwest Jacksonville and JAX3 in Cecil Commerce Center in West Jacksonville; the JAX5 Westside Industrial Park sortation center; and the AMXL HJX1 facility in Westside to handle heavy bulk freight.

The JAX7 softlines fulfillment facility is under construction in Imeson Park, not far from the new package delivery center.

Amazon also plans to open JAX9, a 278,237-square-foot center whose use has not been disclosed, in Cecil Commerce Center.

Amazon operates last-mile delivery centers with similar designations. The Cabot Commerce Circle facility in North Jacksonville is DJX1 and the Blanding Boulevard site under development in West Jacksonville is DJX2. Another, DJX6, is planned in St. Johns County.






Working on the front lines of our Last Mile tech team means that you have a tangible impact on an our customer’s experience getting their package. We deliver packages (and groceries, Prime Now, 3P, and Restaurant orders) to homes, businesses, Amazon Lockers, and even cars all over the world! This network is powered by hundreds of small businesses and tens of thousands of drivers that leverage Amazon technology to deliver millions of smiles to customers each day.



Amazon to open more than 1,000 small warehouses in suburbs across the US, report says

Sept. 16, 2020 9:16 a.m.


Amazon reportedly plans to open more than a thousand small delivery hubs in cities and suburban neighborhoods across the US in an effort to deliver products to customers as quickly as possible. The facilities will eventually number around 1,500, according to a report Wednesday from Bloomberg, and could help the online retail giant continue to expand one-day delivery for Amazon Prime subscribers.

Many of Amazon’s warehouses have traditionally been located on the fringes of suburbs, but the expansion of these quick-delivery warehouses would put them deeper in communities alongside car dealerships, fast-food restaurants and big-box stores, according to Bloomberg.

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The move could help Amazon continue to push faster deliveries as it competes with other retailers, including Walmart. In addition to one-day shipping, Amazon already offers same-day deliveries on millions of items in 44 major metropolitan areas, as well as its Prime Now program for deliveries in a few hours. Earlier this month, Walmart launched its own Walmart Plus membership program that offers perks like same-day shipping for some orders and a cashier-less checkout feature in the Walmart app.

Amazon declined to comment on the reported warehouse expansion but said its last-mile delivery network is meant to supplement what’s already provided by its carrier partners.

“Amazon’s transportation network is built on a foundation of over 20 years of operations and logistics experience, an unwavering commitment to safety, technological innovation, and talented teams who are obsessed with delivering for our customers,” said an Amazon spokeswoman in an emailed statement. “Our dedicated last-mile delivery network just delivered its 10 billionth package since launching over five years ago, and we’re proud to provide a great service for our customers.”

First published on Sept. 16, 2020 at 8:51 a.m. PT.



Amazon Plans to Put 1,000 Warehouses in Suburban Neighborhoods

Seeking to compete with Walmart on same-day deliveries, the company is opening small shipping hubs around the U.S.

By    Spencer Soper

September 16, 2020, 5:00 AM EDT

Amazon.com Inc. plans to open 1,000 small delivery hubs in cities and suburbs all over the U.S., according to people familiar with the plans. The facilities, which will eventually number about 1,500, will bring products closer to customers, making shopping online about as fast as a quick run to the store. It will also help the world’s largest e-commerce company take on a resurgent Walmart Inc.

Amazon couldn’t fulfill its two-day delivery pledge earlier this year when shoppers in Covid-19 lockdown flooded the company with more orders than it could handle. While delivery times have improved thanks to the hiring of 175,000 new workers, Amazon is now consumed with honoring a pre-pandemic pledge to get many products to Prime subscribers on the same day. So with the holidays approaching, Chief Executive Officer Jeff Bezos is doubling down by investing billions in proximity, putting warehouses and swarms of blue vans in neighborhoods long populated with car dealerships, fast-food joints, shopping malls and big-box stores.

A worker places a label on a box at the Amazon fulfillment center in Baltimore, Maryland.

Photographer: Melissa Lyttle/Bloomberg

Historically, Amazon gnawed away at brick-and-mortar rivals from warehouses on the exurban fringes, where it operated mostly out of sight and out of mind. That worked fine when the company was promising to get products to customers in two days. Now Walmart and Target Corp. are using their thousands of stores to beat Amazon at its own game by offering same-day delivery of online orders. Walmart also recently started is own Prime-style subscription service, upping the competitive ante.

A recently opened warehouse in Holyoke, Massachusetts, exemplifies Amazon’s answer to this existential challenge. Located not far from a once vibrant mall, it’s just a short drive from more than 600,000 people. The goal is to creep closer to almost everyone in the U.S.

Beyond Amazon’s retail rivals, the mass opening of small, quick-delivery warehouses poses a significant threat to United Parcel Service Inc. and the U.S. Postal Service. Being fastest in the online delivery race is so critical to Amazon’s business that it doesn’t trust the job to anyone else and is pulling back from these long-time delivery partners. Amazon is basically duplicating UPS’s logistics operation. Many of Amazon’s new hubs are within walking distance of UPS facilities.

“In just a few years, Amazon has built its own UPS,” says Marc Wulfraat, president of the logistics consulting firm MWPVL International Inc., who estimates Amazon will deliver 67% of its own packages this year and increase that to 85%. “Amazon keeps spreading itself around the country, and as it does, its reliance on UPS will go away.”

A worker unloads a truck of Amazon packages at a UPS hub in Hodgkins, Illinois.

Photographer: Daniel Acker/Bloomberg

Amazon shares were up less than 1% at 9:37 a.m. on Wednesday and have gained about 70% this year.

The company declined to comment on the expansion plans, but has said its last-mile delivery efforts are meant to supplement, not replace, its long-time partners. “Our dedicated last-mile delivery network just delivered its 10 billionth package since launching over five years ago, and we’re proud to provide a great service for our customers,” a spokeswoman said.

The company’s appetite for real estate is so strong that many analysts have speculated that Amazon would convert vacant department stores into distribution centers. In fact, that option is only a last resort, said the people privy to the company’s plans, who requested anonymity to discuss an internal matter.

Department stores such as J.C. Penney are often two stories and lack sufficient loading capacity, they said, meaning they require extensive remodeling to accommodate an Amazon delivery hub. Moreover, mall leases with existing tenants often prohibit the owner from introducing a delivery hub that could spoil the shopping experience, and city officials might not quickly approve an industrial use in a retail area. It’s more likely that dead malls will be bulldozed to make way for an Amazon warehouse, as they have in the Midwest, than for an Amazon delivery station to sprout in a half-vacant mall to coexist with Kay Jewelers and Cinnabon.

Still, analysts expect underutilized retail space to make way for more e-commerce delivery stations due to rising rents for industrial space, along with a surge in store vacancies. “Any time you see retail being occupied by non-traditional retail uses, they’re just holding off what’s inevitable,” says Rick Stein, principal at Urban Decision Group, who estimates the U.S. has 50% more retail real estate than it needs. “It’s a Band-Aid, and at some point that mall is coming down.”

In the past three years, 13.8 million square feet of retail space has been converted to 15.5 million square feet of industrial space, including vacant shopping malls razed to make room for new warehouses, according to a July report by the commercial real estate firm CBRE Group Inc. That trend will continue but not quickly enough for Amazon, which is building new facilities and moving into existing warehouses where it’s faster to get a hub up and running.

Amazon usually puts new delivery stations inside existing warehouses or signs long-term leases with development firms like Prologis Inc. to build them to its exacting specifications. Typical delivery stations are about 200,000 square feet—about one-fourth the size of one of the company’s giant fulfillment centers—with large lots where workers can park their personal vehicles and Amazon can stage delivery vans. About 20 tractor-trailers arrive each night to drop off packages, which are loaded into hundreds of vans each morning before drivers fan out to make their rounds. In the afternoons, hundreds more Amazon Flex drivers, who use their own cars, arrive to deliver whatever’s left. A typical hub can generate more than 1,000 vehicle trips each day, often in areas where roads are already congested.

Amazon Flex drivers load packages for customers in San Francisco, California.

Photographer: David Paul Morris/Bloomberg

The surge in online shopping creates challenges for cities that still plan for growth and transportation needs based on people shopping at stores. They’ll have to make more room close to residential areas for warehouses with big parking lots that generate a lot of traffic, creating inevitable clashes with local residents who want things delivered to their homes but don’t want to have to look at a delivery station or get stuck in traffic behind a convoy of Amazon vans.

“Regulation is definitely flat-footed right now,” says Nico Larco, an architecture professor at the University of Oregon, who studies urban land use. “The warehouse doesn’t want to be tucked away in an industrial district any more. It wants to be right next to you. But when these things come to our neighborhoods, they’re unsightly.”

NIMBY wars haven’t slowed down Amazon so far. The company is opening three facilities in Kearny, New Jersey, this year, among more than a dozen slated for the Garden State. The small township near Newark airport offers proximity to shoppers in the New York suburbs and is less than 10 miles from Manhattan’s Lower East Side, making it a prime location. Mayor Alberto Santos has noticed a “weird gentrification process for warehousing” since Amazon came to town, with rents skyrocketing.

“They don’t stop at one,” Santos says of Amazon. “They keep picking up sites, which drives up prices for everyone else. Kearny is one of those locations that had large warehouse and small warehouse users. This could crowd out that small user that has to find an alternative further away.”

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Back in Holyoke, planning board member Eileen Regan says Amazon’s delivery station prompted some concerns about traffic from nearby residents but didn’t face significant opposition. The company staggered shifts to keep delivery vans off roads during peak travel times, which is also in Amazon’s interest, she says. Initially, Regan worried that traffic from both Amazon and the mall during the holidays could clog streets, but Covid-19 will likely keep shoppers at home, leaving more room for those Amazon vans.

“I’m glad Amazon is there because so many retail facilities have gone under during this pandemic,” she says. “I’m glad that we have them to keep things running.”




Amazon Prime one-day delivery now covers over 10 million items in US

The company talks up its faster shipping capabilities as it works to stand out against Walmart.

Ben Fox Rubin    June 3, 2019 5:51 a.m. PT


An Amazon warehouse in Robbinsville, New Jersey.

Ben Fox Rubin/CNET

Amazon said Monday its one-day Prime delivery program is now available on more than 10 million products across the continental US.

Products eligible for these faster shipments include books, baby wipes, doggie bags, sunscreen, closet organizers and cleaning products. Amazon noted that when it launched two-day deliveries in 2005, it only offered 1 million items, meaning its one-day program is already 10 times bigger.

The e-commerce giant in April announced plans to upgrade Amazon Prime in the US from a two-day shipping program to just one day. Early that month, it had already added more selection to its one-day program, and it plans to continue growing that inventory, the company said Monday. It’s otherwise offered few details about the plan and its rollout, but said it’s spending $800 million this quarter to upgrade its infrastructure to help speed deliveries.

The move ratchets up competition in the retail world, where Amazon has been growing relentlessly for two decades, with traditional retailers struggling to keep up with the company’s innovations. The change to one-day shipping also comes as more retailers have started offering two-day shipping. Walmart, the world’s largest retailer, is already working on matching Amazon’s one-day push, saying last month it started offering next-day deliveries in Phoenix and Las Vegas.

The same day as Walmart’s announcement, Amazon tweeted: “Others are trying to up their fast shipping game. Fact is, Amazon customers in thousands of cities across 44 major metropolitan areas already have access to millions of items with free SAME DAY delivery. Customers are smart – they know the difference.”

All this work is expected to speed e-commerce shipping times for customers. But with Amazon already a leader in shipping, this latest push could strength the company and leave more retailers in the dust, cutting down retail options for shoppers.

There are key differences between the Amazon and Walmart one-day programs. Amazon’s one-day shipping doesn’t include minimum order thresholds but requires customers pay $119 annually for a Prime membership. Walmart’s program is free to use, but requires a $35 minimum order and includes far fewer items: about 220,000. By year’s end, Walmart expects to reach about 75% of the US population with its one-day program.

In addition to one-day shipping, Amazon already offers same-day deliveries on millions of items in 44 major metropolitan areas, as well as its Prime Now program for deliveries in a few hours. Amazon had previously offered Prime one-day deliveries for orders over $35; that threshold still stands for its same-day deliveries.

Amazon has said it’s working to speed up its deliveries globally, though Prime customers in the UK already usually get one-day deliveries and members in Japan generally receive their packages the same day. In Alaska, Hawaii and Puerto Rico, Amazon said Monday deliveries are also getting faster, though packages typically arrive in one to five days.






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Amazon to open facility in Slidell next year; see details on the ‘strategic location’

PUBLISHED MAR 25, 2021 AT 10:30 AM | UPDATED MAR 25, 2021 AT 8:24 PM

At Amazon’s new delivery hub location on Honore Lane in Baton Rouge, delivery trucks roll in and out on Wednesday, Oct. 28, 2020.

Amazon said Thursday it  will build a delivery station in Slidell that is set to open in 2022, the first of this type of facility in St. Tammany Parish and the third in Louisiana.

Construction will begin in the next few weeks, according to a company spokesperson.

The announcement about the 140,000-square-foot facility – about the size of a Sam’s Club – offered few details but said that it will create “hundreds” of full and part-time positions. The site, still covered by trees, is at 1914 Town Center Parkway, near the intersection with Old Spanish Trail and close to Interstate 10.

Delivery stations are the final stopping place for packages before they are delivered to the customer, and Amazon said that the centers are designed for electric delivery vehicles as the company works toward a goal of having 10,000 electric delivery vehicles delivering goods by next year.

Slidell Mayor Greg Cromer said there will be over six miles of conduit in the ground to accommodate the electric vehicles, which will be charged as they are loading up.

The other two Louisiana delivery stations are in New Orleans and Baton Rouge. National media outlets have reported that Amazon plans to put as many as 1,000 of the last-stop facilities in suburban areas across the country.

Rumors that Amazon would build the facility in Slidell have circulated for weeks. Cromer, who had demurred weeks when asked about the possibility, said the city had been working to bring the center to the city for about 15 months.

“This is a huge win for the community and the city,” he said Thursday. “I’m just so excited. I’ve been bursting to talk about it.”

Cromer said that while Amazon asked him not to discuss specific numbers, the center would bring more than 250 jobs and fewer than 400.

“This is the biggest project to come around since I’ve been in office,” Cromer said. “We’ve not had anybody with an international brand and over 200 jobs in a long time. It’s the biggest thing business-wise in Slidell in quite a while.”

He called Slidell’s strategic location, workforce and ease of doing business “compelling advantages.”

Gov. John Bel Edwards said in a prepared statement that Amazon’s investment in Louisiana “enhances our logistics sector by providing new career opportunities and crucial consumer connections.”

Amazon said that delivery station jobs will have starting pay of $15 per hour and benefits and also provide opportunities for entrepreneurs and independent contractors who want to deliver packages.

Bottom of Form

“It’s a significant project for Slidell,” Chris Masingill, CEO of St. Tammany Corp., the parish’s economic development agency, said.

An undeveloped lot at the corner of Old Spanish Trail and Town Center Parkway in Slidell will be the site of an Amazon delivery center by 2022. The internet retail giant said the facility will create “hundreds” of jobs in the area.

Logistics, transportation and warehousing is a targeted development sector for St. Tammany, which has three interstate highways, Masingill said. Amazon choosing to come to Slidell validates that.

“It’s a strong signal that we have the right work force, infrastructure and geographic location to be a leader in logistics and transportation,” he said. “Imagine what that would also say to global Fortune 500 companies.”

St. Tammany already has some of that kind of business, with both Rooms To Go and Associated Wholesale Grocers operating large warehouse facilities in the eastern part of the parish. But Medline, a large medical supply company that has operated a smaller facility near Covington for a decade, abandoned plans to greatly expand its operations after running into lawsuits and opposition from nearby residents and decided to move to Tangipahoa Parish.

Slidell has targeted that sector, too, although Cromer said this is first such project to come to the city. He’s talking to several developers about building structures between 100,000 and 400,000 square feet that have at least 40-foot ceilings to allow for palletized storage. If the city had an inventory of that type of building, Cromer said, they could get them filled.

The Amazon center is the second large development being proposed for the Slidell area, following an announcement in February that a casino developer wants to build a casino resort just outside the city near the I-10 twin spans.

Amazon has had its eyes on Louisiana for awhile, locating a 111,918-square-foot distribution center on 34 acres in south Baton Rouge. The company is currently building a 1-million-square-foot fulfillment center at the former Evangeline Downs site near Carencro.

Amazon is also planning to build a 2.9-million-square foot fulfillment center at the site of the largely vacant Cortana Mall in Baton Rouge. Amazon bought the site last month, and the East Baton Rouge Parish Metro Council approved rezoning last week with the goal to open by August 2022.

And last fall, Seefried, an Atlanta-based developer that works closely with Amazon, bought a site in Port Allen. Documents filed with the West Baton Rouge Parish Clerk of Court’s office outline a lease agreement with Amazon, which plans to put a regional sorting center there by the end of this year.

Staff writer Timothy Boone contributed to this report.



What are the Top 7 Trends in Last Mile Logistics?

April 5, 2021

Last Mile Logistics article created by, and permission to publish here provided by, Adam Robinson on  https://cerasis.com 

Shippers face many challenges in successfully delivering products to end-users, and last mile logistics will be a core focus of change in the coming months. Consumer demands and expectations are rising, and up to 25 percent of consumers are willing to pay extra for same-day delivery.

Also, same-day delivery will reach a 25-percent market share by 2025. By 2018 alone, same-day delivery and last mile logistics will be valued at more than $1.35 billion.

E-commerce is the driving force behind the sudden uptick in last mile logistics, and as explained by Logistics Management, e-commerce is expected to grow to $2.4 trillion by 2018 as well.

To gain a competitive advantage in last mile logistics, shippers need to understand the top seven trends in last mile logistics.

  1. Last Mile Logistics Gets Faster Fulfillment

Fulfillment timetables are changing. Consumers want faster fulfillment, and shippers need to move more product at a faster pace. Shipments that previously required one hour to process are now being forced into three-minute intervals, if not faster times.

Consequently, last mile logistics is finally in a position to become part of this push toward faster fulfillment. Among millennials, consumers are willing to pay a premium up to 30-percent more for same-day delivery, reports McKinsey & Company, with an overwhelming majority willing to pay extra for guaranteed delivery, as shown below:

Paired with the sudden spike in parcel delivery, last mile delivery will continue to grow 10-percent annually.

  1. Supply Chain Disruptors Impact Last Mile Logistics

Supply chain disruptors, such as venture capitalist start-ups, previously discussed in the Uberization of Trucking, are also impacting last mile logistics.

Up to 84 percent of global freight spend on trucking costs, including fuel, labor, technology and asset tracking, amounting to more than $800 in the industry. According to Business Insider, Amazon is already well on its way to creating and managing its comparable Uber-like app for trucking.

Unfortunately, the tech landscape is riddled with cases of supply chain disruptors failing, but the trend is clear and shows little indication of regression.

  1. Shippers Turn to Smart Tech for Tracking

The use of Uber-like apps implies another impact and trend in last mile logistics, the use of smart technology for tracking purposes. Through the Internet of Things (IoT), smart technology and sensors can successfully track shipments in real time.

Consumers and shippers can both receive SMS alerts, email notifications and even Google notifications for every movement a shipment makes. Combined with the upcoming electronic logging devices (ELD) mandate, the use of smart tech to track last mile logistics will grow.

  1. Analytics Will Drive Last Mile Logistics Costs Down

The amount of information coming from automated systems and smart technology can have another purpose when applied through analytics. Analytics allow supply chain entities to isolate the cost-impacting factors across all shipments.

Although subtle changes may not have a major impact on initial costs, data analytics provide a means of pushing costs to infinitesimal limits. As a result, the overall costs of last mile delivery can be pushed further down, encouraging more consumers to use same-day delivery and faster delivery options.

  1. Insourcing Reaches Into Last Mile Logistics

Outsourcing seems to be the topic of the year, especially among companies providing third-party logistics (3PL) services. However, the sudden spike in last mile delivery encourages more shippers to begin insourcing last mile deliveries.

In other words, shippers are using their trucks to reach their immediate, local consumers. Yet, 90 percent of shippers have fewer than six trucks, so outsourcing may be necessary for increasing shippers’ last mile delivery options.

  1. Autonomous Vehicles and Trucks (AVs and AT), Drones and Robotic Delivery Grow More Important

AVs and ATs, otherwise known as self-driving vehicles or trucks, will impact last mile logistics as well. Self-driving vehicles, drones, and robots will become key to increasing last mile delivery options, while maintaining high reliability and same-day delivery, in both rural and urban areas.

However, existing regulations around the trucking industry are not likely to enable wide-scale implementation of driverless delivery options within the next two years.

  1. Drivers Become Merchants

Shippers need to find ways to reach more shoppers and convert them into consumers. While up to 65 percent of all purchases use the internet for research purposes before making a purchase, putting information and product in front of consumers remains the strongest way to encourage this conversion.

In conjunction with faster, better technology, including driverless trucks, the role of the driver will evolve. Drivers will become merchants, selling items from trucks, but there are several challenges shippers face in accessing this new resource, reports Susie Walker of Veriship. These include the following:

  • Who assumes the burden of risk for merchandise that has not been paid for?
  • What happens if consumers wish to return merchandise purchased from drivers?
  • How will drivers process payments and handle their accounting?
  • Will there be a charge per transaction to the original shipper?
  • In interstate or international shipping regulations, who will be listed as the official owner of merchandise being sold by drivers?

The Last Mile Logistics Revolution Is Coming: Will You Be Prepared?

Exciting things are happening in last mile logistics, and the level of technology leveraged to push the frontiers of last mile delivery and same-day delivery is growing in complexity and scope.

Shippers must take note of the trend in last mile logistics today, or they face losing their competitive advantage, especially with e-commerce giants, like Amazon, Walmart, and Target, moving toward instant delivery as part of last mile logistics.

How will your organization prepare to handle the growing complexity of the rising demand for more last mile logistics deliveries by consumers?



ARCHIVES: This is legacy content from before Industry Dive acquired Mobile Commerce Daily in early 2017. Some information, such as publication dates, may not have migrated over. Check out our topic page for the latest mobile commerce news.

Taking the Amazon battle to last-mile delivery seriously

Author   Mickey Alam Khan

Amazon’s decision to experiment with deliveries bypassing traditional delivery companies takes the retail battle to the newest area of competitive advantage: the last mile.

The Internet retailer’s tiptoe into last-mile delivery starts with shipments in San Francisco, Los Angeles and its Seattle hometown for its Amazon Fresh grocery service. It will rely on its ever-burgeoning network of fulfillment and sortation centers that are increasingly designed to deliver to the ZIP code – a direct shot at the bread and butter of express-delivery firms UPS and FedEX and the United States Postal Service.

Amazon is in a commodity business. Its product offering is similar to competitor retailers. What sets it apart are lower prices, wide assortment, quick delivery and conditional free shipping. But now even those advantages are eroding, leaving the retailer squeezed for finding more profit margins and more points of difference for customers to return.

That newly developing edge happens to be the last mile. And what Amazon is up to may yet redefine retail, especially ecommerce and mobile commerce.

In short, Amazon wants to control every link in the supply chain, from sourcing the product to warehousing and now delivery to the doorstep. In certain categories, such as book publishing, it is also manufacturing the product. Owning its own trucking network and drones are part of the last-mile strategy.

Such dominance helps iron out inefficiencies in the system, yielding margins as long-suffering Wall Street demonstrates some impatience with poor returns on equity investment.

So what does this mean for Amazon’s competitors – everyone from Walmart and Target to Best Buy and ecommerce-only retailers? The focus for exemplary customer service will now equate with meeting gratification within hours.

Amazon’s goal is to replicate the physical-world shopping experience: pick a product, fish out the card or smartphone to pay and take possession of the product in a secure shopping bag – all within the span of minutes.

That, indeed, is the ultimate advantage that bricks-and-mortar retailers still have over ecommerce and mobile commerce retailers. And yet, sufficient numbers of consumers do not mind waiting for Amazon’s two-day delivery for Prime members or traditional wait times for non-members due to the sheer convenience of doorstep delivery.

Getting it
With Amazon planning to deliver products on the same day would change customer expectations and make that delivery time lag normal. EBay has already figured this out with its same-day, within-hours eBay Express delivery service and so has Google with its Google Shopping service. Their logoed delivery vans are now noticeable across Manhattan streets.

Amazon’s move to control the last-mile delivery obviates the worry of disappointing dithering customers who place orders right before Christmas Day or important holidays. To guarantee delivery and then deliver on that promise becomes a reality if Amazon controls this part of the retail transaction.

On the face of it, Amazon’s expansion of its own delivery network threatens UPS, FedEX and USPS. But the larger threat is to the bricks-and-mortar retailers who, surprisingly, did not press the ubiquity of their stores to deliver products to customers within hours.

Walmart and Target and their ilk still have time to make same-day or two-hour delivery a reality for most metropolitan areas nationwide.

Failure to match Amazon’s initiatives with their own efforts – a network of company-owned delivery trucks or special deals with UPS, FedEX or USPS – will spell the end of a major retail-store competitive advantage of instant gratification. Even worse, it may spell the end of the competing retailer as Amazon casts itself as the Walmart of tomorrow.



Amazon bets big on last mile delivery service improvements

Amazon has made a significant investment in building out its last mile delivery services to grab a piece of the growing grocery delivery market.

Ed Scannell, Editor at Large   Published: 06 Apr 2020

For years, Amazon CEO Jeff Bezos has had a laser focus on eliminating any and all issues relating to customer service, something he believes is crucial to the company’s lavish success. But once a package left one of Amazon’s cavernous warehouses, the company had little control over the quality of that last mile of service.

Amazon took matters into its own hands about two years ago and invested heavily in developing its own delivery channels as a way to ensure better quality control right to consumers’ doorsteps. Those investments, involving electric-powered delivery vans, drones, sidewalk robots and partnerships with third parties, have met with varying degrees of success.

The demand for Amazon delivery services from its e-commerce site and Whole Foods has skyrocketed during the COVID-19 pandemic as consumers seek ways to get goods without leaving their homes.

While some delivery methods are too new to pass judgement on, what’s certain is that Amazon’s delivery service strategy is sure to have ripple effects across the supply chain and transportation industry.

The cost of Amazon’s last mile delivery investments

There appear to be an abundance of financial opportunities that could make Amazon’s delivery service investments worthwhile.

In 2018, overall revenue for the last mile delivery market in North America was $31.25 billion, and it is expected to grow to about $51 billion by 2022, according to market researcher Statistica in a report issued early this year. Underscoring just how big of a financial impact last mile revenues have on the overall economy, the Bureau of Economic Analysis (BEA) reported the last leg of overall transportation costs make up 28% of overall logistics expenses. Adding to that, the Bureau of Transportation Statistics said last mile goods and services purchased by businesses and government in 2018 made up $1.48 billion, or 8.9%, of the U.S. GDP.

But when the 28% BEA figure is applied to the latter number, “the market for final mile (from a GDP perspective) is a whopping $417 billion,” according to a recent report by the BEA.

Amazon’s investment to maintain its lead in the last mile delivery market, however, is becoming increasingly expensive. In its third quarter earnings report the company said it invested $1.5 billion in its one-day delivery initiative, which company officials said they hope will replace  two-day Amazon Prime membership program. The $1.5 billion figure is twice what the company spent in last year’s second quarter. Then, in its fourth quarter call, Amazon said it spent another $1.5 billion on its one-day delivery initiative with plans to spend another $1 billion in this year’s first quarter on the program.


The first Amazon One plane, a Boeing 767-300, launched in 2016 to support one- and two-day package delivery to Prime customers in the US.

Amazon estimated its shipping costs for the holiday quarter ending December 31 would surpass $10 billion, driving up its yearly costs to $35 billion for 2019. This is on top of the cost of adding 100,000 people to support the one-day delivery program.

Just as Amazon’s move to two-day delivery pushed competitors like Walmart and Target to initiate their own programs, so too has Amazon’s one-day delivery program forced competitors to respond. Walmart introduced its one-day delivery program for over 200,000 different items as long as each order exceeds $35. Target bought Shipt in 2017, which specializes in same-day delivery, and has continued to expand programs that better customize their same-day service or ways to lower the cost of that service.

Amazon’s ace in the hole

One advantage Amazon holds over both Target and Walmart is that it can draw on capital from its other businesses, most notably its AWS cloud services where profit margins are significantly higher than those from its other e-commerce businesses. The other advantage Amazon holds in the last mile delivery is what has made it, well, Amazon: Bezos is unafraid to quickly cobble together adventurous new delivery programs, and if one doesn’t work, just as quickly introduce another — something Walmart and Target have yet to do.

“The bottom line is even if competitors out-innovate Amazon in this area, they are fast followers and have the money to catch up,” said one New York-based retail consultant who has worked for Amazon and requested anonymity. “And once they do, they still find ways to apply new competitive pressures and can turn the tables and force those same competitors to react to them,” he said.

Amazon last year furthered bolstered its late mile delivery business by establishing a small and medium-size program that allows anyone to operate their own package delivery fleet. It also launched an Uber-like delivery program for next-day orders.

“This is how they [Amazon] are able to do one-day shipping, by doing more of it themselves as well as hiring contractors,” said Thomas O’Connor, senior director and analyst in Gartner’s Supply Chain Industries practice. “But when you have contractors who are part of your last mile delivery network, it adds in new challenges around managing them. You may be getting your deliveries to your doorstep one day faster, but are customers getting the same quality of service they get with [full-time] Amazon drivers?”

O’Connor and other analysts have heard scattered reports among some dissatisfied customers, which is not surprising given the enormity of delivering such a service nationwide. He added that such complaints are to be expected, given the ambitious nature of the program.

“But the question now is, are those complaints accelerating or decelerating,” O’Connor said. “From what I gather recently, they are not accelerating, so this is a positive for them.”

Another analyst believes Amazon’s one-day delivery program could be a case of the company’s reach exceeding its grasp, and that any deterioration in quality of service is a problem the company brought on itself. Amazon has created an “unintended monster” in attempting to convince consumers and businesses they should be able to get almost anything they want delivered to their house and within two hours, said Guy Courtin, former vice president of industry strategy at Infor, who finds this idea completely artificial.

“There is so much pressure from Bezos on down to meet these crazy SLAs for delivery,” Courtin said.  “You know it’s a bit much when you hear horror stories of drivers peeing in bottles so they don’t lose time. Amazon realizes now that matching the expectations they set is very different than promising them.”

Months before Amazon’s one-day delivery program launched last year, the company may have tipped its hand about how aggressive it intended to be when in 2018 it purchased some 20,000 Mercedes Benz Sprinter vans, a number of which are electric. Such a large a purchase was not only intended to strengthen its last mile delivery capabilities but also be used as a way to generate more revenues via third parties, O’Connor said.

“The reality is they are utilizing themselves as their first customer just as they did with Amazon Web Services,” O’Connor said. “But what will be interesting to see is once they get to an efficient enough level, will they sell any additional space in all those vehicles to other retailers? I’m sure that’s on their roadmap because they have a clear record of using that strategy.”

Food delivery service comes at high cost

Perhaps the most lucrative business for last mile deliveries is food, not just for Amazon, given its ties to Whole Foods, but for the Walmart Online Grocery service and Target’s grocery business as well. Analysts believe all three, particularly Amazon, are focusing hard on groceries because it is one of the few areas in retail where you can have multiple orders per week. This, in turn, creates a certain level of standardization for delivery and touchpoints. Consequently, these companies can get a better handle on what volumes they are dealing with and can then tag onto that other types of delivery services.

But the cost of entry to this business isn’t cheap. In a recent report, Capgemini Research Institute wrote that today’s last mile delivery models are not sustainable. The report contained a survey that found 40% of respondents took frequent advantage of food delivery services every week. The cost of providing last mile services accounted for 41% of the overall supply chain costs, which is double any other category including warehousing and parceling, according to the report.

Capgemini counseled that retailers must examine more closely the supply chain cost per item and not per bulk unit anymore. The report noted that the drop in Target’s gross margin in the third quarter 2018 to 28.7%, much lower than anticipated, was due to the cost of fulfillment for web-based sales.

Walmart’s grocery business has largely relied on several third-party delivery partnerships including those with Point Pickup and DoorDash. One delivery partner, Skipcart, will end its deal with Walmart this month, following in the footsteps of Uber, due to the inability to profit from Walmart deliveries, according to reports. Still, at the end of last year, Walmart Grocery had 3,100 pickup locations and 1,600 stores that partnered with the company on grocery delivery.

One new last mile delivery approach — that won’t do much to encourage personal relationships with consumers — is Walmart’s deal with Nuro where the two companies have begun an autonomous vehicle grocery delivery service to selected Walmart customers in the Houston area with plans to significantly expand throughout this year the course of 2020.

Drone delivery a dream deferred

What was anticipated to be an integral last mile delivery service a few years ago for food and a wide assortment of other products, delivery drones has stalled. The biggest roadblocks to widespread use in the U.S. are the restrictions placed on drones by the Federal Aviation Administration (FAA), mostly having to do with line-of-sight issues with commercial aircrafts. In Europe and China, where there are fewer restrictions, some companies are in the early stages of launching commercial businesses.

“This is a huge hurdle for Amazon and competitors attempting last-mile fulfillment in the U.S.,” O’Connor said. “But they are starting to get into that business in Europe and China. One company making some headway with drones over there is DHL,” he said.

Amazon debuted early trials for its Amazon Prime Air service in Cambridge, England in 2016 but had only two beta customers at the time. In March 2015 the FAA gave Amazon permission to begin testing a prototype and it began testing a prototype along the U.S.-Canadian border also in 2016. Assuming it gained full FAA approval, Amazon had expected the drone delivery service to begin operations in late 2019, but the service has yet to launch.

U.S. regulations currently limit drones to flying no higher than 400 feet and not faster than 100 mph. They also must remain within a pilot’s line of sight. Amazon officials in the past said their goal for Prime Air drones would be to fly above 200 ft and below 500 ft. The company said its drones would carry packages weighing up to 55 lbs. and travel within a radius of 10 miles from its distribution centers.


In June 2019, Amazon debuted Prime Air drones that can fly up to 15 miles and deliver packages under five pounds to customers in about 30 minutes. The FAA has yet to approve use.

If the FAA, Amazon and its competitors can work things out with drone-based delivery services, Courtin believes there is a rich opportunity waiting to be pursued mainly in heavily populated urban areas such as New York.

“When I am in New York I’m struck by the number of large trucks double-parking on narrow streets, tying up traffic for blocks,” Courtin said. “Amazon could drive trucks to their large distribution center in Staten Island and from there launch drones to carry packages in the last two miles. They could also restrict flying times from midnight to 5:00 am to reduce the possibility of incidents with aircraft.”

To make that work, corporate users, as well as consumers living is large apartment complexes, could build drone airports on their respective rooftops where packages can be delivered to individual mailboxes, Courtin added.

Another potential opportunity for drone services would be in delivering much-needed medical equipment or prescription drugs to people in remote islands offshore where there is likely to be less commercial air traffic.

“Local pharmacists could order medications and get the delivered via a more reliable delivery service than they currently have,” Courtin said. “It’s an interesting use case people should be thinking more seriously about.”

For now, delivery drones and their necessary urban infrastructure remain a dream deferred.

Amazon officials did not respond to requests for comment.




Robots delivering the goods for retailers

Amazon is investing in autonomous robot delivery in the UK, adding to pioneering work undertaken by Co-op and Starship Technologies

By   Ben Sillitoe

Published: 12 Oct 2020

Amazon is ramping up its research and development (R&D) investment in autonomous delivery in the UK, adding to some well-established work in this space by the grocery sector.

The technology titan is creating a new team at its Cambridge development centre which will focus on Amazon Scout, the company’s fully electric autonomous delivery service already in test mode in the US.

Amazon Scout vehicles are the size of a small fridge and roll along pavements at a walking pace. They are currently used to deliver packages to customers in four states in the US, as Amazon assesses the technology and its suitability for fulfilment.

By investing in a UK team, which Amazon said will consist of dozens of engineers, there will be departments on both sides of the Atlantic developing on-system software to help the Scout devices safely and autonomously navigate around neighbourhoods.

On announcing the R&D function in Cambridge, Sean Scott, vice-president of Amazon Scout, said the navigation work will focus on how vehicles avoid collisions with pedestrians, pets and obstacles such as recycling bins and sign posts.

“The team we’re building in Cambridge will work closely with the Amazon Scout research lab in Seattle,” he said. “We’re now hiring software development engineers who are at the forefront of robotics and autonomous systems technology.”

Toby Pickard, head of insight, innovations and futures at grocery research group IGD, says Amazon’s move will inevitably be linked to its drive to get a firmer hold in the grocery sector. Although, as the “everything store”, it will consider distributing multiple product ranges through this service, he adds.

He expects the new autonomous delivery vehicle R&D will be conducted in tandem with further testing of aerial drones for fulfilment, which previously took place in Cambridge.

Aside from Whole Foods, which it acquired in 2017, Amazon does not have a wide network of its own UK stores from which Scout can fulfil goods. “Maybe more partnerships will grow with Morrisons, Booths and others – fulfilling from those stores would be one way of utilising Scout,” Pickard says.

Early pioneers

Supermarket chains in the UK already experimenting with this type of technology for deliveries include Tesco and Co-op Food. The latter has the most extensive autonomous delivery proposition in the UK, operating from eight stores in the Milton Keynes region.

Co-op delivers goods to customers via Starship Technologies’ robots in several neighbourhoods in the Buckinghamshire town. From two stores using the robot delivery service at the start of the year, it now has eight stores connected to Starship’s technology following a growth in demand during the coronavirus lockdown.

Between March and June 2020, when many shops closed and people were told by the government to stay at home as much as possible, Co-op doubled the number of its orders via robot – and the value of the goods ordered grew fourfold. It makes thousands of deliveries a week via robot, although stops short of revealing the exact figure.

The robots, which use GPS routing software, require a personal shopper code to open, and are fitted with several security features including cameras, were also programmed to pause to “clap and cheer” at 8pm on Thursday evenings at the start of the pandemic. It brought them in line with the actions of many Britons giving thanks to carers and key workers for their contribution to tackling the pandemic.

Circa 2,000 Co-op products and popular ranges are available via Starship delivery, and Jason Perry, the retailer’s head of online development, says the pick-from-store model allows the company’s nascent online business to grow while still driving sales via stores.

“It fits nicely with our focus on choice, speed, convenience and zero emissions, as well as getting extra volume through Co-op shops,” he says of the service, which forms part of a wider online retail expansion plan he is helping to formulate at the retailer.

Aside from a Starship partnership from one store in April 2018, Co-op did not start selling groceries online until spring 2019, when it launched a service in London. That has since been extended across the UK, supplemented by an online grocery offering via food delivery app Deliveroo, the Starship tie-up, and other third-party fulfilment partnerships.

“The robots are suited to our on-demand customer shopping missions – we’re about food for now, and shoppers getting it quickly and having it delivered safely,” adds Perry, who says, in this particular case, robots have helped create Co-op jobs not replace staff.

More robot delivery across the UK depends on local authorities like those in Milton Keynes permitting it, but for now Starship is making a name for itself in Buckinghamshire – and Co-op is its key major retail partner there.

For Co-op, which now operates online retail from around 200 UK stores, the robots are one component of wider plans to use digital to better to serve its communities. And the way it uses technology to do that will seemingly evolve over time.

“Building the e-commerce platform, we’ve tried to approach it from a tech-friendly way so a lot of it is API-driven and it means we can partner with who we like in the future,” says Perry.

“There’s definitely scope to deepen our tech partnership with Starship, whether that is availability from shop or integrated deliveries from our own platform. For us, it’s about finding the right time to do those things.”

Tesco has also worked alongside Starship, and more work in the autonomous delivery space could be on the cards at the UK’s largest retailer after it announced its Red Door innovation programme in September.

Under the leadership of new group innovation director, Claire Lorains, Tesco announced in September that it is looking to engage with organisations that can help it disrupt the status quo and gain “true competitive advantage”.

It is on the hunt for innovators to help various aspects of its business, although the four initial priority areas are food & drink products and technology, data, robotics and automation, and packaging.

“There’s lots more to come, as we work with partners to develop new and disruptive innovations, and we welcome approaches from anyone with an idea to share,” said Lorains when announcing the Red Door initiative.

For retailers working with Starship, robot delivery orders are made via the technology company’s app – as opposed to the retailer itself. Pickard suggests this format is a potential obstacle to adoption, as consumers will need to download an additional app.

“There’s an element, here, of needing to onboard shoppers – it’s likely those using it first are going to be an early adopter of technology and an online shopper already, so these are barriers the industry is overcoming,” Pickard adds.

From robots to driverless vehicles

Like Co-op, online-only grocer Ocado tends to adopt an experimental outlook when trialling new delivery options and partnerships.

But while Ocado’s robots are consigned primarily to its warehouses, for picking and packing purposes, as well as part of the Ocado Smart Platform it licenses to third parties, it did dabble with driverless delivery in 2017. An experiment took place with autonomous vehicle software provider, Oxbotica, in a residential property development in east London, which tested the potential of food delivery by autonomous Cargopod.

Although nothing of that nature has been launched as part of Ocado’s day-to-day retail delivery, it is investigating ways autonomous vehicles might function in conjunction with delivery robots. Ocado founder, Tim Steiner, told the National Retail Federation’s annual Big Show, in New York City in January, that it is “playing in that space”.

In the US, Walmart is one of several retailers working alongside autonomous vehicle company, Nuro. It began a pilot in Houston, Texas in December 2019, exploring how the technology could fit into its ever-developing online grocery operation.

Nuro has worked with Kroger, CVS and Dominos in the US, and a spokesperson for the tech company says each opportunity to work with a new brand provides “a major learning experience”. If interest develops, autonomous fulfilment will be offered via retailers’ websites, with customers able to track progress of the delivery via a Nuro app.

“As for our partners, many of them are pursuing autonomous delivery to help close the last mile and lower delivery costs to their customers,” the spokesperson says.

“We plan to begin deliveries with Walmart soon. Right now, we’re actively delivering with Kroger and CVS and have made thousands of deliveries to date in Houston.”

Like in the UK, the spokesperson says wider adoption depends on state and federal regulation evolving to encompass self-driving delivery for non-passenger vehicles.

Autonomous delivery remains an area of potential growth in retail technology, with some huge players exploring its practicality. IGD’s Pickard says: “The FMCG approach to this sort of initiative is always ‘is it scalable?’. I’m not sure that’s the right question. It’s about ‘is it viable?’. Because it will reduce the last-mile costs and it’s an alternative delivery – it’s about putting it in the right places to reduce costs.”

Commenting more broadly on the impact autonomous delivery vehicles, including aerial drones, can have on retail in the future, he adds: “People overestimate the short-term impact but underestimate the long term, and I think this is one which will have a long-term impact.”

Amazon has built much of its success in retail on long-term thinking, and Nuro’s marketing video content emphasises that “this is just our beginning”. More robot delivery in retail may only be a matter of time.




Amazon’s Shipping Challenges: Will Out-of-the-box Solutions Work?

Sep 10, 2019

Wharton’s Senthil Veeraraghavan and Northwestern’s Tarek Abdallah discuss how Amazon is attempting to balance low prices with unsustainable shipping costs..


E-commerce giant Amazon is facing pressures to revisit its business model as recent events threaten to upset its strategy of winning customer loyalty with low or free shipping offers. FedEx last month allowed its ground shipping contract with Amazon to expire, which comes two months after it ended its air cargo shipment agreement with the company. Amazon deliveries through the U.S. Postal Service (USPS) have steadily fallen over the years, which leaves the company with United Parcel Service (UPS) as the only major delivery partner.

With customer satisfaction and low prices as its chief tools for growth, Amazon has continued to expand its Prime program, where members get free two-day or same-day deliveries. That has forced the company to invest in its “last-mile” delivery infrastructure — moving goods from fulfillment centers to customers’ homes — with programs to sign on local truckers and also to encourage employees to set up their own local delivery firms. However, last-mile delivery is the most expensive part of its shipment chain, and that means it has to innovate itself out of what could be a losing business model, according to experts at Wharton and Northwestern University.

Wharton professor of operations, information and decisions Senthil Veeraraghavan noted that Amazon has for long been a big transportation and logistics operator as part of its e-commerce delivery platform. In 2018, shipping costs consumed nearly 12% ($27.7 billion) of Amazon’s revenues of $233 billion, according to its annual report filing. Amazon said it expected those shipping costs “to continue to increase” to the extent its consumers choose its discounted shipping offers or if it uses more expensive shipping methods. Third-party sellers account for about half of Amazon’s revenues, and they rely on Amazon to deliver their products, Veeraraghavan pointed out.

Customers have also grown their expectations to receive faster delivery, and that has become a key factor in purchase decisions, according to Tarek Abdallah, assistant professor of operations at Northwestern University’s Kellogg School of Management. He said surveys have revealed that “75% of consumers wouldn’t even shop if a seller promises a delivery date of more than three days.” He noted that while Amazon tries “to push the frontier” for same-day deliveries, it is a “very expensive” strategy.

In order for that strategy to succeed, Amazon needs a highly efficient last-mile delivery system. “The last-mile delivery is the most expensive part of the supply chain for e-commerce companies,” Abdallah noted. According to him, Amazon’s shipping costs at current levels are “not sustainable in the long term, especially with their push towards same-day delivery.”

Veeraraghavan and Abdallah explored the challenges Amazon faces with its delivery model and how it might overcome them on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

Much of the increased costs of Amazon’s logistics operations has been because of the frenetic pace at which it has expanded its network of fulfillment centers, according to Veeraraghavan. “There was a time when you could count all of Amazon’s fulfillment centers with one hand,” he said. “But now they have north of 250 fulfillment centers and data centers all over the U.S. States, especially because they’re pushing closer and closer to customers.” A study by logistics consulting firm MWPVL International details the company’s global fulfillment network as of September 2019.

“The last-mile delivery is the most expensive part of the supply chain for e-commerce companies.”–Tarek Abdallah

Amazon feels the pressure to bolster its last-mile delivery infrastructure also because about a quarter of the third-party sellers on its platform are from China, said Veeraraghavan. “If you’re a seller in China and you want to sell to a customer in the U.S., there’s no way for you to set up a logistical arrangement with UPS or USPS or, any transportation company as easily as with Amazon,” he noted.

Changing Delivery Mix

Over the years, Amazon has complemented its own delivery fleet with third-party providers such as the U.S. Postal Service, UPS and FedEx. That mix has changed considerably with Amazon’s share in its deliveries increasing while those by USPS have steadily fallen. Amazon’s use of USPS services has attracted sharp criticism from President Trump. Last year, Trump tweeted that the USPS was effectively subsidizing Amazon, and described it as Amazon’s “delivery boy.”

Now, with a declining share of USPS in its deliveries and expiration of its contracts with FedEx, Amazon has to depend on UPS and other smaller local delivery firms for its last-mile deliveries. The upshot of that is “they have to innovate in terms of how they handle their logistics,” said Abdallah.

Managing relationships with third-party carriers has become all the more important now for Amazon. “Without these third-party logistics, Amazon would not exist in the first place,” Abdallah noted. “So they have to keep good connections with those other carriers.”

The Last-mile Push

To be sure, Amazon has been firing on several cylinders to meet its last-mile delivery challenge. A program it launched in May incentivizes employees who set up their own package delivery company with $10,000 in startup funding and three months’ pay. That is part of a larger delivery service partner program created last year, under which 200 entrepreneurs have launched delivery businesses using their own Amazon-branded trucks or leasing them from a third party with whom Amazon has partnered. A third effort in the delivery space is a “Flex” program where individuals are encouraged to take up local deliveries with flexible schedules.

The program to provide seed money to employees who start their own local delivery businesses is significant because “warehouse jobs are hot jobs and there are not many of them” said Veeraraghavan. “It makes sense for them to have enough of a labor supply to do the last mile delivery. One way to encourage and guarantee this is to have businesses that can take part.”

Abdallah saw the seed money program as a win-win for Amazon. “It gives this extra option for its employees. It can help it retain its customers, but also encourage entrepreneurship among its employees,” he said.

“The new markets where Amazon is moving in with its Prime program like India are low-revenue, high-cost and low-margin.”–Senthil Veeraraghavan

However, signing on local delivery partners may also not be an easy way out. A caller on the show who is an owner-operator with FedEx said he finds Amazon’s lease terms for renting equipment like trucks uneconomical. “Amazon is just pushing prices down, and it’s going to be difficult for them to draw us as servants or as hard workers to come over to their organization for less money,” he said. “That’s one reason why FedEx’s business model is much better than the Amazon model at this point … unless [Amazon] can figure out how to pay more money to the truckers.”

Veeraraghavan agreed with the caller. “The trucking industry has a fairly deep understanding of its local market and costs,” he said. “UPS and FedEx have this core skill of understanding that. And so, that’s going to be new and challenging – for Amazon to figure out what is the right reservation price or the entry point price for contractors or [owner-operators] to come in and see whether they can be a partner.”

Amazon is also investing in strengthening its longer-haul shipping infrastructure. The A Wall Street Journal article provides a snapshot of Amazon’s shipping infrastructure and compares that with FedEx and UPS, citing latest data from the companies. Amazon has a fleet of 60 planes and 20,000 vehicles that are either leased or owned; it plans to rent 10 more planes by 2021. FedEx has 681 aircraft and 160,000 vehicles, while UPS has 564 aircraft and 123,000 vehicles.

Experiments with drones and robots are part of the response to meet the challenges in last-mile deliveries, Abdallah said. Amazon’s network of lockers at retail locations — where consumers could pick up their orders — is another aspect of meeting the last-mile delivery challenge, said Veeraraghavan.

Amazon said in its 2018 annual report that it aims to mitigate its delivery costs with higher sales volumes, extracting efficiencies in its fulfillment network and elsewhere in its operations, and negotiating better terms with suppliers. However, increasing shipping rates for consumers is not one of its options. “We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers,” it stated.

Revisiting the Business Model

Amazon has used those shipping offers effectively to grow its customer base. It has actively marketed its Prime program, where members get free two-day shipping on about 100 million items and same-day delivery for about 10 million items, according to the Wall Street Journal report. Consequently, its Prime membership base has grown to an estimated 105 million, up from 85 million in 2017, even after it increased its annual subscription fee from $99 to $119 in May 2018.

But that Prime push brings a fresh challenge for Amazon: New customers will be more sensitive to the subscription price for Amazon’s Prime program. “They’re going to be harder customers to get,” Veeraraghavan said. “The new markets where Amazon is moving in with its Prime program like India are low-revenue, high-cost and low-margin.” That means Amazon will face challenges in scaling its Prime subscriber base in ways that are profitable, he added.

The upshot of that challenge is that Amazon may have to revisit its business model, according to Abdallah. He noted that the company already has a 50% market share in online sales in the U.S., but extending that reach to “marginal customers” will be “very costly” for the company.

Abdallah wondered what options Amazon might have in that setting. “Are they going to raise prices in order to offer same-day delivery? Probably,” he said. “The real problem for [Amazon] is: How do they continue to be competitive as an e-commerce platform while increasing their quality of service in terms of same-day delivery and whatnot, but still without compromising on their healthy revenues?” However, Amazon is well positioned for the task. “They have lots of data and know a lot about their customers – where they are, their schedules and when they’re available.”

“The real problem for Amazon is: How do they continue to be competitive as an e-commerce platform while increasing their quality of service in terms of same-day delivery and whatnot, but still without compromising on their healthy revenues?”–Tarek Abdallah

According to Abdallah, Amazon’s strategy going forward would be “to build its network gradually, trying to tackle strategically those customers that are closest to their fulfillment centers and those in dense areas rather than suburban areas.”

Loss-leader Model?

As Amazon plots its strategy to build out its last-mile delivery network with third-party providers, it would “most probably run a loss-leader model,” said Abdallah. “They will be very generous in terms of their compensation [in the beginning]. And then, over time, as they gain power, they’re going to start being more aggressive with their pricing.” Some media reports have talked of Amazon offering large discounts to third-party sellers, in order to encourage them to ship with Amazon instead of rivals like FedEx, he noted. “They will probably do the same thing with the drivers.”

If Amazon does go with its loss-leader model for last-mile deliveries, rivals like FedEx would feel compelled to review their own business models, according to Veeraraghavan. He noted that FedEx has in some ways been “ahead of the curve” in terms of how automated its warehouses and its sorting locations are. “FedEx has to make a very good call right away in thinking, ‘These are these are areas or core parts of the businesses for us, so we will continue to grow them. Some of them are uneconomical and hard to scale, and we shouldn’t jump in just because Amazon’s doing that.’” FedEx could also try to build close relationships with other major e-commerce firms or retailers like Walmart and Target, he added.

Amazon’s push to grow its delivery infrastructure using third party providers has courted much controversy, too. An investigation by ProPublicaco-published with the New York Times on Thursday, identified more than 60 accidents since June 2015 involving Amazon delivery contractors that resulted in serious injuries, including 10 deaths. The report noted that Amazon’s contention is that it is not responsible for the actions of its contractors, citing agreements that require them to “defend, indemnify and hold harmless Amazon.” It added that the agreements cover “all loss or damage to personal property or bodily harm including death,” citing recent court testimony by an Amazon operations manager.

A week earlier, Buzzfeed had published a report which held that “Amazon’s gigantic, decentralized, next-day delivery network brought chaos, exploitation and danger to communities across America.” Such stories have provoked strong rebuke and calls for increased regulation of Amazon by Sen. Richard Blumenthal, the top Democrat on the Senate’s Manufacturing, Trade and Consumer Protection subcommittee, and presidential candidate Andrew Yang, Buzzfeed reported. “One of the largest companies in the world cannot be allowed to continually pass the buck,” Blumenthal said.



Will Amazon’s Plan to ‘Upskill’ Its Employees Pay Off?

Jul 22, 2019

Prime Day was a big success for Amazon this year: The two-day online shopping event held in mid-July and featuring special discounts netted higher sales than last year’s Black Friday and Cyber Monday combined, the company said on July 17.  But that wasn’t the only positive publicity Amazon received this month: On July 11, the company announced it is launching an ambitious $700 million retraining program to create “pathways to careers” for its employees in areas including health care, machine learning, manufacturing, robotics, computer science and cloud computing.

The six-year, $700 million effort covers about 100,000 employees, or about a third of Amazon’s U.S. workforce of nearly 300,000, and works out to about $1,200 a year annually for each employee. (That contrasts with a $500 spend on each employee for training by large employers with 10,000 workers or more that were surveyed by the Association for Talent Development, The Wall Street Journal reported.) The mostly free program does not require employees to stay on at Amazon; some programs pay 95% of the costs for tuition and textbooks, capped at $12,000 per employee over four years.

The move will make it easier for Amazon to hire and retain employees, gain a competitive edge over rivals, and it could help to improve its image, said experts at Wharton and New York University.

In fact, the last element is becoming increasingly important: On July 16 — in the midst of Amazon’s Prime Day success — a group of 13 Democratic members of Congress, led by Vermont senator and presidential hopeful Bernie Sanders, called for a Labor Department investigation into the company’s workplace conditions, alleging safety violations and unfair labor practices. Amazon responded by inviting Sanders and his group to visit its warehouses, repeating its invitation of last August. It has also repeatedly pointed to its pledge on worker safety.

Since 2013, seven workers have died of vehicle and equipment injuries at Amazon facilities, earning for it a listing on the so-called “Dirty Dozen” of companies prepared by the National Council for Occupational Safety and Health, a nonprofit made up of labor unions, health and technical professionals.

“While [Amazon’s training program] is an important signal to the marketplace and to workers that [it does not look at its] employees as disposable and in a callous way, there are still these safety issues that it has to address,” said Ari Ginsberg, professor of entrepreneurship and management at New York University’s Stern School of Business. “Amazon is going to have to do a little bit more to figure out how to significantly reduce these serious accidents that they’ve had.”

Safety issues aside, Amazon is taking a calculated risk in offering the training, according to Matthew Bidwell, Wharton professor of management. “There is the concern that if you give people training in transferable skills, either they leave, or the threat that they’re going to leave means that they can demand much higher wages — and that eats away any of the returns [from the] training,” he said. At the same time, employees “tend to be risk-averse when moving jobs and making a leap into the unknown,” he added.

All considered, Bidwell said economists see employers capturing net positive gains from their investments in training. The reason is “the labor market isn’t perfectly efficient,” he explained. “If the labor market is perfectly efficient, all training will be a bad idea.”

Bidwell and Ginsberg discussed what Amazon stands to gain from its retraining program on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

Amazon’s so-called “Upskilling 2025 pledge” aims to score on several fronts, including: equip non-technical employees with the essential skills to transition into software engineering careers; train fulfillment center staff to move into technical roles regardless of their previous IT experience; offer machine learning skills to employees with technical backgrounds, and provide employees with courses to build practical tools to operate in Amazon Web Services, its cloud platform.

Training Keeps Talent

“Generation Z is already fairly tech-savvy and is more likely to be attracted and stay in a place where they can get technology learning,” said Ginsberg. “If they feel they’re in an organization where they are not able to continue learning in the ways they would like, they will leave.”

“Amazon is going to have to do a little bit more to figure out how to significantly reduce these serious accidents that they’ve had.”–Ari Ginsberg

It also makes sense for Amazon to invest in retraining its existing employees with the skills it seeks rather than hire new talent with those skills; it will be cheaper and earn employee loyalty. As one of the biggest employers worldwide, Amazon cannot expect the marketplace to supply its needs, said Bidwell. (Amazon is the world’s second-largest employer after Walmart, according to Fortune magazine.) “You can wait for other companies and universities to train people, but that’s going to be quite slow,” he added. “Also, hiring is always a crapshoot, and a lot of the people you end up hiring are not going to work out.” It seems a much smarter idea to train “some of your people who work hard and have a good attitude, and then help move” into the jobs that call for higher levels of skills.

A Talent Imperative

Reskilling Amazon’s workforce “is necessary for survival,” said Ginsberg. “It will facilitate greater retention and make recruitment easier as the need for such talent will only grow. It will also give [Amazon] a competitive edge over companies like Walmart.”

Citing U.S. Bureau of Labor Statistics (BLS) data, Amazon said in its announcement that there are now more job openings (7.4 million) than there are unemployed Americans (6 million). The BLS anticipates some the fastest growing job areas to be those that need a high level of skills, such as medical assistants, statisticians, software developers, nurse practitioners, and wind turbine service technicians, the company noted.

An analysis of the company’s hiring data covering the past five years revealed huge growth in its talent needs in areas such as in data mapping specialists (832%), data scientists (505%), solutions architects (454%), security engineers (229%) and business analysts (160%). In the area of customer fulfillment alone, the need for people to fill highly skilled roles has increased over 400%, including jobs like those of logistics coordinators, process improvement managers and transportation specialists, Amazon added.

“It is very nice to see that even if you don’t have unions to hold people to account, employers themselves are starting to feel like they need to pay attention — that people are watching, and how they treat people matters.”— Matthew Bidwell

Help in Morale Building

The retraining could also boost employee morale, especially as fears abound of robots taking over human tasks, said Ginsberg. “[It will help] if you have employees who feel the company is actually interested not in replacing us, but in keeping us around because they will need us.” He added that while Amazon has deployed 200,000 robots globally and half of them in the U.S., in launching the retraining program, it is sending out the message that it wants to train its employees to control those robots, and not replace them, Ginsberg added.

In the current, tight labor market, employers are worried about employee turnover and retention, said Bidwell. Companies have moved away “from a model where [employment] is transactional … and are doing all they can to try and build that relationship, and hang on to people,” he added.

Amazon has the financial resources to look beyond quarterly earnings as it invests in such training programs, “and that’s turning out to be an advantage when it comes to managing people,” said Bidwell. He pointed out that the decline of worker unions over the years has contributed to the perception that “workers have become disposable” and that companies are focused more on their bottom lines. But initiatives such as that at Amazon are helping to change that narrative — and that is something to cheer, he noted. “It is very nice to see that even if you don’t have unions to hold people to account, employers themselves are starting to feel like they need to pay attention – that people are watching, and how they treat people matters.”

Ginsberg said he expected Amazon’s move to trigger similar efforts at other companies. Added Bidwell: “One of the big benefits is that it does legitimize this idea [of investing in retraining]. It’s going to be a lot easier to go to my CEO or CFO and say, ‘I think we should invest in training.’” With Amazon setting the example, those calls for training carry “a lot more weight … and it puts pressure on others who are competing with them for talent.”

However, the argument for investing in retraining will need demonstration of tangible returns before it gains momentum, according to Ginsberg. He said such training or programs like “corporate venturing,” where companies incubate new businesses, “make a lot of sense conceptually, but it will be important at some point to have some metrics to link them to bottom line results.”



Is Amazon Getting Too Big?

May 20, 2019

In an era when legacy retailers such as Sears and Macy’s are scaling back or going bust, online behemoth Amazon continues to boom. The company is the second-largest retailer in the United States behind Walmart, and last year it became the second company in the world to reach $1 trillion in market capitalization. Perhaps more significantly, it’s also one of the world’s largest tech companies, with reams of data collected from an enormous customer base. Amazon has sold 100 million units of its voice assistant, Alexa, and an equal number of Prime subscriptions. But is Amazon too big?

Amazon’s runaway growth has prompted questions about whether it has become a massive monopoly that has unfairly edged out smaller competitors. That question has caught the attention of consumers and policymakers, many of whom have called for legislation to regulate the global goliath. The question, while intriguing, seems to be a moot point for founder and CEO Jeff Bezos, who reportedly said his company is “not too big to fail.”

“I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years,” Bezos said, according to a report by CNBC.

The Knowledge@Wharton radio show on SiriusXM invited two experts to discuss the potential backlash to Amazon’s unbridled growth. Wharton marketing professor Barbara Kahn and Ryan Hamilton, marketing professor at Emory University, tackled the topic during a recent interview. (Listen to the podcast at the top of this page.) Following are key points from their conversation.

Regulation Isn’t the Same as Antitrust

The power amassed by Amazon and other tech giants hasn’t gone unnoticed by American politicians. Last year, President Donald Trump launched a Twitter attack against the company and The Washington Post, which is owned by Bezos. In March, Sen. Elizabeth Warren, D-Mass., unveiled a plan to break up Amazon and other companies making $25 billion or more in revenue. But the professors pointed out that subjecting big tech to antitrust laws, which take aim at monopolies that have pushed out competition, is different than enacting legislation to regulate that sector.

“Typically, when you think about antitrust, you think about whether the consumer is worse off. And Amazon has been so far pretty clean on that,” Kahn said, adding that Amazon hasn’t lowered product quality or raised prices. The company also appears to be transparent with its customers.

However, more than half of American households now subscribe to Amazon Prime, so Amazon controls a massive amount of online shopping data in an asymmetric way against the competition.

“There’s nothing that Amazon isn’t touching.”–Barbara Kahn

“I think there are a lot of different issues,” she said. “Historically, what people think about Amazon is that they have so far been true to their word and their consumer focus. But they are ruthless against the competition.”

According to Hamilton, the issues provoked by Amazon require an entirely new way of thinking about antitrust. Monopolies have long been about the ability to control price and profit. Amazon could get broken up into 20 different entities, but that wouldn’t solve the problems surrounding access to data. The issues with data management could be addressed through legislation, which Hamilton thinks is more likely than the government intervening to fracture the companies.

“People are talking about breaking up Amazon; people are talking about breaking up even Facebook, which is a free service. So, it’s no longer about just price; it’s about information, power. It’s about leverage, about control. I would be surprised if there’s kind of an appetite for that broadly, but opinion on this seems to be shifting rapidly,” he said.

Amazon Is Everywhere

Kahn offered a simple, succinct description of Amazon: “There’s nothing that Amazon isn’t touching.”

Most consumers are familiar with Amazon’s online shopping and streaming services, but the company really makes its money from the cloud-based Amazon Web Services (AWS) and Prime subscriptions, which generally cost $119 a year.

“They can offer a very good price and very high quality because they’re really not making much money on margin,” Kahn said. “That, to me, is part of the genius. I don’t think it’s thinking necessarily through a retail lens, it’s thinking through a very sophisticated business lens.”

Amazon is also buying real estate, specifically empty retail sites that can be used as fulfillment centers, and stepping on Google’s toes with a foray into targeted advertising.

“There was a headline [recently] where Jeff Bezos announced that Amazon is planning to go to the moon,” Hamilton said. “So, when we talk about everywhere and everything, you may not be able to escape Amazon by leaving the planet.”

Part of Amazon’s genius is closing the traditional “last mile” for the customer, Kahn noted. That means the burden is no longer on the customer to drive somewhere in order to research, comparison shop and purchase. With a click, the products arrive quickly at the doorstep.

“Amazon has just been ruthless at identifying customer pain points and eliminating them.”–Ryan Hamilton

Amazon continues to try to close the gap. In May, it announced a $10,000 incentive program for employees who want to start their own Amazon same-day delivery service. Bezos is also looking at replacing warehouse workers with robots to achieve greater speed and efficiency.

“Amazon has just been ruthless at identifying customer pain points and eliminating them,” Hamilton said. “When they first started off, it was supposed to be a cheaper way to get books and to find books that might be hard to find elsewhere. Then they just moved down the ladder: What’s the next customer pain point we can get rid of? Three days is too slow? All right, two days. Two days? No, one day. Soon, they’re going to get it to you before you even order it.”

The ‘Creepiness Factor’

Privacy issues are starting to crop up for Amazon, although the company hasn’t faced the same backlash as Facebook. Still, customers have expressed concern about Alexa listening in on their conversations. Hamilton calls it the “creepiness factor.”

“One of the ways that we can overcome this creepiness factor is when people see a clear upside, right? If they understand the benefits that they’re getting from more invasive technology, then people are kind of more accommodating to it,” he said. “I think that that’s where Amazon has avoided some of the problems that Facebook and Google and others have run into, where it seems really obvious to the consumer the benefits that they’re getting from Amazon. Amazon is ramping it up and faster and faster. It doesn’t breathe. Better and better suggestions on what you should buy next. I think as long as that’s transparently obvious to the consumers, there’s going to be less resistance.”

Kahn agreed, saying the transparency is what gives consumers more confidence in Amazon than, say, Facebook.

“They still haven’t violated consumer trust yet, except for privacy issues, but you haven’t seen them do anything inappropriate with that information — that we know of,” she said. “What’s interesting is I go around and give a lot of speeches on Amazon, and when I talk to consumers, they are so loyal to Amazon Prime, it’s shocking, you know? They can’t imagine their life without it.”

“I go around and give a lot of speeches on Amazon, and when I talk to consumers, they are so loyal to Amazon Prime, it’s shocking.”–Barbara Kahn

Always Pushing Forward

Both professors attribute Amazon’s outsized success to the innovative culture instilled by Bezos. While the company doesn’t have the best reputation for the way it treats employees, whatever he’s doing is working. Bezos is the richest man in the word, with a post-divorce net worth of $110 billion.

“I think that Amazon is changing so much of the way we think about business,” Hamilton said. “A standard problem that a maturing organization runs into is that it starts to get entrenched in the way that it’s doing things and then fails to miss the next opportunity. Amazon has so far not fallen into that trap at all. They are just constantly blowing things up and constantly looking for new ways to solve problems.”

But Hamilton pointed out that Amazon can’t continue to do everything. At some point, companies require a focus on core competencies. He’s not sure Amazon has that focus.

Kahn disagreed, saying Amazon may have gotten its start as a retailer, but its real focus is on data and an ever-expanding customer base.

“They have more and more interaction, so now it’s not just bodies but the frequency of interaction with those bodies, and suddenly you have an advertising model,” she said. “So, I think what they’re doing is creating a network and creating in-depth information about that network and different ways to get at that network, and that is what their focus is. Once you have that, you’ve got a business model. You can start selling all types of different services and content to that base.”

Don’t Discount Walmart

As big and powerful as Amazon has become, it has a formidable competitor: Walmart. Kahn said the discount retailer is right on Amazon’s heels. When Amazon began offering one-day delivery to Prime members in certain areas, Walmart announced free next-day delivery on its most popular items.

Walmart is better than Amazon on cost, operational excellence and logistics, Kahn said. And the retailer is using those proficiencies to its advantage. Even its revamped website is easier for shoppers to navigate than Amazon’s, which Kahn describes as “built for an engineer.”

“I think that Amazon is changing so much of the way we think about business.”–Ryan Hamilton

Hamilton isn’t quite as sold on Walmart, saying the retailer will not be able to beat Amazon at its own game. People will continue to shop in stores for certain things, so a physical presence will always be needed. But Walmart will have to chart a different course than Amazon.

“I think that Walmart is doing some smart things, but things are changing so rapidly. I know that sounds like kind of a commentary without any teeth, but things are changing so rapidly that what has worked in the past is not going to have any kind of salience going forward,” he said. “They’re leveraging the strengths that they have in terms of their physical presence, but they’re not going to be able to become the next Amazon. They’re going to have to become something different if they’re going to succeed.”

Kahn flatly disagreed.

“I do think Walmart can beat Amazon at its own game, not in terms of being everything to everyone, but in retail, they can. They’re still the world’s biggest retailer, and they compete head to head in a lot of the same categories. They’re growing very fast online,” she said. “Walmart understands in retail in its bones, whereas Amazon is kind of flirting with it. So, I think that you will see great things from Walmart. I’m very pro-Walmart. What they’re doing is very interesting.”




Jul 24, 2020,11:18am EDT|8,045 views

MILTON KEYNES, ENGLAND – JULY 23:, A man takes his order of fish and chips from a Starship delivery robot on July 23, 2020 in Milton Keynes, England. Starship robots are advanced devices that deliver parcels, groceries and food directly from stores via a mobile app within a 4-mile radius (Photo by Darren Staples/Getty Images)



Ecommerce is up significantly year over year as the pandemic has increased the desire of shoppers to shop safely from home. Total U.S. online sales reached $73.2 billion in June year over year, up 76.2% compared with $41.5 billion a year earlier. This historic surge in ecommerce puts a lot of pressure on logistics operations. One of the challenges in ecommerce is the last mile. The last mile represents the final, short segment of the end-to-end origin to destination route products take to get to customers.

What will last mile delivery look like post-coronavirus? Ecommerce will not continue to grow at the incredibly high rate we have seen during this crisis. Nevertheless, as the pandemic comes under control, most experts believe that ecommerce will grow even faster than the low double-digit rates it has grown in recent years as more and more consumers become use to the convenience associated with online shopping.

Last Mile Timeframes

One big question that most consumers have is how soon can I get my order?  Amazon has been stealing market share from traditional retailers based both on the breadth of products they carry and the speed with which they can deliver. For many products, delivery to Amazon Prime members can occur the next day. In some urban areas, Prime Now members can have grocery items delivered within a two-hour delivery window the same day. This pressure to deliver more quickly is known as the “Amazon Effect.”


An Amazon Prime delivery truck drives through the Port of Los Angeles and Long Beach April 22, 2020 in Long Beach, California. (Photo by Robyn Beck / AFP) (Photo by ROBYN BECK/AFP via Getty Images)


The Amazon Effect has changed everything when it comes to e-commerce, with more retailers trying to reduce market share losses by offering their own version of a Prime. For some, this means a similar subscription model for faster deliveries. For others, it means a subscription-free model for guaranteed delivery timeframes given a specific spending threshold. For expensive items and perishables, customers want the deliveries to occur in a narrow 2-hour delivery window.


Quick Deliveries Depend on Access to Local Inventory

Quick deliveries depend on inventory being located close to consumers. This has led Amazon to rely less on very large – 850,000 square foot and up – regional distribution centers. Amazon has increased the number of smaller warehouses in large urban environments. These smaller warehouses serve as sortation centers where associates sort customer orders by destination zone and consolidate them onto trucks for faster delivery. Amazon is moving from last mile deliveries to what their managers refer to as “last yard” deliveries.

As store traffic declines, more retailers are using stores as micro-fulfillment centers and delivering orders from the store. According to my ARC Advisory Group colleague Chris Cunnane’s last mile survey of retailers published late last fall, the number one reason stores are used for e-commerce order picking and shipping is the need for an expedited order timeframe. His research reported that 38 percent of respondents frequently use stores in this situation, and another 24 percent sometimes use stores in this situation. The second main reason for using stores is when the DC does not have the item in stock (36 percent frequently, and 23 percent sometimes).

So how quickly can a store get an item to a customer. In my colleague’s survey, he asked respondents to give the quickest guaranteed delivery time for orders shipped from a store. According to respondents, 22 percent offer same-day delivery, with about a third of those offering a two-hour delivery timeframe. Another 39 percent of respondents indicated a one-day delivery timeframe, and another 26 percent indicating a two-day delivery timeframe. That’s not too bad, considering the complexities of running a store like a warehouse.

Nevertheless, picking orders in stores and shipping from stores creates problems for retailers. Stores tend to have much lower inventory accuracy than warehouses. Many retailers have in-store inventory accuracy of 90 percent or less as compared to an inventory accuracy of 99.9 percent at warehouses. This can lead to a retailer promising to deliver something quickly they don’t have in stock. This results in disappointed customers who may not remain loyal. Retailers are responding by using in-store autonomous mobile robots (AMRs) to discover empty slots, slots with no inventory, on the store shelf so that inventory accuracy can be improved. Walmart has hundreds of AMRs from Bossa Nova in use for this purpose.

There are two other problems with fulfilling orders in a store. First, the labor associated with picking is more expensive than what it is in a warehouse. Warehouses are designed to maximize picking efficiencies; stores are not. Secondly, having associates pick items in the store can adversely affect the in-store experience of shoppers.

This may drive many retailers to follow the Amazon example and build more warehouses in urban areas. Unlike Amazon, however, there appears to be a growing trend to highly automated, micro fulfillment centers – so called “dark warehouses” – in urban areas. Takeoff Technologies uses KNAPP shuttles to support its development of micro-fulfillment centers that employ as few as 15 employees to pick and pack goods for delivery. Last year Takeoff reported an existing client base that included Ahold, Albertsons, and ShopRite and that they had rolled out a half dozen active sites. Takeoff and Knapp confirmed a $150 million, 50-site order in April of 2019. Now, during the pandemic of 2020, the company reports rapidly expanding sales and that they are now also working with Albertsons, Big Y, and Wakefern, and Woolworths in Australia. They are not the only player in this space; Fabric and Alert Innovation are competitors.

Last Mile Operations

Currently, according the ARC Advisory Group survey, 83 percent of respondents are using parcel companies such as UPS and FedEx for last mile deliveries. These services were built to deliver small packages to your doorstep in a short timeframe. They are also affordable for small businesses to use, as well as retail behemoths. Parcel shipping software solutions from companies like Logistyx and Descartes, can make it easy for retailers to more heavily utilize less costly regional parcel companies.

A drone with an Amazon package floats in front of the Amazon logistics center in Leipzig, Germany, 28 October 2014. The drone symbolically brings a labor contract to the strikers. The Verdi trade union is striking against this and four other Amazon locations in Germany. Photo: PETER ENDIG/dpa | usage worldwide (Photo by Peter Endig/picture alliance via Getty Images)

PICTURE ALLIANCE VIA GETTY IMAGESThe two other highly used delivery methods are drop shipments from partners and 3PL delivery partners (51 percent each). Drop shipments are used by retailers to reduce their inventory carrying costs. Instead, the order is sent directly to the manufacturer for delivery. This is especially common for large appliances and shipments. Many companies are outsourcing their last mile deliveries to a 3PL delivery partner. This partner may control a private fleet or handle the company’s freight. This again can lead to cost savings while creating efficiencies in route planning.

One of the more interesting areas of last mile is around crowd-sourced deliveries. Currently, only 9 percent of respondents indicated using these partners, but 25 percent are planning to implement a partnership in the next 12 months. Crowdsourced delivery is popular in the restaurant and grocery space, and is gaining traction in big box and specialty retail as well. An incredible amount of investment money has poured into the space, and company valuations have taken off. Target decided to forgo a major partnership and instead outright acquired Shipt for $550 million in 2017. In May this year, Target announced they were also acquiring Deliv for a price analysts believe is similar to what they paid for Shipt.

Drones and Delivery Bots

We’ve been promised delivery drones will soon be in widespread use since Amazon announced it was working on this technology in 2013. Alphabet trialed its Wing delivery drones as recently as March 2019 to transport parts to ships 1.5 kilometers from shore. And this year, Flytrex is in a small pilot to deliver from a Walmart Supercenter to a handful of backyards nearby. Currently, the most action is on testing of these drones is for making deliveries of medical products to hospitals and health clinics, although these are not necessarily short, last mile deliveries.

So where are we now with this technology? Very few delivery drones are in service. The reality is that there are still regulatory hurdles to clear and more testing needs to be done. About 11 percent of respondents in the ARC survey are investigating the use of drones for last mile deliveries.

Delivery bots that run on sidewalks or bike lanes, while far from being in widespread use, have more promise. According to ARC’s survey, 15 percent of respondents are actively pursuing the technology for last mile deliveries. Coronavirus, and the desire for contactless delivery, has led to greatly enhanced interest in this technology. Autonomous robot delivery providers Nuro and Starship are using their bots to make deliveries in Sacramento; Mountain View California; Milton Keynes in the UK, and other locations. Starship reports that its deliveries in Milton Keynes have “exploded” during the coronavirus epidemic.

The pandemic could have been a windfall for these companies, but these bots need approvals from local governments before they can be put in use. It has also been a problem to ramp up manufacturing of their delivery robots to meet the increased demand.

Last Word on Last Mile

So, what will last mile delivery look like post-coronavirus? The last mile of delivery is complex, costly, and expensive. Retailers are constantly looking at ways to be innovative in order to satisfy the customer. Currently, most retailers are still relying on the major parcel players to make their deliveries, even though this does not give them as much control over that final experience as they may like. But the future potentially looks bright for disruptive technologies for last mile transportation, urban warehousing, and stores.



Aug 26, 2020,09:19am EDT|3,609 views

Last Mile Deliveries: Complex, Costly, And Critical

Steve Banker

SAN FRANCISCO, CALIFORNIA – JULY 30: A United Parcel Service (UPS) driver prepares to make … [+]


One of the most difficult and expensive aspects of the retail supply chain is last mile and home delivery. However, from a customer experience standpoint, it is also the most memorable and possibly important. My colleague, Chris Cunnane, spoke about this on a panel at Reuters Events Retail Supply Chain Virtual USA conference.

He looked at last mile in a few ways. First, what is the store’s role in last mile deliveries for e-commerce orders? Second, what kind of interest are retailers expressing for new and emerging last mile technologies? And third, how can retailers that rely on private fleets meet customer expectations for last mile deliveries?

The Store and Last Mile

The store’s role in omni-channel retail has changed significantly over the last few years as more and more brands look to make their stores a bigger part of e-commerce fulfillment. According to Chris’s recent omni-channel fulfillment survey, 37 percent of respondents indicated that they fulfill e-commerce orders from the store. For these orders, 78 percent indicate they pick orders from the front of the store and 48 percent pick from the back of the store. This survey was released pre-COVID, so the number of stores used to fulfill e-commerce orders has undoubtedly increased.


The big question becomes how are e-commerce orders fulfilled from the store? According to survey respondents, the number one method is to pick orders at the store and hold them for customer pick-up (83 percent). COVID has certainly accelerated this capability for many retailers, and the result has been a pivot to contactless, curbside pick-up. Additionally, 71 percent of respondents are picking orders at the store and shipping them to the customer. This is a capability that likely has seen an uptick during the COVID pandemic as store were turned into warehouses during the initial re-opening phases.

There are varying circumstances for when retailers turn to their stores for e-commerce fulfillment. In Chris’s survey, he asked what the key criteria were for deciding to use a store rather than a distribution center. The most important factor, identified by 44 percent of respondents, was the item quantity on hand at the DC versus the store. Essentially, as stores have excess inventory, they are using the store to fulfill orders to reduce inventory overhead. Forty percent of respondents identified delivery distance to the customer as a key criterion, which is especially true for rush orders.

Emerging Technologies for Home Delivery

When it comes to last mile, 83 percent of respondents are using parcel companies such as UPS and FedEx FDX -0.9% for last mile deliveries. These services were built to deliver small packages to your doorstep in a short timeframe. They are also affordable for small businesses to use, as well as retail behemoths. The two other highly used delivery methods are drop shipments from partners and 3PL delivery partners (51 percent each).

But what about emerging technologies for home delivery? Adoption rates are very low, but interest is growing in a few areas. One of the more interesting technologies is the autonomous mobile robots, such as those developed by Starship Technologies and Alibaba Group BABA 0.0%. These robots are able to navigate city streets to deliver an item to a consumer. So how much interest is there right now in robots? According to survey respondents, 15 percent are actively pursuing the technology for last mile deliveries.

As autonomous technology continues to improve, there is increased interest in drones and autonomous vehicles. The reality is that there are still regulatory hurdles to clear and more testing needs to be done. About 11 percent of respondents are investigating the use of drones for last mile deliveries. Recently, Wake Forest Baptist Health began regularly scheduled drone deliveries of medicines and blood using drones from Matternet and UPS as their carrier. Autonomous vehicles have also been tested for home delivery. In this situation, an autonomous vehicle brings a package to a customer’s house, whereupon the customer enters a code and retrieves the package from a cargo hold. About 13 percent of survey respondents have indicated plans to adopt this technology at some point in the future.

Private Fleet and Home Delivery

When it comes to transportation management systems, fleet management solutions for last mile remains relatively small. But, the growth of e-commerce and omni-channel should represent an opportunity for TMS suppliers. Currently, it does for only a few providers of fleet management as last mile routing is different from cross-country routing. Many retailers rely heavily on parcel solutions or a transportation execution solution rather than a multi-modal TMS, and other retailers will examine crowdsourcing solutions rather than a TMS. Coronavirus has changed the outlook for direct-to-consumer commerce, and a TMS is now a critical component of this strategy. There is still room to compete in last mile, but suppliers need to think creatively to capitalize on this opportunity.

At the Descartes Evolution virtual conference last month Chris Jones, Executive Vice President at Descartes, spoke on “Home Delivery Best Practices.” Mr. Cunnane wrote about this in a recent article in Logistics Viewpoints.

In the US, May alone eclipsed the entire 2019 holiday shopping season and $82.5 billion was spent online. During his presentation, Mr. Jones pointed out that we are now in a delivery economy and touched upon a few ways that home delivery can drive the customer experience. Mr. Jones introduced the concept of “customer delivery personas.” These different personas help a retailer to understand who their customer is and allows the retailer to reduce costs and improve service. The delivery personas can be applied as a matrix looking at delivery speed and precision. This way retailers can let customers self-select their delivery service. Premium customers, who are willing to pay more for speedy deliveries, can generate a lot of money.

Within the presentation, Mr. Jones identified four solutions/capabilities that drive the customer experience: dynamic delivery appointment scheduling, same-day optimization, contactless delivery, and omni-channel home delivery.

Dynamic Delivery Appointment Scheduling

Dynamic Delivery Appointment Scheduling generates dynamic appointment options during the sale. Retailers can use DDAS to sell premium delivery timeframes, which generally cost more. This gives the customer more control over the delivery process and allows them to choose whether they want to pay a premium for home delivery in the timeframe they want. The solution helps to create delivery density, as retailers can make sure that they are only offering delivery to certain areas at certain times so drivers can make a large number of deliveries in a short period of time. This eliminates unscheduled or unfeasible deliveries. Retailers can use tiered pricing depending on how and when the customer wants their order delivered.

Same Day Optimization

Same Day Optimization enables time-definite same-day appointment scheduling based on real-time fleet status. Essentially, you can book delivery timeframes on a dispatch schedule. The benefits of same day optimization are three-fold. First, it allows companies to maximize resource utilization. Second, it allows companies to maximize customer service by ensuring realistic timeframes. And third, it provides a premium delivery service to consumers.

Contactless Delivery

Contactless Delivery is more important than ever in a COVID world. This solution provides proof of delivery information using picture capture and GPS coordinates. Contactless delivery helps to keep drivers safe as they no longer need to directly interact with customers for signature capture. It also minimizes disputes over whether an item was delivered or damaged. Drivers can take a picture on their phone of the delivery, whether that is where they left it or the customer taking it, and it is emailed immediately and directly to the customer. Given the COVID pandemic, contactless delivery will likely be the new norm.

Omni-Channel Home Delivery

Omni-Channel Home Delivery is delivery appointment promising across multiple delivery modes. As home delivery becomes increasingly complex, these modes include private fleets, DC/stores, white glove agents, parcel and local couriers, commercial LTLs, the gig economy (crowdsourced deliveries), and click and collect from stores. By combining these modes, and the different selling channels into one platform, companies can utilize specialized options to reduce costs and improve service. Namely, it gives the customer a lot of options of how and when they want their item delivered.

Last Thought on Last Mile

Last mile will always be the most difficult and most expensive part of the retail supply chain. However, if COVID has taught us anything about home delivery, it is that the customer’s expectations for a seamless experience will not change. As a result, retailers are making a pivot in how they use stores, re-thinking technology for home delivery, and putting the customer at the forefront of the decision-making process on delivery timeframes and modes. Contactless delivery options will continue to drive the market and likely will result in new technological advances. It is certainly an area we will continue to monitor.

The primary author of this article was Chris Cunnane.



May 29, 2020,12:25am EDT|14,007 views

Demand For These Autonomous Delivery Robots Is Skyrocketing During This Pandemic

Bernard Marr

One thing that the novel coronavirus COVID-19 did for all of us was to push us outside comfort zones and to adapt to new ways of working and living no matter how resistant we might be. From enabling telecommuting for workers who hadn’t done so prior to tackling video conferencing, we expanded our horizons and changed as a result. Another thing many were exposed to for the first time during this pandemic was autonomous delivery robots. I expect that like my family, who has used autonomous delivery robots for years now but increased our reliance on them to stay away from busy shops while social distancing, many will now want to keep using this convenient technology in a post-coronavirus world.

Demand For These Autonomous Delivery Robots Is Skyrocketing During This Pandemic


Massive Growth of Robot Delivery

The coronavirus outbreak may have limited business for many companies, but if you happened to be able to offer robots for delivery service like Starship Technologies could, business is booming. Robotic delivery services can promise contactless delivery, a highly sought-after service under mandates of social distancing. While autonomous delivery robots were already in use in some urban areas, airports, universities, hotels and large corporate campuses prior to the pandemic, demand for them is “expanding exponentially” since they couldn’t be infected with the novel coronavirus as human delivery drivers could. In Phoenix, Ariz., residents within a half-mile radius of Venezia’s New York Style Pizza could even get their pizza delivered by a robot.

Food and Medical Deliveries During Coronavirus

The six-wheeled delivery robots of Starship Technologies started by two Skype co-founders in 2014 were the ones my family relied on to deliver food while we were on lockdown for coronavirus. These bots can navigate around people and public spaces without a human driver. What was first appealing due to the novelty became routine during the pandemic to get small grocery or take-out orders from restaurants.

You can see a video of the delivery robot here:

Although Starship’s bots were in operation for years, the company is experiencing a surge of interest by many companies, including restaurants, grocery stores, and other delivery service companies as human delivery personnel either get ill or fear getting infected by the coronavirus. These bots have already completed 100,000 autonomous deliveries and traveled more than 500,000 miles.


Self-driving vans by start-up UDI delivered food when China was under lockdown during the pandemic. These vans and delivery robots rely on technology such as cameras, lidars, and deep-learning algorithms to successfully complete missions. Autonomous delivery vehicles help provide contactless delivery but might be the viable answer to closing the gap between the global desire for deliveries (quickly) and the labor shortage in a logistics system demanded by companies such as Alibaba that is preparing to handle 1 billion packages per day.

Chinese company JD.com was also quick to fast-track its autonomous delivery systems that resemble mini electric vans to make medical deliveries during the outbreak.

Bot Delivery Coming to a Street Near You

It’s just a matter of time—and the timetable has gotten a boost thanks to coronavirus—before delivery bots will become the new normal in most of our cities. Amazon completed a successful test run in Washington and then launched in Southern California in 2019 to use autonomous robots to complete the “last mile” of the delivery process (from the company’s local storage hub to the recipient’s address). The company’s battery-powered bot called Scout is about the size of a large cooler and can deliver small- and medium-sized packages. Its powerful sensors help it avoid obstacles along its path, including people, pets, trash cans, and even cars backing out of driveways. To accelerate the launch of these bots nationwide, Amazon is using virtual maps of American cities and having the bots run delivery simulations.

Amazon isn’t the only company getting into the autonomous robot delivery business. Many companies already create robots that serve enclosed premises such as corporate campuses, hospitals, and universities and might soon be seen on city streets. These bots deliver paperwork, food for snacks and lunches, lab tests, and more. Some of these companies are backed by large organizations such as Toyota and ThyssenKrupp or are off-shoots of well-known companies such as Segway and are all trying to develop their particular niche of service in autonomous delivery robots.

After the outbreak is controlled, we won’t go “back to normal” but will settle into a new normal. That new normal will likely have autonomous delivery robots in our workplaces, public spaces, and on our streets.




The challenges of last mile delivery logistics and the tech solutions cutting costs in the final mile

Shelagh Dolan 

Jan 21, 2021, 12:16 PM

As consumers increasingly turn to ecommerce for all their shopping needs, speedy fulfillment and distribution isn’t just a “nice to have” — it’s the expectation of every online shopping experience. And if logistics companies and their retail partners want a shot at thwarting the ever-looming threat of Amazon Prime, it needs to be a priority.

A big challenge for companies is same-day, final mile delivery. Courtesy of UPS

As a result, businesses have begun racing to develop new technologies and experimental supply chain models to increase parcel volume, expedite deliveries, and delight customers — all while trying to cut costs. Unfortunately, one of their biggest expenses and challenges is same-day, final mile delivery.

What is last mile delivery?

In a product’s journey from warehouse shelf, to the back of a truck, to a customer doorstep, the “last mile” of delivery is the final step of the process — the point at which the package finally arrives at the buyer’s door. In addition to being a key to customer satisfaction, last mile delivery is both the most expensive and time-consuming part of the shipping process.

What is the last mile problem?

If you’ve ever tracked a package in real time online and saw that it was “out for delivery” for what felt like forever, you already understand that the last mile problem is inefficiency. That’s because the final leg of shipment typically involves multiple stops with low drop sizes.

In rural areas, delivery points along a particular route could be several miles apart, with only one or two packages getting dropped off at each one. In cities, the outlook isn’t much better; what urban areas make up for in stop proximity is quickly negated by the near constant delays of traffic congestion.

The costs and inefficiencies of the last mile problem have only been further compounded by the continuous rise of ecommerce in US retail sales, which has dramatically increased the number of parcels delivered each day, as well as raised customer expectations to include not just fast, but also free, delivery.

What are the costs of last mile delivery?

As a share of the total cost of shipping, last mile delivery costs are substantial — comprising 53% overall. And with the growing ubiquitousness of “free shipping,” customers are less willing to foot a delivery fee, forcing retailers and logistics partners to shoulder the cost. As such, it’s become the first place they’re looking to implement new technologies and drive process improvements.

Technology solutions to improve last mile logistics

With the rise of the gig economy, many consumers are already familiar with the concept of crowdsourcing local services through digital platforms like Uber, Airbnb, and Postmates. Location-based crowdsourcing allows consumers to open a mobile app to hail a ride, book a place to stay, order coffee to the office, hire a handyman to mount a TV, send flowers to that special someone, or even schedule takeout to arrive just as they’re walking through their apartment door.

What ordering looks like from the Postmates app. Postmates

The crowdsourcing model has been prevalent in transportation, hospitality, and food delivery for some time now, and retailers are eyeing its low startup costs, asset-light operations, and improved customer experience to ease their last mile delivery woes.

With crowdsource technology, retailers, logistics partners, and consumers can connect directly with local, non-professional couriers who use their own transportation to make deliveries. Companies can get their online orders to customers faster, and customers can get their items when and where they want them. The freedom to make on-demand and scheduled deliveries also ensures that customers are home at the time of delivery — eliminating the need for a second (or third) attempt.

And with the ongoing integration and enhancement of automation across industries, it’s likely we’ll start seeing delivery robots, drones, and self-driving vehicles making many of these drop-offs in the not-so-far future.




Amazon’s Last-Mile Delivery is Reaching New Heights

By Vanessa Conforti


Digital technology is transforming Amazon’s supply chain through Amazon Prime Air, an initiative to develop a fleet of unmanned aerial vehicles (UAVs) to digitize and automate its last-mile delivery process.

Digitization of Delivery

Digital technology is transforming Amazon’s supply chain. In 2013, Amazon announced Amazon Prime Air, an initiative to develop a fleet of unmanned aerial vehicles (UAVs) to digitize and automate its last-mile delivery process.[1] UAVs will enable Amazon to deliver within 30 minutes, thus enhancing its customer promise of fast, convenient product delivery.[2]

Amazon’s investment in digitizing its own logistics operations will be a significant driver of future profitability, making this of notable concern for Amazon management.[3] In 2016, net shipping costs grew by 43%, outpacing net sales growth of 27%.[4] Although the vertical supply chain integration through UAVs would require significant up-front investment, it would ultimately lower variable delivery costs by avoiding markups from traditional third-party carriers. Additionally, electricity-powered UAVs would decouple Amazon’s shipping costs from the price of oil and reduce its carbon footprint.

When combined with Amazon’s digitized fulfillment centers, UAV delivery will help increase visibility of product movement from warehouse to consumer, thus providing Amazon with increased data which could help inform demand predictions.[5] Shorter lead time would also increase supply chain efficiency and limit the amplification of issues within the chain.


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To address the digitization megatrend in the short- and medium-term, Amazon is focusing on regulation and R&D.

Operating at the forefront of a new technology, Amazon is facing a regulatory environment that is not yet equipped to handle the change. Amazon is working with the Federal Aviation Administration (FAA) to develop an air traffic system that will enable safe operation of commercial UAVs.[6] In 2016, the FAA announced preliminary rules for autonomous drones, including weight limits, daylight-only operation restrictions, and designated no-fly zones (i.e. near airports).[7] The most limiting regulation for Amazon is that drones must operate within a visual line of sight (VLOS).[8]

Amazon has focused its R&D efforts in the UK, where airspace regulation has been less stringent. This year, Amazon opened a new R&D facility in Cambridge, UK where it continues to refine its sense-and-avoid technology and autonomous vehicle maneuverability.[9] In December 2016, Amazon successfully delivered its first package via UAV during a beta test in Cambridge, UK.[10]

Ultimately, Amazon’s fulfillment centers are at the core of its strategy to deliver to customers quickly. Amazon is expanding its network of fulfillment centers by over 30% year-over-year, bringing Amazon closer to end consumers.[11] This network will be a critical component supporting its UAV strategy.

Despite technological advances, regulation represents the greatest barrier to UAV delivery. Continuing to work with government and regulatory bodies around the world over the next decade will be critical to Amazon’s success in rolling out this potentially industry-altering service.

Getting Off The Ground: Additional Considerations

There are a number of additional considerations that Amazon management will need to address in order to make drone delivery a reality:

Air Traffic Control Capacity: Air traffic control tends to be the limiting factor on airspace capacity.[12] US Air Traffic Control currently manages 85,000 flights per day.[13] As more UAVs enter the airspace, finding ways to alleviate this bottleneck, such as creating a separate air traffic control system for low-altitude aircrafts, is critical.[14]

Safety and Security: In the event of a malfunction, a drone could fall from the sky and cause serious injury. Amazon needs to navigate potential legal consequences and proactively develop its technology to avoid these incidents. Amazon will also need to secure its drones to prevent hacking. In the wrong hands, drones could potentially be used by terrorists to deliver bombs. Unattended packages also present opportunities for theft. This risk could be mitigated by adapting and expanding Amazon’s existing locker system to create a network of secure personal mailboxes capable of receiving drone deliveries.

GPS Accuracy: Amazon will need to develop constraints for dealing with less-than-perfect GPS accuracy levels that prevent package delivery. For example, if a drone is uncertain about a delivery location, it should be programmed to return to the nearest fulfillment center.

Optimizing Fleet Size:  Given the capital-intense investment required, Amazon will need to optimize the size of its drone fleet relative to anticipated demand to avoid underutilization during periods of low demand, and avoid capacity constraints during periods of high demand (i.e. Christmas).

Weather: Weather could introduce significant variability to UAV flight paths and could inhibit Amazon’s ability to deliver during stormy periods. Amazon will need to establish procedures for mitigating customer dissatisfaction if they are unable to deliver on their 30-minute on-demand promise.

Outstanding Questions

In conclusion, digitization of last-mile delivery represents an enormous opportunity for Amazon to revolutionize the e-commerce and aviation industries. But do consumers really need such instantaneous delivery? Will consumers value 30-minute delivery more than their safety?



[1] Amazon.com, Inc., “Amazon Prime Air,” https://www.amazon.com/Amazon-Prime-Air/b?node=8037720011, accessed November 2017.

[2] “Amazon’s Jeff Bezos Looks to the Future,”60 Minutes, CBS, December 1, 2013, https://www.cbsnews.com/news/amazons-jeff-bezos-looks-to-the-future/, accessed November 2017.

[3] Wall Street Journal, “Today’s Top Supply Chain and Logistics News”, January 29, 2016, accessed via ProQuest November 2017.

[4] Amazon.com, Inc., December 31, 2016 Form 10-K, https://www.sec.gov/Archives/edgar/data/1018724/000101872417000011/amzn-20161231x10k.htm, accessed November 2017.

[5] Philipp Berttram, Stefan Schrauf, “Industry 4.0: How digitization makes the supply chain more e cient, agile, and customer-focused”, Strategy&, 2016, https://www.strategyand.pwc.com/reports/industry4.0, accessed November 2017.

[6] Amazon.com, Inc., “Revising the Airspace Model for the Safe Integration of Small Unmanned Aircraft Systems,” https://utm.arc.nasa.gov/docs/Amazon_Revising%20the%20Airspace%20Model%20for%20the%20Safe%20Integration%20of%20sUAS%5B6%5D.pdf, accessed November 2017.

[7] Lisa Eadicicco, “Here’s Why Drone Delivery Won’t Be Reality Any Time Soon,” Time, November 3, 2015, http://time.com/4098369/amazon-google-drone-delivery/, accessed November 2017.

[8] Federal Aviation Administration, “Summary of Small Unmanned Aircraft Rule,” June 21, 2016, https://www.faa.gov/uas/media/Part_107_Summary.pdf, accessed November 2017.

[9] “Amazon to Expand Development Centre in Cambridge, Boosting Investment in Machine Learning and other Research and Development Programmes”, press release, May 4, 2017, on Amazon website, http://phx.corporate-ir.net/phoenix.zhtml?c=251199&p=irol-newsArticle&ID=2269691, accessed November 2017.

[10] Amazon.com, Inc., “Amazon Prime Air,” https://www.amazon.com/Amazon-Prime-Air/b?node=8037720011, accessed November 2017.

[11] Amazon.com, Inc., December 31, 2016 Form 10-K, https://www.sec.gov/Archives/edgar/data/1018724/000101872417000011/amzn-20161231x10k.htm, accessed November 2017.

[12] Amazon.com, Inc., “Revising the Airspace Model for the Safe Integration of Small Unmanned Aircraft Systems,” https://utm.arc.nasa.gov/docs/Amazon_Revising%20the%20Airspace%20Model%20for%20the%20Safe%20Integration%20of%20sUAS%5B6%5D.pdf, accessed November 2017.

[13] Amazon.com, Inc., “Revising the Airspace Model for the Safe Integration of Small Unmanned Aircraft Systems,” https://utm.arc.nasa.gov/docs/Amazon_Revising%20the%20Airspace%20Model%20for%20the%20Safe%20Integration%20of%20sUAS%5B6%5D.pdf, accessed November 2017.

[14] Amazon.com, Inc., “Revising the Airspace Model for the Safe Integration of Small Unmanned Aircraft Systems,” https://utm.arc.nasa.gov/docs/Amazon_Revising%20the%20Airspace%20Model%20for%20the%20Safe%20Integration%20of%20sUAS%5B6%5D.pdf, accessed November 2017.

Comments  Nov 2017

As Amazon and its competition turns increasingly to automation, the problem of the last mile, or even the last 100 feet (delivery truck to front door), will become a huge focus. As shown in this article, even the most promising solution has many obstacles. In my prior role, I worked in the area of autonomous vehicle safety and certification for a government contractor. We had many systems and processes in place for verifying aerial vehicles to a degree of safety that would satisfy government standards. It was completely apparent that autonomy posed a major challenge to being able to quantitatively prove that one could meet these high standards. I think many of the commercial companies who have tried to enter this space underestimated how inflexible the government would be on this issue. I also believe the government’s inflexibility is completely justified. This is a matter of public safety and from what I saw, commercial companies were not even in the ballpark in terms of reliability so any negotiation was pointless. In addition, this doesn’t solve an important enough problem to justify changing standards. I will be very interested to watch this space unfold. In addition to regulatory issues, Amazon should also be looking into technology to reduce the noise created by UAVs (a potential public nuisance if not addressed) and more advanced localization techniques to supplement GPS. With these capabilities along with continued development of autonomy algorithms, I believe Amazon can bring to market safe UAVs that their consumers will welcome.


Amazon’s autonomous drones have the potential to change both regular consumer and commercial deliveries. While safety is a big concern in near-term, similar to the evolution of airplanes, I think we can expect the technology to improve rapidly in the near future. In this sense, I don’t think rapid delivery is at inherent odds with safety. I would also add that there are some emergency, non-frivolous use cases in which the speed could be need-driven (not just convenience-driven). For example, drones could be used to deliver medicine on-demand at the site of a car accident in a high traffic area.

Beyond the technology, there are a lot of implications for government oversight that are worth considering. For example, the introduction of drones puts considerable additional burden on the local civil aviation authority for monitoring in parallel to commercial aircraft. Amazon should think critically about how it can partner to make this as easy as possible for governments.



‘Future of last mile delivery’: Amazon reveals first custom electric delivery vehicle built with Rivian

BY TAYLOR SOPER on October 8, 2020 at 7:49 am

Amazon is lifting the hood on one of three custom-designed electric delivery vans it built in partnership with Rivian.

The new vehicle is 100% electric and features various technology such as sensor detection, exterior cameras that provide 360-degree views, Alexa voice integration, and more.

“We combined Rivian’s technology with our delivery logistics knowledge, and the result is what you see here-the future of last mile delivery,” Ross Rachey, director of Amazon’s Global Fleet and Products, said in a blog post.

Rachey noted that Amazon is working to build technology that supports physical charging infrastructure and “enhancements and optimization of our delivery stations.”

(Amazon Photo)

Amazon last year announced plans to purchase 100,000 electric vans from Rivian to bolster its delivery fleet; it is also a major investor in the Irvine, Calif.-based company. Amazon led a $700 million round for Rivian last year.

Amazon said today it will have 10,000 custom electric delivery vehicles on the road as early as 2022, and all 100,000 by 2030.

The Seattle tech giant in August inked a deal with Mercedes to buy more than 1,800 electric vans for the company’s delivery fleet in Europe. Mercedes also joined Amazon’s Climate Pledge, an initiative announced by the tech giant last year to become net carbon neutral by 2040.

Amazon will roll out 10,000 fully electric three-wheelers in India.

Amazon’s 2019 sustainability report shows that its greenhouse gas emissions rose over the previous year by 15%, illustrating the challenge the company faces in its quest to go carbon neutral.

The electric vehicles are part of Amazon’s increasing investment in its own delivery infrastructure of trucks, cargo planes and more.




Amazon Prime’s Direct Shipping Model To Cover Last Mile?


Posted on April 4, 2019

And now, the last mile gets a bit more crowded.

News comes that, as reported in This Just In, Amazon’s shipping and logistics service is operational, at least in part.

The service had been noted last year as a way for the eCommerce giant to compete with logistics companies like FedEx and UPS, with an eye toward moving tangible goods from sellers to Amazon-owned fulfillment centers. The service, said reports back then, would feature shipping prices cheaper than those seen with traditional logistics providers.

Reports now say Amazon Shipping is in fact a seller-to-customer service, moving beyond the fulfillment center.

In terms of mechanics, invited sellers can print labels from Amazon. The eCommerce firm will pick up packages from sellers’ warehouses each weekday, but deliveries to customers will span the entire seven-day week.

Ground shipments will arrive at their destinations within five calendar days, and as is germane to Prime, Amazon Shipping will fulfill those shipments to customers who live within a two-day shipping radius (via ground shipping) from seller warehouses.

The shipping service is operational for sellers that have warehouses in the greater Los Angeles, New York/New Jersey and Chicago areas.

The move, we contend, further crystallizes a strategy that uses Amazon’s scale to offer rates cheaper than those of other firms. As CNBC reported last year, when the shipments were focused on fulfillment centers, Amazon’s rates were as much as 50 percent cheaper than those offered by the likes of UPS.

That initial pilot program reportedly centered on the Los Angeles area – and now, at least according to the most recent headlines, the effort seems to have expanded, not just in terms of geographic reach but also scope (i.e., delivering directly to customers).

Shipping costs were $11.5 billion in 2015, and that tally was $27.7 billion in 2018.

In the past, FedEx has seemed a bit, well, dismissive of the eCommerce giant’s efforts to have a soup-to-nuts infrastructure and logistics operation.

“While there has been significant media interest in what Amazon is doing to expand their in-source delivery capability, this should not be confused as competition with FedEx,” FedEx said via a statement earlier this year. FedEx also said Amazon represented less than 1.3 percent of total revenues last year. “The global infrastructure, the technology, the capabilities and the knowledge needed to compete in our business is quite extraordinary, and we have built that up over 40-plus years.”

Ah, but now, with bringing delivery directly to customers, Amazon plants a flag more firmly along the last mile, where those deliveries have been traditionally handed to USPS and others. The company also boosted its Amazon Air efforts to target a 50-plane fleet and new regional hubs, and CNBC has cited reports from Wolfe Research estimating the company handles shipping for a bit more than a quarter of online orders.

The effort has been in the works for years – and Amazon, as we know, is not content to sit on its laurels. From selling books to selling … everything, from online commerce to contactless commerce through Amazon Go.

It’s not too far-fetched to think that delivery for Amazon sellers across the last mile becomes delivery for all sorts of firms – which should have FedEx and others re-examining their certainty that Amazon is now gearing up to compete much more fully.



Amazon Quietly Worming its Way Into the Auto Industry

By Egil Juliussen  03.11.2021

Amazon keeps extending its tentacles everywhere. Few ever anticipated the company would move into the auto industry, but now that we’ve seen Amazon reach into the markets for groceries and medical care, nobody should be that surprised to see the company probing into yet another seemingly unrelated area. Much of Amazon’s activity in the automotive arena isn’t readily apparent, nor is its growing influence in the automotive market, which is a good reason to write this column.

Amazon is quite unique in its strategy and long-term thinking (other companies could learn much from Amazon). Amazon is participating in the automotive and transport industry in multiple ways:

  • To deliver its products, Amazon is a major customer and user of automotive and transport products and services.
  • Amazon is an investor in automotive technology startups to retain its status as a leading innovator. This often make Amazon an early customer of new technology. This has led to multiple acquisitions of startups and probably more in the future.
  • History tells us that Amazon will keep entering new markets. It is reasonable to consider Amazon a potential competitor in new transportation segment such as robotaxis and goods delivery AVs.
  • Amazon AWS is a growing service provider to the auto industry across the four phases of creating, making, marketing, and using automotive products. AWS is especially growing in the development and usage phases of the software segments. AWS is also becoming a force in helping OEMs and Tier 1s managing automotive production and sales activity.

Amazon is doing so much in the auto industry that two columns are needed to cover it all. My first column will look at Amazon’s size, technology diversity and its role as a major user of automotive products for its logistics and goods delivery services. My second column will focus on Amazon’s impact on the autonomous vehicle industry and the growing involvement of Amazon AWS on automotive technology — from the software development to the decade-long software use phase of vehicle owners.

It is important to understand the size and growth of Amazon across multiple parameters. It is useful to understand Amazon’s four philosophies, mentioned throughout in its financial reports:

Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.

Amazon Size
Amazon is already one of the largest companies in the world and was ranked #9 the 2019 Fortune 500 list of the world’s largest companies. Amazon was #13 in the 2018 list and is likely to move up when the 2020 list is available.

The next table shows key Amazon financial information. I have extracted various segment information from Amazon’s 10K annual report and 4Q financial release.

(Source: Egil Juliussen)

Amazon’s total sales increased 37.6% in 2020 to over $386 billion including product sales of nearly $216 billion and service sales of $170 billion. Amazon uses three segments for its detailed financial reporting — N. America and International sales with AWS as the third segment. N. America is by far the largest segment at over 61% in 2020. International sales increased to 27% in 2020 from 26.6% in 2019.

AWS contributed 11.8% of Amazon’s revenue in 2020, a decrease from 12.4% in 2019 — due to AWS revenue “only” growing 29.5% in 2020 to $45.37 billion. AWS is by far Amazon’s most profitable business with 2020 AWS operating income at $13.5 billion or over 59% of Amazon’s total operating income.

Amazon’s 2020 net income was $21.33 billion or a growth of over 84% from 2019, which is much higher than sales growth. However, Amazon’s overall business profitability is on the low side with net income at 5.5% of total sales.

Amazon has added lots of employees in 2020 with much of the increase due to tremendous growth in e-commerce deliveries from pandemic impact. At year-end 2020, Amazon had 1.3 million full-time and part-time employees—an increase of 62.7% from year-end 2019. This excludes independent contractors and temporary personnel.

Amazon includes additional regional revenue information as shown in the above table. USA revenue was $263.5 billion or 68.3% of total sales. Germany provided 7.7% of revenue, UK had a 6.9% share and Japan accounted for 5.3% of revenue. Other regions had revenue of $46 billion or 11.9% of total sales.

Amazon also included net sales by revenue segments. The online store category was the dominant segment at over $197 billion or 51.1% of net sales in 2020. Third party sellers contributed over $80 billion or 20.8% of total sales.

Amazon’s subscription services include annual and monthly fees associated with Amazon Prime memberships, as well as digital video, audio book, digital music, e-book, and other non-AWS services. Total subscription revenue was $25.2 billion in 2020—an increase of over 31% from 2019. Subscription services reached 6.5% share of sales.

Other segments, primarily advertising services, and other service offerings, topped $21.4 billion or nearly 5.6% of net sales.

Amazon’s global shipping cost in 2020 was over $61 billion or 15.8% of total sales revenue. This is quite high compared to most companies and shows how important logistics and product deliveries are to Amazon. Amazon’s shipping cost as share of revenue has been increasing from less than 11% in 2015.

Amazon and logistics
It is time to look at Amazon’s logistics and delivery strategy to better understand the future of delivery methods and technologies. Amazon initially used logistics services from other companies but have been adding its own logistics capabilities—especially in the last decade. Amazon now has one of the largest logistics capabilities of any company in the world.

The next table summarizes most of Amazon’s logistics activities where data was available. The table has information on air and ground logistics capabilities. Note that Amazon’s various autonomous vehicle development and other activities will be covered in the next column.

(Source: Egil Juliussen)

Amazon Air, which was previously named Prime Air, is Amazon’s fleet of aircraft to move its freight in the USA and some foreign countries. Currently, Amazon has a fleet of 74 aircraft with more on order. Vast majority of the planes are leased, but Amazon has started buying its own. Amazon purchased 11 aircraft in January 2021 that will be operational in 2022 or possibly sooner.

Amazon’s focus is to cover the U.S. since the US is its main package delivery market. Amazon is expanding its airport gateway operations. Amazon is mostly using small airports that are located close to its package sorting and fulfillment centers.

The Amazon Prime Air name is now reserved for its future autonomous drone delivery network. Amazon started developing delivery drones in 2013. Amazon got FAA permission to start testing its drones in June 2019. By August 2020, the Amazon drone fleet experience surpassed several thousand flight hours. Amazon received FAA permission to test autonomous drone deliveries at the end of August 2020.

Amazon’s drones use a sensor-based electronics system to avoid crashes. Amazon is also developing its own autonomous drone management system that will provide low-altitude drone operations. The drone management system will enable communication and cooperation between drones regardless of who is operating them.

Amazon has not started package delivery via drones to consumers yet. Autonomous drone deliveries are clearly an important part of its long-term vision for 30-minute delivery windows.

This episode includes our conversation with Robin Gaster, author of the book “Behemoth: Amazon Rising.”

Ground transportation
For Amazon, ground transportation is a strategic weapon to deliver its e-commerce products faster and with less customer cost than its online and retail competitors. Amazon is using ground transportation in two main ways:

  • Long-haul and middle-mile transport between airport gateway locations and package sorting and fulfillment centers. Trucks are the main vehicles used for these transport routes. Autonomous trucks are sometime in the future.
  • Last mile delivery from fulfillment centers and Prime Now hubs to the customer locations. The main vehicles used are vans, but special electric bikes for goods delivery are used in some cities. Use of airborne drones and goods AVs are only a question of when and how fast.

Amazon’s current trucking strategy is to build a large third-party logistics network that is mostly based on small and independent companies. The recent addition of a proprietary truck brokerage app, Amazon Relay, is a key to grow and manage the transport business activities between Amazon and its Relay users. With this strategy, Amazon has built an in-house network of truck drivers who can pick up loads on a freelance basis.

Amazon takes an active role in helping entrepreneurs start and manage their trucking or delivery business. This has been a key to building Amazon’s delivery and trucking operation. A 2020 Amazon report provided some numbers on Amazon’s impact on small business including Amazon’s number of drivers in Amazon’s network. The link is here.

The table above show that Amazon has 82,000 last mile drivers with over 1,700 Amazon delivery partners. Many of the Amazon delivery partners participate in a program called Delivery Service Partner (DSP). Through its DSP program, Amazon helps entrepreneurs build their own business delivering Amazon packages. The DSP program provide discounts on a suite of assets and services, including vehicle leases and insurance. As part of DSP, there are 50,000 Prime-branded last mile vehicles on the road delivering packages.

One of Amazon’s Rivian vehicles, in Los Angeles (Source: Amazon).

Middle mile and long-haul service providers are small businesses that haul Amazon packages to and from fulfillment centers, and in and out of air hubs. They can build their business with delivery volume from Amazon. They have access to Amazon’s growing delivery technology and receive hands-on training. This has resulted in network of 13,000 drivers for Amazon’s middle-mile and long-haul transport business. However, these drivers can work for other companies if they want to.

I was able to find some data on Amazon’s transport equipment as shown in the above table. Amazon has around 2,000 Prime-branded trucks primarily from Volvo and Kenworth. Many of these trucks are equipped with driver monitoring systems (DMS) for safety. Amazon also have around 30,000 Prime-branded trailers.

Amazon is rapidly growing its van fleet for last mile delivery and is shifting to battery electric vehicles (BEVs). Amazon ordered 20,000 Mercedes-Benz Sprinter vans in September 2018. These are being used in Amazon’s DSP program. In February 2020 Amazon ordered 100,000 BEVs from Rivian and deployment of these vans started in Los Angeles in January 2021.

The last item is the above table is about Amazon’s delivery centers. Amazon has around 70 package sorting centers and about 60 Prime Now hubs. Prime Now hubs are used to shorten deliver times to a few hours in some cities. Amazon has around 110 large fulfillment centers in the U.S. and another 75 international centers.

Amazon is likely to open a large number of small fulfillment centers in the future. This may be needed to compete with Walmart’s thousands of stores that can provide rapid product delivery of online orders.

Other interesting Amazon projects
Since one of Amazon’s guiding principles is “passion for invention” it has and is developing many interesting and innovative products and services. The next table summarizes some of these innovations. Most of these products will have some impact on the auto and/or transportation industries.

Most of Amazon’s innovation create products and services that require lots of chips, electronics, IT systems and even more software—from embedded software clients to cloud software and SaaS.

Alexa is already well established in homes and many other systems. Alexa is also growing rapidly in car infotainment systems. Currently, Amazon’s Alexa website lists 27 car brands that come with Alexa functionality with a total of over 180 auto models. The brands include Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ford, GMC, Honda, Hyundai, Jeep, Kia, Lexus, Lincoln, Mercedes-Benz, Mini, Nissan, Toyota, VW and Volvo.

Key to Amazon’s In-Garage Delivery is a secure and convenient way to receive Amazon packages and groceries inside your garage. This requires select garage door openers that work with one-time codes that the delivery person can use to open the garage for drop off. The service was first launched in 50 cities in April 2019 to Prime members. In November 2020, the coverage expanded to over 4,000 cities. The potential user base is in  tens of millions of Prime members in the United States.

In April 2019 Amazon announced its Project Kuiper, a large broadband satellite constellation for broadband internet access. It may take up to a decade to deploy all 3,236 satellites planned for the constellation at a cost in the $10 billion range. Amazon won approval from the Federal Communications Commission to deploy the satellites, with at least half of them to be launched by 2026. Amazon is developing innovation antenna technology that should result in a lightweight, low-cost customer terminal with an antenna that’s only 12 inches wide. The satellite network will likely be providing a lot of bandwidth to Amazon and its Prime customer in a few years.

Amazon’s Project Kuiper is competing with SpaceX’s Starlink satellite constellation for broadband internet access. which already has 1,000 satellites launched and is planning for a total of 11,000 satellites.

Amazon’s Climate Pledge Fund — with an initial $2 billion in funding — will invest in visionary companies whose products and solutions will facilitate the transition to a low-carbon economy. The fund is focused on multiple technologies that will impact the auto and transportation industries:

  • Transportation and logistics
  • Energy use, storage, and management
  • Manufacturing and materials
  • Circular economy
  • Food and agriculture
  • Renewable energy technology

Amazon’s investments in wind and solar power will supply its operations with more than 18,000 gigawatt hours (GWh) of renewable energy annually. If successful, Amazon will achieve 100% renewable energy by 2025. Amazon is investing in building 26 new utility-scale wind and solar projects in Australia, France, Germany, Italy, South Africa, Sweden, UK, and U.S.

A recent Amazon project, named Vesta, received considerable coverage in the last week—a home robot. Information from Business Insider says it is a small home robot with cameras, display, microphone, and Alexa user interface. It will need substantial amount of processor, memory, sensor, and other chips. It sounds like proto-type product that with unknown market entry timing.

Next Amazon column
The next column will focus on two topics that has major implications for the auto industry — Amazon’s autonomous vehicle activities and the growing influence and use of AWS in the auto industry.




Plugging into Amazon’s fleet electrification strategy

By Mike De Socio

October 30, 2020

The interior of an Amazon Rivian van. Photo courtesy of Amazon

When Ross Rachey set out to electrify Amazon’s fleet of last-mile delivery vehicles a few years ago, he thought it would be a matter of matching the company’s needs to the right vehicle on the market.

It was not that simple.

“We were a little underwhelmed at the vehicles that were available to us when we looked across the industry. It’s not for lack of trying, lots of really smart companies working hard, but we couldn’t find a vehicle that suited our need,” said Rachey, director of global fleet and product logistics for Amazon.

The existing models didn’t live up to Amazon’s range and payload demands. And if the company’s fleet team did find something they liked, they couldn’t purchase it in the quantities they needed.

“We realized we needed to take an active role in accelerating the products and the technology,” Rachey said.

The reality is that charging infrastructure, electricity and utility connections — it’s the longest lead, probably the most challenging part of this equation.

So Amazon finds itself, through a partnership with Rivian, designing its own delivery vehicles and playing a large role in scaling up the electric vehicle market.

“We’re at the point now where we’re really comfortable placing big, bold bets. We’re comfortable being a first mover. And I think we’ve gotten to a point where we’re really comfortable taking risks,” Rachey said.

Amazon’s Rachey spoke this week with GreenBiz Senior Writer Katie Fehrenbacher during a session VERGE 20. Here are a few takeaways on what we need to rapidly scale EVs.

We need big players to take the lead

There aren’t many motivators as large as a 100,000-unit order for electric vehicles. But that’s the challenge facing Amazon’s partner Rivian right now, and it’s pushing the industry to think a lot bigger.

For scale, Amazon’s order is 100 times larger than similar orders from FedEx or UPS. And Rachey said more large-scale moves such as that could ignite this nascent industry.

“We as corporations and fleet purchasers and auto manufacturers — we have the ability to make it easier for consumers to adopt electric vehicles. We do that by advancing the technology on more aggressive timelines. We do that by building great products so that people can purchase more products,” Rachey said.

More fleet operators are likely to start moving in the same direction, but Rachey says the private sector should pick up the pace before government mandates make it non-negotiable.

“I’m in favor of any policy that makes consumer adoption easier, but we can’t sit around and wait for that. We as the corporate customers, manufacturers, battery suppliers, we need to move this curve faster,” Rachey said.

Brake lights surround the backend of Amazon’s custom electric van. Courtesy of Amazon

We need to design (and retrofit) infrastructure with EVs in mind

Rachey’s goal is to make Amazon’s electric fleet as easy to drive and fuel as the gas fleet. That means building out a robust charging infrastructure at Amazon facilities long before it will be needed.

“The reality is that charging infrastructure, electricity and utility connections — it’s the longest lead, probably the most challenging part of this equation,” Rachey said.

The first thing Amazon has done is design all new buildings with the ability to handle multiple types of fueling, with stronger energy connections to the grid and space onsite for eventual energy storage needs.

“Make sure that when you build a site, you haven’t created a one-way door that is going to be painful later to electrify,” he said.

For existing sites, Amazon is figuring out how to retrofit and already has started the work at thousands of locations across Europe and North America.

We need to develop strong relationships with utilities

Rachey says Amazon — and all early movers in this space — have an obligation to be good partners to regional utility companies. The earlier these private companies communicate their infrastructure needs, the sooner utilities can try to meet them.

“We are both an exciting customer, because we’re going to have very large energy demands, but it’s not lost on us that we’re a challenging customer, given the scale and the timelines,” Rachey said.

It’s likely that Amazon’s demands will outpace the utilities — Rivian is aiming to put the new delivery EVs on the road by the end of 2021 — but Rachey says the company is being as transparent as possible with its plans. He’s encouraged by the fact that everyone at the table, including policymakers, utilities, corporations and auto manufacturers, has the same goal: decarbonization.

“Our goals are all aligned, and that’s a really powerful jumping-off point,” Rachey said.




Amazon’s big holiday shopping advantage: An in-house shipping network swollen by pandemic-fueled growth

After struggling with shipping at the start of the pandemic, Amazon quietly built a logistics operation that rivals UPS.

The wave of online shopping during the coronavirus pandemic forced Amazon to grow and adapt its logistics operations. (The Washington Post)

By    Jay Greene   November 27, 2020 at 11:00 a.m. EST

SEATTLE — When the economy sputtered with the coronavirus pandemic‘s spread this spring, unemployment surged as employers laid off workers by the thousands.

Amazon took a different tack, hiring 400,000 workers to stow, sort, pick, pack and deliver goods from its warehouses across the country, and pushing its total employee count over 1.1 million people.

It didn’t stop there. The e-commerce giant leased 12 Boeing 767-300 cargo aircraft, bringing its air fleet above 80 jets. It added 220 package facilities since the start of the year, ranging from urban delivery stations to giant warehouses, according to an industry consultant.

Amazon says it will hire 100,000 workers as coronavirus sparks rise in online orders

Amazon announced on March 17 that it would hire 100,000 workers to manage surge in orders, as many people turn online for goods during the coronavirus outbreak. (Reuters)

Amazon used the crisis, when prices on everything from commercial real estate to cargo jets plummeted, to amass an empire already beginning to rival the U.S. operations of United Parcel Service and FedEx, long the most dominant logistics companies, which helped the e-commerce giant get its start. But its ambition reaches well beyond delivering parcels to its own customers, according to former Amazon executives. The company is building a logistics system to one day deliver packages for customers to compete directly against UPS and FedEx, something it’s already doing in the United Kingdom.

“They are building the world’s biggest package-delivery company,” said David Glick, a former Amazon logistics executive who serves as chief technology officer at Flexe, which helps retailers warehouse and deliver goods. “If you believe the carrier network is tapped out today, and it is, there is no other option.”

Amazon said on a recent earnings call that it boosted its fulfillment capacity — the collection of warehouses, delivery stations and drivers it uses to get packages to customers — by 50 percent this year, helping fuel $30 billion in total capital spending.

While Amazon’s move into shipping its own packages and freight has been building for years, the implications will provide it a stark advantage this holiday season, when Amazon’s rivals will probably wrestle with getting packages delivered by a network already clogged with pandemic shopping.

That will probably hand Amazon a massive advantage in a holiday season in which U.S. e-commerce purchases will climb 35.8 percent to $190.5 billion, according to a forecast by the research firm eMarketer.

(Amazon chief executive Jeff Bezos privately owns The Washington Post.)

When the pandemic started, there were few e-commerce companies that seemed less prepared than Amazon. It went beyond just logistics. Warehouse staff around the globe sounded alarms that company policies put their health in jeopardy. Rogue third-party sellers gouged buyers on such hard-to-find items as hand sanitizer and listed products making dubious claims about virus protection.

Meanwhile, shipping delays led customers to gripe about third-party sellers at the highest levels ever. The clogged network, and the new hurdles caused by the pandemic, led Amazon to throw gobs of money at the challenge. It sped up spending it had planned for next year on acquiring new warehouse space, to supplement a logistics network straining under the weight of pandemic-fueled shopping.

Amazon’s virus stumbles have been a boon for Walmart and Target

“We are erring on the side of having too much capacity,” Amazon’s finance chief, Brian Olsavsky, said late last month during a conference call with analysts. Amazon spokeswoman Rena Lunak said the company is ready for the holidays.

Even so, the added surge in holiday shopping could pose a challenge. Olsavsky noted that Amazon’s capacity will be “tight” this holiday season, and that the company continues to rely on shipping partners such as UPS and the U.S. Postal Service. When the pandemic shopping fades, Amazon will have a massive network, built when few were looking.

Amazon’s push into logistics echoes past moves into markets where longtime partners operate. The company has a long record of leveraging its dominance in one market, and the data it gleans from that hegemony, to dive into another. A House subcommittee that last month accused Amazon, along with Apple, Google and Facebook, of engaging in anticompetitive conduct, found that the e-commerce giant “routinely appropriates seller data to benefit its own private-label and retail businesses,” a charge Amazon denies.

In the case of its newer transportation business, Amazon has long studied the shipping routes of its partners, digging into the economics of population density of urban markets, said a former Amazon executive who spoke on the condition of anonymity because the person was not authorized to speak publicly on the matter. The more dense a region’s population, the more lucrative the route is for partners like UPS. Drivers can deliver more packages in a shorter period, and keep other costs, such as fuel consumption, down. It’s why Amazon has left many of its costlier rural deliveries to other partners, primarily the Postal Service.

UPS often shared proprietary routing data with Amazon executives, and gave them tours of its operations to sell them on its business, according to a former executive who wasn’t authorized to speak on the matter. As Amazon’s shipping aspirations became clearer, UPS shared less. But then Amazon hired dozens of logistics executives to help it map out its own delivery strategy.

The key is managing the costs in the most expensive part of a parcel’s trip to customers, the “last mile.” Learning from its shipping partners, as well as its own shipping operations, Amazon squeezes costs by focusing on high-density markets and dotting urban markets with delivery stations that allow it to reduce its reliance on other shipping companies. This month alone, Amazon has announced plans to open delivery stations near AtlantaColorado Springs and Syracuse, N.Y.

It’s not the first time Amazon has used its immense resources to disrupt an industry. As Netflix took off and DVD sales withered, the company debuted its Prime Video service. Amazon similarly pushed into corporate computing, disrupting the business models of legendary giants IBM and Oracle with the now-dominant Amazon Web Services.

For the time being, Amazon and UPS and the Postal Service are dependent on each other. (In 2019, FedEx announced it decided not to renew key domestic contracts with Amazon.) But analysts and former employees say the company’s hiring spree and the rapid expansion of its fulfillment capacity hint at its long game: to enter a new market large enough to make a difference to Amazon’s finances. Already, Amazon’s logistics business will handle 5.1 billion packages in the United States this year, just shy of the 5.3 billion packages UPS will ship domestically, estimates Montreal-based logistics consulting firm MWPVL President Marc Wulfraat. Amazon declined to comment on MWPVL’s data.

“I say they are building their own UPS because it’s not far from the truth,” Wulfraat said.

UPS spokesperson Kara Ross called the carrier’s relationship with Amazon “mutually beneficial,” noting that other large customers handle pieces of their transportation business.

“We are confident in our ability to compete and will continue to focus on opportunities that generate good financial returns,” Ross said in an emailed statement.

U.S. Postal Service spokesman David Partenheimer declined to specifically address the Amazon threat, but said generally that the agency competes by “providing reliable service at a competitive price.”

The holiday season in 2013 triggered an awakening for Amazon: UPS struggled to meet holiday shipping deadlines after a last-minute shopping surge caught the shipping giant off guard, tarnishing Amazon’s reputation when gifts didn’t arrive before Christmas. Within two years, Amazon launched Flex, an Uber-like service for package deliveries with contract drivers who often use their own cars to drop off orders at customers’ homes. Two years later, Amazon invited entrepreneurs to form small businesses to lease 20 to 40 gray vans with Amazon’s blue smile logo to expand further into delivery in metro markets.

The company now says it has 1,700 delivery-service partners in the United States, Canada, the United Kingdom, Spain and Germany. In total, more than 400,000 drivers deliver goods for Amazon, all of them either self-employed or working for other companies.

The company has moved quickly into airfreight, too. By 2016, Amazon had leased 40 jets to move its freight around the country. That same year, Amazon began tinkering with the prospect of taking on UPS and FedEx and began a pilot project in Los Angeles to soak up capacity in its shipping operations in off-peak times, a program it has since paused.

The company has created its own same-day services, offering Prime Now deliveries in many urban areas and grocery delivery from its Whole Foods Market.

In June, Amazon placed an order with Rivian, a Detroit start-up that’s building electric vehicles, to build 100,000 delivery vans starting next year. That will more than double the roughly 75,000 vehicles in Amazon’s delivery fleet, according to MWPVL estimates. (In January, UPS agreed to purchase 10,000 electric vehicles from London-based start-up Arrival.) And Amazon also agreed to buy the self-driving technology firm Zoox, expanding its portfolio of technologies to automate the delivery of packages.

The company is making those moves to dial back its dependence on traditional carriers. It’s a stark difference from Amazon’s earliest days, when it relied on UPS to help it roll out its Prime membership business that promised to deliver packages in two days to customers who paid in advance for the service. UPS handled nearly two-thirds of all Amazon U.S. deliveries in 2015, according to estimates from investment bank Cowen.

Amazon has also reduced its reliance on the U.S. Postal Service. To offer package deliveries on Sundays, Amazon turned to the Postal Service in 2013, which agreed for the first time to deliver packages at regular rates on Sundays. Amazon still counts on that service from the post office, as well as deliveries to costly rural routes, though the agency has seen its share of deliveries slide, too.

Amazon executives recently pushed their counterparts at the Postal Service for clarity on rate hikes that President Trump demanded, according to internal Postal Service documents obtained by The Post from American Oversight, a watchdog group that requested the records under federal open-records law. Postal Service executives fretted over Amazon taking business away if the rate hikes were passed.

The logistics buildup, and Amazon’s changing relationships with carriers, has led to Amazon handling the shipping of two-thirds of its package deliveries in the United States by the end of this year, according to MWPVL.

“That 67 percent is going to go north to 85 percent” in 12 to 18 months, Wulfraat said.

Compare that to 2015, when UPS, the Postal Services and FedEx delivered more than 97 percent of Amazon’s packages in the United States, according to estimates from Cowen.

Prime members first: Amazon is ranking customers and ramping up hiring to address coronavirus demand

The number of warehouses, sorting centers and distribution facilities Amazon owns or leases in the United States grew 46 percent by October this year, to 697 facilities, says MWPVL, which tracks Amazon’s footprint. At the end of last year, UPS owned or leased more than 1,000 U.S. logistics facilities with roughly 80 million square feet of space, the company disclosed in its annual regulatory filing.

Olsavsky said during the earnings call that Amazon’s overall square footage will climb about 50 percent by the end of this year, and half of that will be in the company’s transportation facilities.

One of Amazon’s new facilities is a candy factory in the beachside Boston suburb of Revere, Mass., that sat idle for nearly two years, after the 170-year-old New England Confectionery Co. shut down its Necco Wafers plant. In July, Amazon transformed it into an 800,000-square-foot distribution center.

That facility, and massive distribution centers near Denver and Chicago that also opened in July, reduce the time it takes Amazon to get packages to customers in those regions.

It’s not just space that Amazon has amassed this year. The 400,000 jobs it has added since the pandemic started, all of them permanent, some of them part-time, are part of the surge in front-line staff that has also led retail rivals such as Walmart, Target and CVS Health to add tens of thousands of workers to their payrolls this year.

At Amazon, those workers unload products from manufacturers and third-party sellers, stock them in the shelves of their massive warehouses and pick the goods from those shelves to pack orders from customers. Its giant warehouses are often located near airports, and sometimes close to other logistics hubs run by such carriers as UPS.

The hiring binge at Amazon, where the starting warehouse wage is $15 an hour, has fueled a jump in pay across the industry, said Brian Devine, a senior vice president at ProLogistix, a warehouse staffing firm that competes with the e-commerce giant to hire workers. ProLogistix’s average wage is $15.68 an hour, up from $14.02 a year ago, Devine said.

Amazon’s spending on workers, vehicles and warehouse buildings will give it an advantage this holiday season over competitors that will be relying on shipping companies that are already stretched thin.

Shipping capacity among the major carriers for this holiday season is largely tapped out by now, said Carson Krieg, co-founder of Convey, which provides digital technology to retailers such as Walmart and Home Depot to help them select the best shipping options. FedEx and UPS are both adding surcharges for business shippers during the holiday surge.

Many of Convey’s customers are turning to regional carriers, including LaserShip or OnTrac, and finding that even those options are limited.

The capacity constraints from carriers are likely to lead online retailers to move deadlines for guaranteed Christmas delivery earlier in December than they have in previous years to prevent customers from being disappointed. Amazon’s network may allow it to ship later in the month, as well as deliver last-minute with its two-hour Prime Now delivery network in major markets.

Amazon may have used proprietary data to compete with its merchants, Bezos tells Congress

Amazon’s burgeoning logistics operations may lead to the company competing directly with UPS and FedEx, shipping packages for customers beyond its third-party sellers. It has debuted Amazon Shipping in the United Kingdom to deliver items for e-commerce customers there.

The primary impediment to doing that right now: Amazon’s retail growth. The company’s retail operations, with both its products as well as third-party merchant sales, will continue to soak up the shipping capacity it creates with its own logistics operations, especially during the pandemic.

“There has always been an eye toward” building a carrier that could handle shipping for business customers, said the former Amazon executive who requested anonymity. “But with covid, they have enough growth.”





Amazon, MIT team up to add driver know-how to delivery-routing models

In a new competition, research teams will train machine learning models to factor in drivers’ deviations from computed routes.

By Larry Hardesty    February 17, 2021

Routing is one of the most studied problems in computer science. The traveling-salesman problem, or determining the most efficient route for a salesman who has to visit several different destinations, is the most famous example of a problem that is NP-complete, meaning that in all but the simplest instances, it’s computationally intractable.

Nonetheless, the Amazon Last Mile team, which develops planning software for Amazon’s delivery fleet, finds approximate solutions to the traveling-salesman problem (optimizing for safety, experience, sustainability, and efficiency) on a regular basis. Given a delivery driver and a set of package destinations, the Last Mile team’s software tries to find the most efficient delivery route.

Drivers, however, frequently deviate from those computed routes. Drivers carry information about which roads are hard to navigate, when traffic is bad, when and where they can easily find parking, which stops can be conveniently served together, and many other factors that existing optimization models don’t capture.

Now, the Amazon Last Mile team is collaborating with MIT’s Center for Transportation & Logistics (MIT CTL) with the aim of incorporating driver know-how into route optimization models. The two groups are sponsoring a competition, called the Amazon Last Mile Routing Research Challenge, in which academic teams will train machine learning models to predict the delivery routes chosen by experienced drivers.


At left is a delivery route computed by the Last Mile team’s optimization software, at right the route that a delivery driver actually chose to drive. (Map details have been omitted.) Green symbols (A and B) indicate the driver’s starting locations, purple symbols (also A and B) the ending locations.

Amazon is providing the training data for the models and will be evaluating submissions, with technical support from MIT CTL scientists. MIT CTL will publish and promote technical papers about the top-performing models. The winners’ prizes are $100,000 for first place, $50,000 for second, and $25,000 for third. Top-performing teams may be interviewed by Amazon for research positions in the Last Mile organization and be invited to present their work at MIT CTL

The historical data provided by Amazon will include approximate delivery locations, package dimensions, and travel times and distances between locations — information used by existing route optimization algorithms.

But Amazon will also provide more than 4,000 traces of driver-determined routes, which encode the drivers’ know-how. Using both sources of information, contestants will be able to build models that identify and predict drivers’ deviations from routes computed in the traditional manner.

After the researchers have submitted their models, Amazon will release another 1,000 routes’ worth of historical data for evaluation purposes.

“We are encouraging participants to develop innovative approaches leveraging artificial intelligence, machine learning, deep learning, computer vision, and other non-conventional methods,” says Julian Pachon, director and chief scientist at Amazon Last Mile. “The contest is seeking to produce solutions to the route-sequencing problem that outperform traditional, optimization-driven operations research methods in terms of solution quality and computational cost.”

The contest is open for registration beginning on February 22, and the research period starts on March 15, 2021.



J Transp Geogr. 2020 Oct; 88: 102825.

Published online 2020 Aug 12.

The distribution network of Amazon and the footprint of freight digitalization



The emergence of e-commerce as a dominant retail paradigm is associated with a rapid shift in the commercial footprint towards distributional-based consumption. Through the analysis of the geographical expansion, market coverage, and functional specialization of Amazon’s distribution network, the research underlines that digitalization has a pronounced physicality. E-commerce is favoring a transition from the conventional retail freight landscape towards a new physicality of freight distributions involving purpose-designed facilities, modes, and channels. The case of Amazon underlines a consistent locational behavior to achieve a distributional hierarchy of facilities granting logistical access to consumer markets. The distributional hierarchy is organized in three stages, which are procurement and fulfillment, distribution, and last-mile.

30 pages  worth the read


  1. Conclusion The transition towards e-commerce has reached a point where what used to be a marginal complementary activity became in direct competition with conventional retail. Accordingly, significant changes in the footprint of the retail sector have taken place, which is shifting from commercially-accessible locations towards transportation-accessible locations. The example of Amazon is illustrative of a Dablanc et al., 2014 4/26/2021 The distribution network of Amazon and the footprint of freight digitalization https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7419283/ 27/30 retailer using e-commerce to penetrate a wide range of retail segments. To support the requirement of distribution-based consumption, a hierarchy of specialized distribution facilities has emerged, each with its own locational, operational, and physical characteristics. It includes three stages: procurement and fulfillment, distribution, and last-mile deliveries. A look at the respective footprint of Amazon’s facilities underlined that their function is size-related, from large suburban e-fulfillment centers (of about 850,000 square feet) to small-sized fast delivery hubs and delivery stations usually located in central areas (of about 50,000 to 90,000 square feet). Medium-sized facilities (about 300,000 square feet), namely sortation centers, tend to be located in intermediate locations. The location of each facility represents a trade-off between economies of scale, operational requirements, market areas, land use density, lead time, and land cost. The weighted median center of most of Amazon’s facilities corresponds to the demographic center of the United States, a behavior that has previously been noted for the air hub selection of FedEx and UPS. This consistent locational attribute underlines the market servicing function of e-commerce as the goal is to achieve a distributional hierarchy of facilities to access consumer markets. The inbound crossdocking facility and the e-fulfillment center are the backbones of the fulfillment process, accounting for the most significant footprint. The sortation center, a medium-sized facility, is the core of the distribution process, allowing to route deliveries within metropolitan areas and for Amazon the option to interface with local post offices. It reconciles the apparent contradictions between the need to service high market density in central areas from low-density peripheral locations. The last-mile layer either focuses on fast delivery facilities such as Amazon Prime, or delivery stations where parcels are assigned on delivery routes. The co-location of facilities is common and appears to be a location-specific opportunity that involves two separate distribution functions within the same facility (each facility bears a different code and is therefore considered independently within the distribution network). It is used as an ad-hoc opportunity taking advantage of local market accessibility potential, existing volumes, and the footprint available. The functional specialization of e-fulfillment centers is prevalent, mainly along the lines of if the parcel is sortable or non-sortable. The nature of the item is secondary, while how it can be distributed is primary. If the parcel is sortable, it can be sent through regular parcel delivery services, while a non-storable parcel requires a different distribution channel because of bulk and weight considerations. Concomitantly, an emerging functional specialization of delivery stations between regular parcels and heavy deliveries is rapidly emerging. The growth of Amazon is reflective of both horizontal and vertical integration underlining an extensive command of logistics, by being able to address customer expectations for faster deliveries while counterintuitively offering an unparalleled diversity of items that retail stores cannot carry. Through horizontal integration, Amazon used logistical facilities to expand market coverage and lower lead time, realizing economies of density on which relied the prior expansion of major retail chains such as Walmart and Target. Through vertical integration, Amazon used logistical facilities to control distribution flows and channels, allowing to control how the parcels are routed within its distribution and last-mile facilities, including final deliveries to the consumer. The locational behavior of facilities seeks to maximize regional market accessibility. Still, it remains unclear if locations in a local context are optimal in terms of reducing externalities such as congestion. A closer look at the cases of Los Angeles and New York underlined a regionalism articulated around two freight distribution clusters, the fulfillment cluster with an agglomeration of large footprint inbound 4/26/2021 The distribution network of Amazon and the footprint of freight digitalization https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7419283/ 28/30 cross-docking and e-fulfillment centers, and a last-mile cluster serviced by small footprint delivery stations and fast delivery facilities (Amazon Prime, Amazon Fresh, and Amazon Pantry). In both cases, the sortation center was located at an intermediary location, acting as a gateway between the fulfillment and last-mile clusters. The rapid growth of e-commerce has opened new research avenues that are being actively explored. Among potential research opportunities are the market penetration and diffusion behavior of e-commerce, including its resilience to disruptions (e.g. COVID-19). This also includes entry strategies in new markets, such as developing economies that have seen the growing popularity of e-commerce but require substantial improvements in the logistical capabilities that e-commerce firms can provide. Case studies about the contextspecific aspects of e-commerce (spatial structure, income, demographic composition, regulations) would reveal much about the resulting locational choice adaptations. The impact of the footprint of e-commerce as a generator of externalities is of high relevance. Congestion, energy consumption, carbon emissions, and reverse flows (wastes and returns), could impede further developments as e-commerce receives greater public and regulatory scrutiny. Finally, e-commerce firms either originated as new ventures (such as Amazon, Alibaba, and Jindong) or as the digital adaptation of conventional retailers (many failed and were forced to curtail their footprint or go bankrupt). Consequently, several overlapping e-commerce distribution systems are operating in any given market. A closer look at their respective diffusion, competition and complementarity could reveal original adaptations of distribution networks and footprints.




Amazon is a logistics beast – A detailed teardown

Supply chains globally have been disrupted on account of Covid19. Yet, platform players like Amazon and Alibaba have demonstrated how their approach to logistics and supply chain management is not only scalable but also responsive and resilient to such disruptions.

This issue takes a peek under the hood of Amazon’s logistics capabilities and its potential in a post-Covid world.

In particular, a few insights before we get started

  1. Amazon’s logistics playbook involves two mutually reinforcing flywheels: an asset infrastructure flywheel (Increase asset base and offer as-a-service) and a data-driven predictions flywheel (Gather data and improve predictions).
  2. Mapping capabilities will be a key source of competitive advantage in logistics. Outdoor mapping for deliveries and indoor mapping for warehouse optimization. Amazon is well set up for both.
  3. Amazon’s integration into demand-side data, not just as a retailer, but as a platform, is its key strength in managing utilization of its logistics infrastructure.

There’s a lot of good stuff here.

Let’s get started…

First… some framing

Amazon’s approach to logistics is a masterclass in balancing vertical integration vs openness.

Amazon demonstrates that platforms don’t have to be asset-light, they just have to be strategic about asset ownership. Amazon increases asset ownership were such assets increase ecosystem dependance, and opens itself at other parts of the value chain where it needs third parties to bring in niche capabilities to complement its own.

Amazon stands to be among the biggest beneficiaries of the ongoing lockdown. Orders are up, boosting the company’s revenues an additional $800 million per month. Amazon manages the delivery of the majority of this ecommerce volume without relying on 3PL service providers. It estimates a decrease of approximately $2-$4 in cost per package shipping using its internal network versus utilizing legacy carriers.

Let’s look at the key capabilities that uniquely position Amazon for a play in logistics.


In the age of AI, Prediction is king

Amazon’s integration into demand is one of its strongest control points in logistics.

Why is demand integration such a big deal?

To answer that, let’s look at a simpler example from another company: Netflix.

You could argue that there were many things that drove Netflix’s success in the DVD rental business. But the one thing that Blockbuster could never compete with was the integration of demand-side queuing data (users would add movies that they wanted to watch next into a queue) with a national-scale logistics system. All this queueing data aggregated at a national scale informed Netflix on upcoming demand for DVDs across the country.

Blockbuster could only serve users based on DVD inventory available at a local store. This resulted in:

1) low availability of some titles ( local demand > local supply), and

2) low utilization of other titles (local supply > local demand).

Netflix, on the other hand, could move DVDs to different parts of the US based on where users were queueing those titles. This resulted in higher availability while also having fewer titles idle at any point.

Queueing data improved stocking and resulted in higher utilization and higher availability. It allowed Netflix to serve local demand using national inventory.

Traditional supply chains need to manage the trade-off between utilization and availability. The ability to predict demand solves this trade-off and informs stocking and logistics.

By correlating delivery times and delays with these variables, Amazon is creating a new layer of delivery intelligence on top of mapping data.

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Amazon’s prediction powerhouse


Amazon is well-positioned here, with multiple weapons in its arsenal.

  1. Ecommerce analytics

Amazon uses collaborative filtering and other data analytics to build deep customer profiles. These profiles include behavior data, interest graphs, affinity scores etc. Amazon uses these profiles to predict, suggest, and drive purchases on its platform but also uses this to inform its stocking.

  1. Anticipatory shipping

Amazon’s patented anticipatory shipping model predicts precisely where, when, and how much of a particular SKU to be made available at any of its fulfilment centers, so they are ready to ship when ordered. Thus, Amazon can scale operations while ensuring high availability and high utilization.

  1. Store analytics

Amazon uses in-store data to decide on product pricing, inventory management, store layout at Whole Foods, and Amazon Go stores. Sensors placed across the store detect the products that shoppers buy but also their interactions with the store layout. These stores will also double up as local collection points for Amazon’s delivery network, especially for essentials in a post-Covid world.

  1. Extra-fast shipping

Amazon also regularly tests what new products people might want with extra-fast shipping, and uses this to inform its stocking better.

  1. SKU optimization

Amazon constantly decides what to stock by looking at every product detail. For instance, it would stock a shirt based on data about color, length, silhouette, sleeve length and purchase history for similar clothing inventory.

Prediction at ecosystem scale

Here’s where this gets more interesting. Amazon doesn’t merely act as the most data-aware store in the world. It also extends this capability to the rest of its ecosystem.

  1. Seller analytics as-a-service

Amazon also packages some of these insights for its 3rd party resellers, enabling them to anticipate and plan for customer behavior. Planning for any customer behavior provides a significant advantage to merchants who usually rely only on post-sales data. To ensure better delivery, Amazon collaborates with its suppliers and manufacturers and tracks their inventory and provides recommendations on inventory management.

  1. Store analytics as-a-service

Amazon has a history of doing something really well, developing scale (in assets and/or data), and then packaging that capability as a service to third parties. It’s does this with AWS (tech infrastructure) and with FBA (warehousing infrastructure). It could do the same thing with store analytics by eventually offering store analytics to third party stores as-a-service.

  1. Supply chain management as-a-service

As manufacturers are move towards leaner operations, and as supplier audits increase in a post-pandemic world, Amazon is well positioned to provide end-to-end logistics and supply chain management as-a-service. Such a system would potentially analyze supplier data (e.g. delivery performance, audits, evaluations, credit scoring etc.) and create a reputation system for suppliers, enabling manufacturers to make better supplier decisions and reconfigure their supplier network. It would also allow suppliers and manufacturers to plug into Amazon’s logistics and delivery infrastructure seamlessly, removing the need for complex procurement.

All of these as-a-service models ensure that Amazon’s capabilities are used at industry scale and all the resultant data constantly trains Amazon’s prediction models, enabling it to develop the long tail of predictions.

Optimizing package interactions inside the warehouse

Amazon has built a massive warehousing and fulfilment footprint across the US, which now includes

1) Smaller warehouses closer to city centers where Prime Now promotes super-fast delivery options

2) Whole Foods locations for faster access to groceries and essentials

Amazon constantly invests in optimizing package interactions within the warehouses. This includes robots moving shipments inside the warehouses, gesture recognition to identify when a worker has placed a package on a shelf, automatic scanning of items that workers hold in their hands – all geared toward minimising the click-to-ship cycle time. Future patents suggest the use of UAVs for warehouse management and augmented reality enabled eyewear to increase warehouse worker’s efficiency.

The rise of indoor mapping

In its bid to maximise warehousing efficiency, Amazon has developed strong indoor mapping capabilities. These indoor mapping capabilities may be eventually rolled out into stores as well. Indoor mapping, as a capability, will likely become more important in a post-Covid world, where contact tracing will require tracking of movement inside indoor spaces.

Amazon’s last mile play

Controlling the last mile is critical for control over customer experience. The last mile makes up ~30% of overall logistics expenses.

Amazon has a host of logistics services in the last mile, including crowdsourced deliveries from external contractors (Amazon Flex and Amazon Logistics), Fresh food delivery (Amazon Fresh), Amazon Key to allow deliveries into your home, delivery to car trunks, remote door access to Amazon couriers, Amazon lockers and apartment hubs (Amazon hubs), and distribution by drone (Prime Air) ensure customer convenience.

Again, data is the reason Amazon gets this right:


Route optimization: Optimal routes for delivery drivers are derived from the data aggregated across customers, drivers, connected vehicles, weather forecasts, traffic monitoring systems, and digital and satellite maps.

Fleet planning: Amazon’s fleet management system calculates how many drivers are needed at any given time. It evaluates the weight and number of packages headed to the same destination and matches packages and destinations to fleet availability. This includes determining the order of packing boxes into a vehicle to enable the most effective unloading based on delivery address.

Mapping metadata: Amazon is gathering delivery metadata that puts mapping features into context. For instance, one big challenge for Amazon Flex delivery personnel is parking. Amazon constantly analyses late deliveries and identifies patterns and correlations with:

1) Building type (single address vs multi-address),

2) Access (Deliver at door vs at reception vs in mailroom)

3) Parking facilities (at building vs not)

By correlating delivery times and delays with these variables, Amazon is creating a new layer of delivery intelligence on top of mapping data. This prediction capability can again be opened as-a-service for third party logistics firms.

Amazon’s logistics playbook

Amazon’s logistics play follows a common playbook that we’ve seen in other parts of Amazon’s business:


Gain asset scale through supply-side integration

Gain data scale through demand-side integration

  1. Leverage supply-side scale to open out asset-as-a-service to ecosystem partners
  2. Leverage data across the ecosystem to constantly improve prediction models
  3. The more asset-as-a-service scales, the larger the ecosystem using Amazon’s logistics infrastructure and the greater the data capture for Amazon to constantly improve its prediction models

This virtuous cycle constantly strengthens Amazon’s logistics play.




Amazon is the fourth‑largest US delivery service and growing fast

Don Davis | May 26, 2020

Amazon has invested $60 billion since 2014 in building out fulfillment warehouses, leasing airplanes and buying delivery vans, says Bank of America Global Research. The retailer already delivers half of its own packages in the U.S. and could become a major competitor for the fulfillment business of other e-retailers in the years ahead.

Many online retailers were frustrated at the end of the 2013 holiday season when a combination of ecommerce growth and bad weather led to many consumers not receiving purchases in time for Christmas. But Amazon.com Inc. did more than gnash its teeth—it set out to establish its own delivery network to ensure that its customers would not be disappointed.

Since 2014, Amazon has spent $39 billion to build out a massive delivery network, according to Bank of America Global Research, a unit of big U.S. financial institution Bank of America Corp. And that investment soars to $60 billion when including capital leases for such items as warehouses and aircraft, the report says. (Amazon leased 97% of its fulfillment and data center space in 2019, the retailer said in its annual report.)

Amazon is approaching a truly vertically integrated logistics network on par with the largest delivery companies in the world.

 “Amazon is approaching a truly vertically integrated logistics network on par with the largest delivery companies in the world,” the report says.

That massive investment enabled Amazon, No. 1 in the 2020 Digital Commerce 360 Top 1000, to deliver 2.3 billion of the 4.5 billion parcels, or 58%, it shipped to U.S. consumers in 2019, the report says. Plus, that represented 22% of the 10.6 million online retailer parcel deliveries last year in the U.S. and made Amazon the fourth-largest U.S. shipping service, the Bank of America report says.

Internationally, Amazon handled 48% of its own deliveries—1.2 billion of the 2.5 billion packages it shipped outside of the U.S. in 2019, according to the Bank of America study.

What’s more, Amazon may compete more aggressively in the years ahead with its Amazon Shipping service to deliver orders for other online retailers, including those that do not sell on Amazon’s online marketplace. By 2025, Amazon could deliver between 7.5 billion and 9.7 billion packages in the U.S., including its own orders and those of other retailers. That would represent between 38% and 49% of the what Bank of America projects will be 19.5 billion U.S. online order deliveries that year.

However, the report notes retail competitors may hesitate to hand over fulfillment to Amazon now that it is a major rival in many merchandise categories: “Other B2C [business-to-consumer] retailers may not want to ship with Amazon, so Amazon may have to look to the B2B [business-to-business] market to grow its non-Amazon shipping business.”

Amazon announced in April plans to temporarily suspend its shipping service starting in June because of the pressure on its fulfillment network from increased demand since the COVID-19 outbreak.

Amazon spends more on shipping packages

Besides investing in fixed assets like warehouses, robots and delivery vans, Amazon is steadily increasing its variable expenses for shipping, including fees paid to carriers, employee salaries and vehicle fuel and maintenance. Those shipping expenses more than doubled from $16 billion in 2016 to $38 billion in 2019, and will reach $117 billion by 2025 as Amazon spends more on next-day shipping and online grocery delivery, Bank of America says.

Free next-day delivery for Amazon Prime members, which Amazon introduced last year, cost the retailer $1.5 billion in 2019, the report says. But Amazon is reaping rewards by offering free shipping: A Bank of America consumer survey found that shipping cost is the second-most important consideration for online shoppers after the price of the merchandise itself.

And Amazon Prime members are noticing that orders are arriving faster. A recent Bank of America consumer survey found 42% of Prime members said Amazon orders have arrived more quickly over the past year compared with only 19% of Amazon customers who are not members of Prime.

Amazon’s growing warehouse and delivery center network

Amazon now operates nearly 500 logistics facilities in the U.S. covering 173 million square feet and another 1,100 globally that cover 262 million square feet, the report says, referencing data from logistics consulting firm MWPVL.

Here is a brief description of the facilities Amazon operates, as described in the Bank of America report:

  • 10 receiving centers, often located near major seaports, take in products in bulk. These facilities average about 600,000 square feet.
  • Receiving centers ship merchandise to 170 fulfillment centers, the giant warehouses near major highways that average 773,000 square feet and employ thousands of workers. There are “sortable” receiving centers, some for large items and others for small products, where workers pick and pack orders for delivery to consumers. More than 200,000 robots assist employees at 50 of these sortable centers.
    Fulfillment centers for non-sortable items range up to 1 million square feet in size and ship large items such as rugs and patio furniture.
  • Packages destined for consumers outside of a fulfillment center’s region are sent to one of 20 air hubs where cargo planes fly parcels around the country. Amazon is spending $1.5 billion to expand its air hub in Hebron, Kentucky, which is near Cincinnati, to serve as the center of its U.S. hub-and-spoke air cargo system. It plans to complete that project in 2021. Amazon operates 40 cargo planes and plans to expand to 70 planes by 2023.
  • Whether from an air hub or a fulfillment center, packages go to one of 49 U.S. sortation centers, each averaging 340,000 square feet, where 100 to 300 workers per facility sort packages by ZIP code, putting them on pallets for shipment by truck.
  • Last-mile delivery is handled by delivery stations—Amazon has about 200 delivery stations in the U.S. and plans to open another 84 in 2020, according to MWPVL. These facilities typically average 129,000 square feet, employ 200-300 workers and are located near airports of major cities. Drivers pick up packages at these delivery stations to cover the last mile to consumer’s homes.

Who delivers packages for Amazon?

Deliveries to shoppers are handled by two types of drivers—those hired by Amazon’s Delivery Service Partners, companies that deliver exclusively for Amazon, and independent couriers who pick up Amazon packages when Amazon needs them as part of a program called Flex.

Amazon launched the Delivery Service Program in 2018, offering applicants willing to invest about $10,000 discounts on delivery vans, insurance, mobile devices and uniforms. There now are about 800 companies operating under this program with some 75,000 delivery drivers, according to the Bank of America report.

For this program, Amazon has acquired 20,000 Mercedes-Benz Sprinter vans. In September 2019, Amazon announced it would purchase 100,000 electric-powered delivery vans from a startup called Rivian for delivery from 2021 to 2030.

The Flex program began in 2015 and now employs couriers in about 90 U.S. cities, Bank of America says. Amazon provides auto insurance for Flex couriers, except in New York, and says those drivers can earn $18-$25 per hour.



Amazon Supply Chain Innovation Continues

By Chris Cunnane • 03/24/2021

Three years ago, my colleague Steve Banker wrote an article about the Amazon supply chain, asking if it was the most innovative in the world. In the article, he wrote about Amazon Relay, the acquisition of Whole Foods, Amazon the carrier, and the expansion of its warehousing capabilities. As the world is in year two of the Covid pandemic, and the supply chain landscape has changed, it is time to revisit Amazon’s supply chain and see how it has changed and how prepared it is for the future.

Amazon continues to grow and adapt with the changing world. And the company’s operations and technology have evolved over the last three years, with a focus on its trucking, warehousing, and air capabilities. How do each of these drive the Amazon supply chain?

Amazon Trucking

Over the last few years, Amazon has continued to expand its private fleet of long haul and last mile delivery trucks. The end goal is to reduce or eliminate its reliance on UPS, FedEx, and the USPS to make deliveries, thus becoming more profitable while controlling the customer experience.

While Amazon has rolled out its own digital freight matching marketplace named Amazon Freight, the company is always looking at new opportunities in this area. One way is to build its own pool of drivers, and to do this, the company is reportedly building an incubator for startup trucking companies. Essentially Amazon is recruiting hundreds of people to start trucking companies and only drive for Amazon. The incubator will provide business training and loans for entrepreneurs to start their own trucking companies.

According to sources, the incubator is not about tackling the challenges of today’s capacity crunch. Instead, the program is about looking at the future and where that demand will be, and how Amazon can take control of it with an in-house solution.

Amazon is also investing in the future of its trucks by exploring more sustainable fuels. The coronavirus pandemic helped push e-commerce to new levels; but as e-commerce sales soared, so too did heavy duty trucking on the roads to get goods to their final destination. And that increased congestion and pollution. Amazon is looking ahead at reducing carbon emissions in its fleet by upgrading to natural gas class 8 trucks. The company has ordered more than 700 compressed natural gas class 6 and class 8 trucks so far, as it looks to introduce new sustainable solutions for freight transportation. Amazon is working on testing a number of new vehicle types including electric, CNG, and others. The engines, supplied by a joint venture between Cummins Inc and Vancouver-based Westport Fuel Systems Inc, are to be used for Amazon’s heavy-duty trucks that run from warehouses to distribution centers.

Amazon has never shied away from making controversial decisions, and the latest technology the company is developing for its trucks fits squarely in this category. Last month, Amazon announced that it plans to equip its branded delivery vans with cameras powered by artificial intelligence. The cameras, which will always be on, are being promoted as an effort to improve driver safety. However, many workers and privacy advocates are concerned about drivers being continuously subjected to surveillance and data gathering.

The cameras, which run on Netradyne’s Driveri platform, are intended to improve safety for drivers and the community they are making deliveries in. Each camera system has four HD lenses to sense road conditions, driver speed, and collision detection technology. And while the cameras will be rolling at all times, Amazon has said that footage will only be uploaded if the driver triggers one of 16 actions, such as running a stop sign or speeding.

Amazon Warehousing

Amazon has spent years cultivating its logistics network to move items around the world as fast and as cost efficiently as possible. Part of speeding up delivery is to make sure that not just large cities have fulfillment centers in place. Amazon is building out a network of delivery stations in an effort to “blanket the suburbs.” The delivery stations are the final link in Amazon’s supply chain that begins with its large regional fulfillment centers. The delivery stations are smaller terminals that will receive Amazon goods and ship them out to end consumers. The company plans to open 1,000 parcel delivery stations in the near future.

This model is not just about speeding up deliveries in the US, however. At the beginning of the year, Amazon announced plans to open five new facilities in Quebec to speed up its delivery process. The company will add two sorting centers and its first three delivery stations in the province. Overall, the new facilities will create about 1,000 new jobs. The sorting centers will be located in Coteau-du-Lac and Longueuil, while the delivery stations will be located in Laval and Lachine.

The Covid pandemic has certainly been a boon to Amazon’s business. However, not all warehouse employees have been happy with the working conditions. This was especially true at the beginning of the pandemic when social distancing guidelines were first put into place. As a result, Amazon launched cameras and software within its warehouses to detect if and when an employee was violating social distancing rules. This type of software is still a work in progress as more people are vaccinated and guidelines are ever changing.

One of the biggest fears of warehouse workers is that full-scale automation will put them out of work. However, as most companies will say, and Amazon is no exception, robots and cobots are there to make things easier for employees. Amazon continues to invest in robots for its facilities, helping to remove menial and time-consuming tasks from workers so they can focus on other tasks. As things stand, Amazon sees fully automated shipping warehouses as a decade or so away. While Amazon will continue to invest in robots, they are also investing in their human counterparts.

Amazon Prime Air

For the last four years, Amazon has been aggressively investing in its air capabilities. What was formerly known as Amazon Prime Air, Amazon Air is a cargo airline operating exclusively to transport Amazon packages. The company has been acquiring jets to build out its fleet as it also awaits the completion of its air hub at Cincinnati/Northern Kentucky International Airport. As of this writing, Amazon’s fleet consisted of 22 Boeing 737-800’s and 55 Boeing 767-300ER’s, with another 9 aircraft on order. Amazon has also spent $131 million to acquire about 13.5 million shares of Air Transport Services Group (ATSG).

Cargo planes are not the only piece of Amazon’s aerial plans for the future. Drones are a big part of the future of Amazon, something Jeff Bezos has been touting for the last seven-plus years. In September of last year, Amazon took a big leap forward in its quest to use the autonomous flying vehicles as part of its home delivery strategy. The Federal Aviation Administration (FAA) designated Amazon Prime Air an “air carrier,” which allowed Amazon to begin its first commercial deliveries in the US under a trial program. There are still a number of regulatory hurdles that Amazon must clear before it begins making home deliveries, but this is clearly a step in the right direction for drone usage. Amazon joined Wing, the Alphabet Inc. subsidiary, and UPS as companies that have gotten FAA approval to operate under the federal regulations governing charter operators and small airlines.

And Amazon clearly sees drones as a big part of its future, based the amount of research and development it is putting into its drone program, especially in Europe. According to a story published last week, Amazon has doubled the number of staff employed by its Cambridge-based Prime Air team, where the company is developing its drone delivery service. This brings the total number of staff to nearly sixty in Cambridge; Amazon also has research tech hubs in London and Edinburgh. Amazon said last summer it was aiming to begin launching the drone service ‘within months’, announcing that the aircraft could travel up to fifteen miles and deliver packages under five pounds to customers in less than thirty minutes.

Final Thought

The Amazon supply chain continues to be one of, if not the most, innovative in the world. The company is investing in its trucking capabilities to reduce its reliance on other carriers. Amazon is also continuing to expand its warehouse technology and capabilities to make picking, packing, and shipping orders more efficient. And it is heavily investing in taking to the skies, with an emphasis on cargo planes and drones. It will be interesting to see where the Amazon supply chain goes from here.




HGI Sheds Interest in Amazon-Anchored Last-Mile Brooklyn Asset

BentallGreenOak acquired the asset on behalf of an institutional investor.

By Lynn Pollack | February 04, 2021 at 09:17 AM

    Privately-owned real estate investment firm Harbor Group International has sold its interest in an Amazon-anchored last-mile industrial property in Brooklyn to BentallGreenOak, on behalf of an institutional investor.

HGI and Turnbridge Equities acquired the 90,000 square foot Class A industrial property at 2300 Linden Boulevard and 835 Essex Street in a master lease transaction in May of 2018. At the time, the property was vacant, and the JV companies invested $2.6 million in improvements to convert it into a modern logistics facility.

2300 Linden was then leased to Amazon on a long-term basis, a move that both added value to the asset and underscored the e-commerce giant’s commitment to refining and beefing up its last-mile capabilities. Around 30% of new last-mile assets coming to market from 2020 to 2021 will likely be absorbed by Amazon as the company expands its last-mile delivery platform with both new and existing infill industrial assets in markets like Dallas-Fort Worth, California’s Inland Empire and East Bay, and South Florida. The company also tends to gobble up pricier last-mile assets, with an ever-widening gap between overall national logistics rents and the average rent Amazon pays.

“2300 Linden is a prime example of our ‘Last Mile’ industrial strategy,” said T. Richard Litton, Jr., president of HGI, in prepared remarks. “The property’s irreplaceable location within a 30-minute drive to 10.5m customers and in close proximity to JFK Airport, as well as its large, contiguous warehouse space, made it highly attractive to Amazon.”




Global Autonomous Last Mile Delivery Market (2020 to 2030) – by Application, Solution and Vehicle Type

October 12, 2020 08:09 ET | Source: Research and Markets

Dublin, Oct. 12, 2020 (GLOBE NEWSWIRE) — The “Autonomous Last Mile Delivery Market by Application, Solution and Vehicle Type: Global Opportunity Analysis and Industry Forecast, 2021-2030” report has been added to ResearchAndMarkets.com’s offering.

Autonomous last mile delivery consists of autonomous vehicles to deliver the product or service to customer’s doorstep without actually involving any human intervention in the entire process. It ensures that the product is delivered to the customer within a stipulated time without hampering the dignity and market image of the company. Increased usage of internet along with expansion in the e-commerce industry increase the demand for products to be purchased online, which requires a better and efficient means to deliver the product to the customer. Thus, to fulfill the rising demand for the logistics business, various last mile delivery operated companies and product delivery services are being adopted by the companies such as the use of drones and ground delivery vehicles to deliver products in lesser time.

The top market players have carried out various developments in this field and offer the product delivery service that has been adopted by other companies and governments; thereby, boosting the market growth. For instance, Amazon has launched its product delivery robot called Scout, which is of the size of a small cooler and can roll along sidewalks and delivers packages to the doorstep of the customer. This has made Amazon to introduce a new concept in the field of autonomous last mile delivery service. Similar other developments carried out by other companies fuel the growth of the market during the forecast period. Autonomous last mile delivery system market is anticipated to witness significant growth in the coming years, owing to increased demand for faster delivery of products to the customers and rise in technological advancements in delivery vehicles.

The global autonomous last mile delivery market is segmented on the basis of application, solution, range, vehicle type, and region. Based on application, the market is categorized into aerial delivery drones, ground delivery vehicles, self-driving trucks & bus, retail, and others. Depending on solution, it is fragmented into hardware, software, and service. By range, it is bifurcated into short range (&lessThan; 20 km) and long range (>20 km). Based on vehicle type, the market is divided into aerial delivery drones, ground delivery vehicles, and self-driving trucks & bus. Region wise, the market is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

The key players analyzed in the report include Airbus S.A.S., Matternet, Flirtey, Drone Delivery Canada, Flytrex, Amazon.com, JD.com, Inc., Marble Robot, Starship Technologies, Savioke, DHL International GmbH, United Parcel Service of America, Inc. and DPD and others that hold major autonomous last mile delivery market share.

Key Benefits for Stakeholders

  • This study presents the analytical depiction of the global autonomous last mile delivery market along with the current trends and future estimations to depict the imminent investment pockets.
  • The overall market potential is determined to understand the profitable trends to enable stakeholders gain a stronger foothold in the market.
  • The report presents information related to key drivers, restraints, and opportunities with a detailed impact analysis.
  • The current market is quantitatively analyzed from 2021 to 2030 to highlight the financial competency of the market.
  • Porter’s five forces analysis illustrates the potency of the buyers and suppliers.





Amazon last mile logistics hub in London approved


A last mile logistics hub, which will result in 23,000 fewer vehicle journeys in central London each year, has been given the green light by council planners.

In what is the first such scheme to be approved by the City of London Corporation, 39 car parking spaces within the London Wall Car Park will be transformed into a hub for Amazon Logistics.

It will enable the final leg of Amazon’s parcel deliveries to instead be undertaken by e-cargo bikes and people on foot.

Country director at Amazon Logistics, Kerry-Anne Lawlor, said: “Amazon is excited to have been chosen by the City of London Corporation as its partner for its first last mile logistics hub, supporting it in delivering freight targets laid out in the transport strategy.”

Amazon Logistics is expected to be able to complete all deliveries within a 2km radius of the hub without the need for vans. This covers the entirety of the City of London plus some additional parts of central London.

The City of London Corporation’s transport strategy outlines the need to reduce the impact of freight on the city through the use of last mile logistics hubs.

Alastair Moss, chair of the planning and transportation committee at the City of London Corporation, said: “The Amazon last mile logistics hub alone will take up to 85 vehicles off the roads each day, meaning up to 23,000 less vehicle journeys in central London every year.

“The City Corporation’s ambitious Climate Action Strategy sets a target of reaching net zero carbon emission by 2040 and radical initiatives, such as the Amazon logistics hub, will be key in realising that goal.”

The City of London Corporation aims to deliver two additional last mile logistics hubs by 2022 and is aiming for a total of five by 2025.




ABOUT SCAG SCAG is the nation’s largest metropolitan planning organization (MPO), representing six counties, 191 cities and more than 19 million residents. SCAG undertakes a variety of planning and policy initiatives to encourage a more sustainable Southern California now and in the future.


Noise, noise emisions, traffic congestion, vehicle size, parking, autonomous (local sings and regulations), emission vehicles, security, zoning, dock access, delivery locker locations,  parking around last mile locations, local street restrictions, …



Explainer: Is middle-mile delivery a logistics frontier or retail buzzword?


For retailers, the boring back-end leg of the supply chain has quietly sparked a flurry of innovation.

The “middle mile” — the part of the supply chain in which goods are shipped from a supplier’s warehouse to a retail store — might not have the buzz or high profile of last-mile delivery, but a growing number of retailers see middle-mile logistics as a quick path toward slashing delivery costs. For these companies, focusing on this often-overlooked part of the supply chain could make them more competitive as the online delivery space grows more crowded.

One much-hyped way that retailers are doing this is through automation and self-driving vehicles. For example, the company, Gatik — a maker of self-driving software — just announced a new partnership with Canadian grocery giant Loblaw to deploy self-between Loblaw’s Toronto warehouses and its retail stores in order to complete middle-mile shipments. That follows a recent collaboration between Gatik and Walmart to bring autonomous tech to the middle leg of the retailer’s supply chain. Meanwhile, companies like TuSimple and Waymo have raced to build up autonomous trucking fleets this year. Others in the fulfillment game — like Amazon — have tried to streamline their middle-mile delivery by bringing it in house. 

But while startups have positioned the middle mile as the most likely spot for automation to take off, the reality is more complicated. “It’s really a sideshow,” said David Marcotte, svp of Americas at Kantar. Because of the massive PR risks associated with an automated truck accident, plus the relatively unremarkable cost savings that automating middle-mile delivery might bring, self-driving trucks — even on the backend — seem unlikely to take off anytime soon, he said.

What is middle-mile logistics?
“Middle mile” is a startup term, according to Marcotte. In the industry, the more common expression is “local distribution.” Because of the term’s novelty, the exact definition 
can get fuzzy, but it’s helpful to compare middle-mile deliveries to the other steps in the supply chain.

Starting at the beginning, “first mile” refers to the transport of goods from a supplier warehouse — for example, moving a ream of toys out of the Mattel warehouse — and into a retail distribution center. Then comes the middle mile: when all those toys from a regional distribution center — for example — are shipped to a patchwork of local Targets. The last mile, by contrast, is when Target ships a small box of those toys from its local store to your actual home.

Retailers and e-commerce companies have given plenty of attention to the last mile of their delivery services to make their overall shipping services faster and cheaper. Amazon and Walmart each contract home deliveries out to postal carriers or individual gig workers through their respective Amazon Flex and Spark Delivery programs.

Middle mile, by contrast, has gotten less attention. Until recent years, most retailers — like Walmart — have relied on outside freight companies like Schneider and J.B. Hunt to handle their shipping between warehouses and retail stores or fulfillment centers. Others operate through a brokerage system, which Marcotte compared to a “reverse auction”: a retailer will put out a job, and “various, independent consolidators or truckers put a bid out for it,” he said.

What makes the middle mile unique?
On the surface, the logic for why retailers should focus more on their middle mile makes sense: these companies are eager to cut down on their shipping costs. Because of the skyrocketing demand for freight transport, middle-mile trucking 
can get pricey. As a result, some retailers are looking at ways to rethink this part of the supply chain.

One reason that companies like Gatik are betting on middle-mile logistics is that it’s the only step in the shipping process that is entirely repetitive. For retailers, the suppliers they’re going to buy from will often change — one day it’s Mattel, another day it’s Hasbro — and so will the customer address where they will ultimately delivery a given item. But one thing that won’t change is the path from a retailer’s fulfillment center to its own brick-and-mortar stores. Whoever the customer is, and whoever the supplier is, the middle-mile route is always the same. That makes middle-mile an ideal spot for the kinds of ambitious tech upgrades that still feel theoretical across the rest of the logistics sector.

Walmart, for one, has identified its middle mile as a hub of “milk runs” — repeated, easy-to-automate trucking routes. If the retailer succeeds in populating even just that one leg of the logistics system with self-driving trucks, the company estimates it might be able to cut middle-mile costs by half.

“Middle-mile logistics hold a lot of potential for cost savings in most networks,” said Maggie Turner, the national account manager for service provider GlobalTranz.

The theory goes that, should automated trucking become a significant part of shipping, middle mile will be the space it shows up first. Turner called the middle mile “one of the most practical applications for automated vehicles to integrate into delivery networks,” adding that “from a safety and industry adoption perspective [middle mile] makes sense and is generally where we anticipate autonomous delivery to start.”

But will changes to the middle mile really take off?
Although automation is a popular fix, it isn’t the only approach. This year, Amazon has worked to bring its middle mile largely in-house. Roughly 
two thirds of all of Amazon’s middle-mile shipments are now handled through its Relay program, in which independent truckers book gig driving jobs — similar to driving for Uber.

The problem, according to Marcotte, is that all these middle-mile revamps — from gig approaches to automation — don’t offer very big cost savings. It can vary widely, and certainly some retailers might be able to save more than others, but in general, middle-mile costs might only total 20% of overall logistics costs.

“At the moment they’re focusing on endpoint delivery,” he said, noting that convincing customers to pick up their online orders in store — which can cut out the whole last mile of the delivery chain altogether — offers much bigger savings. By contrast, “the movement of product from warehouse to warehouse is just not that big of a deal,” he said.

The middle mile might in fact be the first place that automation really gains a foothold. But that future is still probably many years out. Marcotte noted that many startups, when they see a process that is repetitive, think: “Repetitive should be automated,” he said. “They ask, can we take labor out of the question? But that doesn’t mean it’s a good solution.”



Prime members first: Amazon is ranking customers and ramping up hiring to address coronavirus demand


Amazon’s inability to deliver household staples such as toilet paper and bleach to many customers led the company to reduce sales of nonessential items and prioritize shipping to members of its $119-a-year Prime service


Prime-branded semi-trailers sit at a fulfillment center in Baltimore. (Andrew Harrer/Bloomberg)

By    Jay Greene   March 24, 2020 at 6:00 p.m. EDT

SEATTLE — Amazon this week added a new measure to try to triage its flood of orders and shortage of goods during the coronavirus pandemic: prioritizing its $119-a-year Prime members.

The company on Monday offered delayed delivery times for non-members of Prime on many nonessential items that are available — such as hair dryers, Tic Tac candies and pill pockets to help dogs take medicine.

The move follows weeks of inability to stock and ship household staples — ranging from toilet paper to hand sanitizer to bleach — at a time when shoppers are more and more reliant on Amazon while they are staying at home to prevent the spread of the virus. Amazon has said it will hire 100,000 workers, limit shipments to its warehouses from its third-party sellers, and restrict orders of “lower-priority shipments” to customers in France and Italy, where the outbreak is particularly acute.

Amazon says it will hire 100,000 workers as coronavirus sparks rise in online orders

Amazon announced on March 17 that it would hire 100,000 workers to manage surge in orders, as many people turn online for goods during the coronavirus outbreak. (Reuters)

But even Prime members have reported struggles to get many items on time. Prime Now and AmazonFresh grocery delivery spots are nearly impossible to find, and the company even temporarily shut down its Prime Pantry program, which allows customers to fill a box with household items.

The panic buying triggered by the coronavirus was as big an event as Black Friday or Cyber Monday, events for which Amazon would typically spend months planning, said David Glick, a former Amazon logistics executive who now serves as chief technology officer at Flexe, which helps retailers warehouse and deliver goods.

“In this case, the thing you planned for, Cyber Monday, happened overnight,” Glick said. “It was a shock to the system.”

(Amazon chief executive Jeff Bezos owns The Washington Post.)

Amazon spokeswoman Keri Bertolino said in a statement Monday that some deliveries have been delayed as the company works to balance customer needs with safety of its workers.

“We’ve changed our logistics, transportation, supply chain, purchasing, and third-party seller processes to prioritize stocking and delivering items that are a higher priority for our customers,” she added.

Bertolino said on Tuesday the company was adjusting its systems to prioritize the delivery of essential household staples, medical supplies and more when the longer delivery times appeared for non-Prime customers. Now, delivery times for non-essential items are the same for Prime members and those who had not subscribed to the service, she said.

There is no playbook to manage the crisis. “We’re learning as we go,” Amazon’s top policy and media executive Jay Carney told CBS This Morning last week. The company’s top brass, including Bezos, are holding daily “brainstorming sessions” to help customers and employees, Carney said.

“My own time and thinking is now wholly focused on COVID-19 and on how Amazon can best play its role,” Bezos wrote to employees Saturday, referring to the disease caused by the virus.

The shifting tactics illustrate how caught off-guard Amazon was by the sudden, intense surge of shopping for household staples as the coronavirus spread across the country and around the world. The online retail giant is heavily reliant on both manufacturers and third-party sellers on its site who are based in China. It has also built its own giant logistics network in the United States, including planes, trucks and a contract home delivery fleet, upping the pressure.

Amazon garnered about 38 percent of the U.S. online shopping market last year, according to estimates from the research firm eMarketer. It also has more than 150 million Prime members worldwide whose benefits can include guaranteed one-day shipping, free two-hour delivery and other perks. The company internally has pushed its shipping speeds, training consumers to want them faster and faster — adhering to one of its core leadership principles, “customer obsession.”

Even though the crush of business is probably generating more revenue than Amazon could have possibly expected, its inability to get customers basic products they want is frustrating shoppers such as Dylan Gerr. Like a lot of Americans, the 21-year-old University of Missouri senior was in the market for toilet paper and his local Walmart was out. He thought he lucked out, finding a few rolls on Amazon. But when he purchased the item, he learned it wouldn’t arrive until May 22.

“I’m sitting there thinking, ‘Are you kidding me?’ ” Gerr said. “I’m not going to wait until May 22.” He’s still without toilet paper.

To help resolve its issues, Amazon is taking once-unthinkable steps to lessen the bottleneck that is preventing customers from getting the products they most want. It’s now offering Prime members the ability to get some items weeks earlier than non-Prime shoppers. Prime customers looking Monday to buy a Conair 1875-watt hair dryer, for example, were promised delivery of the item by Friday, while non-Prime members had to wait until April 21.

“There are so many orders that getting stuff out the door to customers is problematic,” said James Thomson, a former senior manager in business development at Amazon and now partner at brand consultancy Buy Box Experts. “Amazon does not want to hurt its Prime customers.”

Amazon‘s scramble to address the crisis has come as a rapid-fire list of decisions to try to fix the problem. Last week, the company told the third-party merchants who sell on its site that it will limit the items it receives at warehouses, prioritizing household staples, medical supplies and other high-demand products that remain difficult to find on the site.

Other cracks emerged Monday morning, when customers of Amazon Business, the company’s site targeted at business owners, could purchase an 18-pack of Charmin toilet paper not available on its main consumer site. Those listings were in error, Bertolino said, and by Monday afternoon, the company moved to make those products available to all its customers.

Amazon is also wrestling to crack down on price gouging by third-party sellers, some of whom offer astronomical prices for much-sought after goods such as masks and hand sanitizer. On Monday, Amazon said it’s monitoring prices around the clock, “through both automated and manual means,” and that it is working with law enforcement to hold price gougers accountable. It added that it has suspended more than 3,900 selling accounts in its U.S. store for violating fair-pricing policies.


Prime Day, as seen in Germany last year, is one of Amazon’s busiest days. Coronavirus ordering has replicated that effect, but without the planning. (Krisztian Bocsi/Bloomberg)

Meanwhile, Amazon’s plans to hire 100,000 workers as quickly as it can have prompted a media blitz. Commercials advertise four-hour shifts picking groceries at Whole Foods, while Carney has made the rounds to the major news networks to talk about the hiring, plus safety measures and higher wages. The company is targeting its pitch at workers who have been laid off or idled as a result of the outbreak.

Bertolino declined to detail how those new hires would be deployed, except to say they’d work at warehouses, transportation operations, stores and make deliveries.

For comparison, Amazon hired 200,000 seasonal workers for its holiday season last year — a massive undertaking even while people aren’t under lockdown. And it’s facing nearly as much competition as it would for the holiday season, too, as other major retailers struggle with the same out-of-stock issues and roll out similarly ambitious hiring plans.

Walmart plans to hire 150,000 workers. Dollar General and CVS each want to hire 50,000 workers. And Monday, Instacart, the grocery-delivery service, said it’s looking to add 300,000 “full-service shoppers.”

There’s no guarantee that Amazon or the other companies will be able to solve the problem with a flurry of job openings. Logistics experts expect supply-chain disruptions to continue to ripple from China, where factory work is resuming as the country begins to emerge from its own lockdowns.

Meanwhile, workers at Amazon’s warehouses in both the United States and Europe have sounded alarms about concerns over workplace safety as the coronavirus has spread. The company has acknowledged cases in its warehouses in New York, as well as Italy and Spain. Some workers have said they are working under conditions that don’t always allow for social distancing or proper hand washing.

Amazon disputes those claims and says it’s working to keep its warehouses clean and its workers at safe distance apart from one another. The company is betting that laid-off workers at restaurants, retail stores, hotels and elsewhere will want the jobs.

“That’s the million-dollar question,” Glick said.

For all the challenges Amazon faces in getting customers what they want, it also appears to be marshaling the resources in a way some smaller rivals can’t. In addition to its massive hiring binge, Amazon is also increasing pay for hourly employees through April by $2 an hour in the United States, 2 pounds an hour in the United Kingdom, and approximately 2 euro an hour in parts of the European Union. The company said that will cost $350 million, a drop in the bucket relative to the $280.5 billion it sales it generated last year.

Few other companies have the financial wherewithal to absorb those types of costs — particularly during a crisis.

“Anyone else who is on the brink is going to get crushed,” said Jason Boyce, a onetime merchant on Amazon who is now a consultant to third-party sellers.

Updated April 19, 2021



Amazon may have used proprietary data to compete with its merchants, Bezos tells Congress

Jay Greene
   July 29, 2020 at 7:43 p.m. EDT

Amazon chief executive Jeff Bezos testified that he couldn’t confirm that the company didn’t use data it collects regarding sales of products in its marketplace to launch its own private-label goods.

It was among the most surprising revelations during a day-long hearing Wednesday that brought Bezos and the CEOs of Apple, Google and Facebook before a House antitrust subcommittee investigation on the clout of the tech behemoths. Rep. Pramila Jayapal (D-Wash.), who represents the Seattle area where many Amazon employees work, pressed Bezos on whether his company ever used data from the sales by third-party merchants in the marketplace to make business decisions.

“What I can tell you is we have a policy against using seller-specific data to aid our private-label business,” Bezos replied. “But I can’t guarantee you that policy has never been violated.”

 (Bezos owns The Washington Post.)

A year earlier, an Amazon lawyer, Nate Sutton, testified before the same committee that the company did not use any specific seller data when creating its own private-label products. Doing so would illustrate the power that Amazon wields, and that rivals can’t match, that allows it to peer into detailed data about products that sell well to debut its own homegrown goods.

Jayapal cited Sutton’s testimony, and Bezos’s subsequent acknowledgment that he couldn’t make the same statement, to illustrate the committee’s suspicions regarding the e-commerce giant.

“The issue that we’re concerned with here is, is very simple. You have access to data that far exceeds the sellers on your platforms with whom you compete,” Jayapal said.

The acknowledgment came during Bezos’s first time testifying before Congress. Like all of the other executives, he testified remotely because of concerns regarding the coronavirus.

Amazon shoppers often don’t realize they might be buying items from third-party merchants when they purchase on the e-commerce site. The company counts more than 2.5 million third-party sellers on its online bazaar, and Bezos testified that about 60 percent of all physical-good sales on Amazon come from those independent merchants. Those sellers augment the goods that Amazon itself carries, and makes it harder for retail rivals such as Walmart and Target to compete on product breadth.

A Washington Post investigation showed the ways Amazon flogs its private-label products even when consumers are trying to buy familiar brands that compete with it. And The Wall Street Journal reported on Amazon’s use of individual seller data directly to compete with those companies, even though the company had previously denied doing so.

Amazon’s power over the third-party merchants on its site was a recurring theme throughout the hearing. The committee chairman, Rep. David N. Cicilline (D-R.I.) asked Bezos about an apparel company that makes goods for construction workers and firefighters that accused Amazon of stealing its idea. The company found itself competing against Amazon, which suddenly made an identical product and sold it at a price the apparel company believed couldn’t be profitable. Its sales went “to zero overnight,” Cicilline said.

The company described the relationship it had with the marketplace as “Amazon heroin, because you just kept going, and you had to get your next fix, your next check,” Cicilline told Bezos.

“I have great respect for you and this committee, but I completely disagree with that characterization,” Bezos replied.

Rep. Jamie Raskin (D-Md.) pressed Bezos on the company’s use of its giant marketplace to favor its own products. The lawmaker asked Bezos about Amazon’s voice-activated Echo speakers prompting users to buy the company’s private-label batteries when they might be shopping for other brands. Amazon has previously introduced features that try to convince shoppers to add its own private-label brands to their digital shopping carts just before selecting competing items.

How Amazon’s quest for more, cheaper products has resulted in a flea market of fakes

While Bezos said he did not know whether the Alexa voice service that runs on its Echo speakers was “trained” to promote Amazon’s private-label products, he did concede that the company plugs its goods in the marketplace in a way that third-party sellers can’t.

“I’m sure there are cases where we do promote our own products,” Bezos testified, calling it a “common practice in business.”

One area where Bezos deflected responsibility was the sale of counterfeit goods on the site. When Rep. Hank Johnson (D-Ga.) noted the widespread availability of counterfeit items in Amazon’s marketplace sold by third-party merchants, Bezos suggested that Congress should enact tougher laws targeting fraudsters.

“I would encourage this body to pass stricter penalties for counterfeiters and to increase law enforcement resources to go after counterfeiters,” Bezos testified.




Amazon sellers say online retail giant is trying to help itself, not consumers

Regulators are probing the online retail giant for potential violations of antitrust law and abusing marketplace power.

Brandon Young sells around $10 million worth of products a year on Amazon. But he’s one of many sellers frustrated by what they say is a tilted playing field on the platform, particularly when it comes to competing Amazon private labels.

By    Jay Greene   Oct. 1, 2019 at 11:01 a.m. EDT

SEATTLE — When Jeff Peterson’s Amazon seller account was hacked recently, he frantically tried to reach Amazon’s customer service for help restoring access to his sports memorabilia store.

As nearly 4,000 fraudulent orders rang up, the Garden Grove, Calif.-based seller called Amazon’s seller support line, phoned its main customer service number, reached out via a separate account on its Canadian site, and even sent an email to chief executive Jeff Bezos. Nothing worked.

“I can’t get any answers from Amazon at all to fix this,” Peterson said, as negative reviews of his service accumulated, decimating his business.

One thing he hadn’t done was pay as much as $5,000 a month for a program Amazon offers sellers as a way to get quick help from a real person.

Amazon has become a powerful marketplace alongside its role as an online retailer, with more than 2.5 million third-party sellers who have become global businesses on its platform. Early on, Amazon compelled sellers to use its warehouses to guarantee speedy Prime shipping, in addition to other programs that largely benefited consumers. But now, sellers and former employees familiar with Amazon’s internal strategy say the company is increasingly focused on boosting its profits on the backs of its sellers — often without any clear upside for customers.

The services include charging sellers thousands of dollars to speak to account managers, as well as making it necessary to purchase ads to guarantee the top spot on a search page. Plus, Amazon is aggressively pushing its own brands — something that may be cheaper for consumers in the short run, but demonstrates its overall power over pricing and merchandise on the site. That gives it an advantage over rival products and sellers who rely on Amazon for their livelihood and have few alternatives if they want to thrive selling online.

Amazon says its success is dependent on those sellers and insists it always prioritizes shoppers.

As much as a third of every dollar merchants make goes back to Amazon, according to consultants and sellers. That helped Amazon generate $42.7 billion in revenue from seller services such as fees and commissions last year, a number that has nearly doubled in two years.

That has drawn the attention of regulators and lawmakers both in the U.S. and abroad, who are investigating Amazon and other large tech companies for potential violations of antitrust law and abusing dominant marketplace power. Traditionally, U.S. regulators have focused on consumer harm, but officials recently emphasized the need to look at the way several tech giants are using their market clout to lower quality, reduce innovation and diminish consumer privacy as officials consider regulating giants of the digital economy.

With regard to Amazon, the Federal Trade Commission appears to be probing how the online retail giant decides who wins each sale and at what price, as well as how Amazon can harm competition by suspending seller accounts or changing its rules with little notice and without appropriate ways to appeal those decisions. The FTC, which has taken on oversight of Amazon, has been reaching out to sellers on those topics in recent weeks, according to sellers who spoke on the condition of anonymity due to concern about retribution from Amazon. FTC spokeswoman Cathy MacFarlane declined to comment.

In July, the European Union launched an investigation into Amazon’s conflicting roles as both a platform and a retailer of its own products. And the German competition agency reached a deal with Amazon, in part requiring the company to offer third-party sellers 30 days’ notice before suspending accounts. Amazon said at that time it would cooperate fully with the E.U. “and continue working hard to support businesses of all sizes and help them grow.”

Amazon’s approach is similar to the way Apple built its iPhone app store, in which developers both play by its rules and compete against the tech giant. And it also resembles the way Microsoft, decades ago, used technology to restrict the types of software that could run on its Windows operating system even as it developed its own competing applications.

Amazon notes that third-party sellers sold $160 billion in merchandise on the site worldwide in 2018, or 58 percent of all physical merchandise sold. “Third-party sellers are kicking our first party butt. Badly,” Bezos wrote in his annual letter to shareholders in April, winning against the company’s own retail operations. (Bezos owns The Washington Post.)

Sellers are a crucial piece of Amazon’s business, and the company invests billions of dollars in digital tools and physical infrastructure to help them thrive, said spokesman Jack Evans.

“Amazon only succeeds when sellers succeed and any claims to the contrary are simply wrong,” Evans said. “Sellers have full control of their business and make the decisions that are best from them, including the products they choose to sell, pricing, and how they choose to fulfill orders.”

Evans disputes the company has prioritized profits over serving consumers, noting that it invests heavily in driving traffic to its site and improving its infrastructure, which benefits third-party sellers, too. Many of the company’s fees are for optional services, and it has recently lowered some.

Still, many third-party sellers say they worry about Amazon’s dual role: a massive open marketplace and a giant competitor in that marketplace. Those sellers complain — increasingly publicly — that Amazon’s ever-increasing power has resulted in a system in which only a few can succeed, and only through paying up.

For every dollar that shoppers spend on products from third-party merchants, as much as 30 to 35 cents goes back to Amazon to cover commissions, advertising buys, account management deals and more, said James Thomson, a former senior manager in business development at Amazon and now partner at brand consultancy Buy Box Experts.

Two-thirds of U.S. shoppers who purchased a product on Amazon in the last 24 months started their search on the site rather than on Google or another retail website, according to a March online survey from Feedvisor, a company that helps third-party sellers with pricing. When people shop on Amazon, they often don’t recognize whether they’re buying products directly or from a third-party.

Amazon is the largest online retail site, and it should account for about 37.7 percent of U.S. e-commerce sales this year, according to the research firm eMarketer. And many sellers say business from Amazon accounts for 75 percent or more of their annual sales.

It can be less costly to do business on other platforms. Some other marketplaces don’t charge the same broad range of fees on top of their commissions. Walmart’s commissions for sales by third-party merchants are similar to Amazon’s, according to the companies’ websites. EBay is cheaper still, taking, for example, just 9.2 percent the cost of jewelry sales compared to 20 percent at Amazon. EBay, though, also charges another roughly 3.5 percent payment-processing fee, company spokesman Ryan Moore said.

But eBay, Walmart and other retailers make up a fraction of U.S. third-party marketplace space. Robert W. Baird & Co. analyst Colin Sebastian estimates that third-party sellers generated roughly $90 billion in U.S. sales for the online retail giant last year — a little more than half what it generated globally. Amazon doesn’t break out the domestic number. That compares to $33 billion at eBay, he said. And third-party sales at Walmart are “negligible in comparison,” Sebastian added.

Amazon, though, views the market differently. Amazon argues that it is part of the total retail market, of which it accounts for less than 4 percent domestically.

Its e-commerce dominance has allowed Amazon to make major changes that can result in a ripple effect across its marketplace. For example, late last year Amazon struck a new deal with Apple to sell its products on its website. But the deal also made it much more difficult for third-party merchants to sell used iPads, Macbooks and more, according to some sellers. Now, they need to use genuine Apple replacement parts on those refurbished items, among other requirements, Amazon’s Evans said.

Josh Gibson says his Seattle-based CTG Inc.’s sales plummeted after removing his Apple stock from the site. “We peeled out because we weren’t going to compete against Amazon,” Gibson said. “The house always wins.”

U.S. lawmakers are also looking at Amazon’s efforts to boost its advertising sales, a business that accounted for roughly $3 billion in revenue in the second quarter of 2019.

At a House hearing in July, Rep. Val Demings (D-Fla.) said, “Because businesses are increasingly dependent on Amazon, some of them are concerned that Amazon is using its ad business to squeeze more money.” Amazon lawyer Nate Sutton replied that advertising isn’t necessary to succeed on Amazon.

Jason Boyce, a onetime merchant on Amazon who is now a consultant to those third-party sellers, disagrees. “If you don’t advertise, you lose organic sales,” Boyce said of transactions not driven by ads. That’s because Amazon directs shoppers to products that sell well, in turn hampering items without ad dollars behind them.

His outdoor company Dazadi.com sold an air hockey table that won hundreds of positive reviews and consistently landed in the top three search results, free. A few years ago, after Amazon introduced sponsored ads, his hockey table dropped in results, he said. Boyce decided to pay $5,000 to $10,000 a month for advertising to recover top placement.

When Boyce left Dazadi last year, it was spending nearly $400,000 annually — about 2 percent of its total sales — on all its Amazon advertising, just to make sure its product pages were among the leading results.

“It was freakin’ painful,” Boyce said. Dazadi did not respond to a request for comment.

The vast majority of sellers have built and run their businesses without advertising on Amazon, company spokesman Evans said.

Lawmakers have also pointed in hearings to Amazon’s ever-increasing fees as potential evidence of a monopoly.

Recently, a hacker hijacked Sanjay Chandiram’s Amazon listing for a kids’ walkie-talkie and recategorized it under “sex toys,” a tactic employed by rogue sellers as a weapon to ensure a product drops out of competition. Chandiram, the chief executive of Bellevue, Wash.-based Kaliber Global, spends $5,000 a month for a service called Amazon’s Marketplace Growth, where he has an account manager who fixed the problem within 48 hours.

Despite Chandiram’s seven-year record selling on Amazon, as well as being a top-150 seller, he said it can be nearly impossible to get help from Amazon’s mostly automated systems without the service, so he pays up. He now also has to spend millions of dollars advertising on the site.

“The overall treatment sellers receive from Amazon is nowhere close to the way they treat their customers,” he added. “We are not treated as partners in this relationship. Things are pretty one-sided.”

But if sellers aren’t willing to pay, they say the results can be devastating.

Peterson, the hacked seller of memorabilia and collectibles supplies, said it took three-and-a-half weeks before he was able to access his account. But the damage was done. Amazon froze the payments for the 4,000 orders, and has since refunded them to customers. Shoppers trashed his store, Perfect Sports Fan, in reviews as “untrustworthy” and a “scam.” Those negative comments are key factors in Amazon’s search algorithms, and have tanked sales. (Amazon removed the comments after Post inquiries.)

Before the hack, Perfect Sports generated about $5,000 a day in sales on Amazon, which accounted for about 75 percent of the company’s total revenue. Peterson estimates he lost about $225,000 in sales during the 45 days his business was paralyzed, forcing him to lay off three employees.

Amazon’s Evans said the company handled more than 40 million contacts from sellers last year, and that 80 percent of their issues were resolved within 24 hours. He declined to comment on individual sellers’ experiences.

Regulators are also asking sellers about the hawking of Amazon’s now more than 100 private-label brands.

Over the past few years, Amazon has drawn on copious sales data from products on its site to help determine markets to target with its own homegrown products. The company’s private-label goods include everything from batteries to vitamin supplements and diapers to nicotine gum. The company has recently been pitching those items next to the box on product pages where customers add items

‘Similar item to consider:’ How Amazon pushes its own products over competitors’

Amazon is pushing its own private-label brands just before customers add products from competitors to their shopping carts. Here’s how it works. (James Pace-Cornsilk, Jay Greene/The Washington Post)

Last month, the House Judiciary Committee asked Amazon to provide extensive records related to how it prices and displays its products alongside those sold by rival sellers.

Miami-based seller Brandon Young sells a hanging toiletry bag that was doing well before Amazon introduced its own version last year. Amazon also added a new row of items high up on the page under the heading “Top rated from our brands.” Young’s bag dropped from the top two rows to below the first screen of the results, and sales were halved overnight to 70 a day. To salvage sales, he cut the price of the bag by $4 to $10.99. The AmazonBasics version sells for $12.22.

“There is definitely an unfair advantage that they have for their brands that they don’t offer other sellers,” Young said.

Like other retailers, the company studies overall sales to make decisions, Amazon’s Evans said. Amazon does not give itself preferential or exclusive placement in the product search rankings, he added, calling the “top rated” row of items “merchandising” that appears alongside search results.

Regulators may be harder to convince. Amazon’s clout is such that a fee increase of, say, 5 percent wouldn’t lead to a mass migration to eBay or another rival service, said Juozas Kaziukėnas, chief executive of e-commerce research firm Marketplace Pulse.

That is key, because judges tend to define a company as dominating a market if its customers would absorb a “non-cost justified price increase” rather than moving to a rival, said Herb Hovenkamp, an antitrust professor at the University of Pennsylvania Law School.

Kaziukėnas believes Amazon’s reach would lead sellers to pass on those costs or eat them.

“The whole industry is locked into Amazon dominance,” Kaziukėnas said.




Amazon has ‘destroyed’ retail and should be scrutinized, Treasury chief Mnuchin says

The comments come a day after the Justice Department announced it would open an antitrust review of the ‘market-leading’ online platforms.


Treasury Secretary Steven Mnuchin criticized Amazon for hurting small businesses during an appearance Wednesday on CNBC. But the company says its retail revenue makes up less than 4 percent of the U.S. total. “Small and medium-sized businesses are thriving with Amazon,” a spokeswoman said. (Pablo Martinez Monsivais/AP)

By    Abha Bhattarai   July 24, 2019 at 3:03 p.m. EDT

Treasury Secretary Steven Mnuchin said Wednesday that he supported the Justice Department’s efforts to look into Amazon, because the tech giant has “destroyed the retail industry.”

“I think if you look at Amazon, although there are certain benefits to it, they’ve destroyed the retail industry across the United States, so there’s no question they’ve limited competition,” Mnuchin said during an interview on CNBC. “There’s areas where they’ve really hurt small businesses.”

Mnuchin made the comments one day after the Justice Department announced it was opening a wide-ranging antitrust review of “market-leading online platforms,” an unprecedented inquiry that could heighten calls for Amazon, Facebook and Google to be broken up. (Jeff Bezos, the founder and chief executive of Amazon, owns The Washington Post.)

Amazon spokeswoman Jodi Seth said the company’s retail revenue makes up less than 4 percent of U.S. retail sales and less than 1 percent globally.

“Small and medium-sized businesses are thriving with Amazon,” she said in an email. “Today, independent sellers make up more than 58 percent of physical gross merchandise sales on Amazon, and their sales have grown twice as fast as our own, totaling $160 billion in 2018.”

The company added that “the vast majority of retail sales — 90 percent — still occur in brick-and-mortar stores, according to the U.S. Census Bureau.”

Mnuchin is one of several former board members being sued by Sears Holding Corp. for allegedly stripping the retailer of billions of dollars as it spiraled into bankruptcy. Sears, the more-than-a-century-old American icon, filed for bankruptcy last year after years of mounting losses during private equity ownership.

Mnuchin’s role on the boards of Sears and the hedge fund ESL Investments have come under political scrutiny in recent months. Earlier this year, Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) said they were “deeply concerned by the financial engineering” that occurred while Mnuchin served on the retailer’s board. The members of Congress have called on Mnuchin to offer more details about his role in the company and its pension plans. Representatives for the Treasury Department did not respond to requests for comment.

On Wednesday, Mnuchin told CNBC anchor Andrew Ross Sorkin that he was eager to hear the attorney general’s recommendations for Amazon. When asked whether Amazon’s market dominance could be likened to Walmart’s a decade ago, Mnuchin said the cases were different.

“In a way it’s the same, and in a way it’s different,” he added. “People had those concerns about Walmart. As you see, Walmart developed a business where small businesses could continue to compete with them. And, look, Walmart ceded a lot of the retail business to Amazon.”

Amazon reported $232.9 billion in sales last year, up 31 percent from the year before. Walmart, meanwhile, had $514.4 billion in annual revenue, a 2.8 percent increase from the year before.



Aggressive Amazon tactic pushes you to consider its own brand before you click ‘buy’

The move shows how the e-commerce giant can use its powerful platform to favor its brands just as shoppers are about to purchase rival items.

‘Similar item to consider:’ How Amazon pushes its own products over competitors’

Amazon is pushing its own private-label brands just before customers add products from competitors to their shopping carts. Here’s how it works. (James Pace-Cornsilk, Jay Greene/The Washington Post)

By    Jay Greene   August 28, 2019 at 11:00 a.m. EDT

Amazon has introduced a feature that pitches its own private-label brands right before customers add rival products to their shopping carts, illustrating the e-commerce giant’s power on the country’s dominant online retail site.

In dozens of product searches by The Washington Post, offers for a “Similar item to consider” featuring Amazon brands appeared just above the spot where shoppers click to add an item to their cart. Those boxes touted a lower price for Amazon’s versions of items such as Glad trash bags, Dr. Scholl’s gel insoles, Energizer batteries and Nicorette gum.

The tactic shows the influence that Amazon can wield over what’s sold on its site, which research firm eMarketer expects to account for 37.7 percent of all e-commerce sales in the United States this year.

“It’s an ad at exactly the moment the customer is ready to buy,” said James Thomson, a former senior manager in business development at Amazon and now partner at brand consultancy Buy Box Experts. “I don’t see how that’s not unfair.”

 (Amazon chief executive Jeff Bezos owns The Washington Post.)

Amazon said the product promotion isn’t very different from the ways other stores hawk their private-label goods.

“Like any retailer we promote our own brands in our stores, which provide high-quality products and great value to customers,” Amazon spokeswoman Nell Rona said. “We also extensively promote products from our selling partners.”

Amazon’s sprawling marketplace has become the default location for consumers to re-up on goods as basic as paper towels and socks. According to analyst estimates, about half of all American households are now Prime members, turning to mobile apps, desktops or even the Alexa voice-enabled application for much of their shopping.

Despite Amazon’s huge selection, most shoppers make up their minds about what products to buy with just a glance or two. About 90 percent of shoppers who make a purchase on Amazon select the option on the page to “Add to cart” or “Buy now,” rather than scrolling below that to choose an offer from other sellers, Thomson said. Amazon has turned much of the site’s premier space over to brands and rival third-party sellers for advertising, which generated about $3 billion in revenue last quarter.

At the same time, the company has developed more than 100 in-house labels — including its popular AmazonBasics — hawking items including bras, vitamins and floor mats for cars. Those private-label brands already occupy prime real estate on the site. This new addition places them in more direct competition with other brands and sellers at the moment a customer decides to buy. And in The Post’s test of the feature, only Amazon brands are offered in the choice location.

Rona declined to say whether Amazon is testing the feature or whether it’s permanent. She also declined to say how many products Amazon targeted with the “Similar item” promotion or whether any non-Amazon brands were included.

The inherent competition between Amazon and those who sell on its platform has already drawn regulatory scrutiny. European regulators announced an investigation into Amazon’s competitive tactics, specifically saying they will look into whether the company is misusing its dual role as both a marketplace for independent sellers and a retailer of its own products.

Regulators and lawmakers in the United States are also looking. The Federal Trade Commission in June took on responsibility for investigating Amazon, a move that could presage a ramped-up inquiry into the company’s competitive tactics. And the House Judiciary Committee grilled Amazon attorney Nate Sutton last month, pressing him with questions about conflicts with third-party sellers.

Providing customers with the lowest price for products could help Amazon defend itself against unfair-competition claims, since U.S. antitrust law often focuses on consumer harm.

Amazon’s latest tactic offers AmazonBasics batteries to shoppers searching for Energizer models, its Trek Support gel insoles to customers searching for Dr. Scholl’s products, and its Basic Care nicotine gum to those searching for Nicorette’s offering. The Post also found examples of Amazon offering its private-label products as alternatives to diapers, coffee pods, beauty products and vitamin supplements, among other items.

The feature doesn’t appear for every customer. But when selected shoppers search for “Glad tall kitchen drawstring trash bags,” they’ll see links for Glad products. One of the top non-sponsored listings Monday, for a 100-bag package of Glad trash bags for $16.77, includes the suggestion to choose an 80-bag package of Amazon’s Solimo tall kitchen drawstring trash bags for $11.11 instead.

Amazon’s own brands are among the most profitable items the company sells, said Elaine Kwon, founder of e-commerce management and software firm Kwontified and a former fashion vendor manager at Amazon.

“It makes sense to me that they are trying to achieve complete market dominance of their private-label products on the platform,” said Kwon, adding that the company is unlikely to alter its approach unless regulators require it.

A spokeswoman for Clorox-owned Glad, Aileen Zerrudo, said, “We trust that consumers who love Glad trash bags will continue to choose our brand.”

Energizer and Dr. Scholl’s representatives declined to comment. A Nicorette representative didn’t respond to a request for comment.

Amazon has previously experimented with aggressively pitching its own products. Earlier this year, the Wall Street Journal reported that Amazon ran a similar trial in its mobile app. That test, which Amazon ended, pushed pop-up windows that took over much of a product page on shoppers’ phones, forcing customers to either click through to the lower-cost Amazon products or dismiss them before continuing to buy. CNBC has reported that Amazon removed some of its promotional private-label brand placement earlier this year.

In addition to giving its private-label products a boost, the tactic appears to give Amazon’s retail sales operation an advantage over merchants that sell their own goods on the site. The company has said that third-party sales hit $160 billion, or 58 percent, of its total revenue from selling physical, rather than digital, retail goods.

But Amazon is the only company that sells its own private-label brands. So the advantage is even greater for Amazon when it persuades customers to buy its own branded items over similar products sold by third parties.

Common Cents Distributors, a New Jersey merchant, recently had the top buy-box listing for a 64-ounce bottle of Wesson canola oil, for $14.48. But Amazon suggested a four-pack of its own Pantry Pro canola oil eight-ounce spray cans, for $11.99, immediately above the “Buy now” button on the page.

“It takes away from our sales, 100 percent,” said Sebastian Cwik, Common Cents Distributors’ chief executive. “It’s definitely not cool.”

Cwik noted that Common Cents has few alternatives. The company generated $30 million in sales last year, 98 percent of that from Amazon. Shifting to rivals such as eBay or Walmart would eviscerate his business, Cwik said.

“Where do you draw the line of [Amazon] being a marketplace and a company pushing its own business?” Cwik said. “There’s nothing we can do but just hope governments get involved.”




Attention, Walmart executives: Amazon’s coming after your low-income shoppers

The online retail giant is working to draw customers who more typically frequent brick-and-mortar stores.

An Amazon Go store in New York was the first of the company’s convenience stores to accept cash to allow customers withot bank accounts or credit cards to shop there. (Mark Lennihan/AP)

By   Jay Greene and Abha Bhattarai   June 18, 2019 at 8:00 a.m. EDT

Amazon is dialing up efforts to win over customers that typically frequent rivals such as Walmart: low-income shoppers.

The online retail giant, whose vast North American retail business growth has slowed in recent quarters, has announced new offerings aimed at the poor, most recently a new credit card for consumers trying to establish or rebuild their credit. It has also added half-price Prime memberships for those on certain governmental aid programs, as well as a method for consumers to reload their online accounts with cash at convenience stores. It has even recently looked at buying Boost Mobile, a prepaid cellphone wireless service that caters to low-income customers, from Sprint.

The moves could help Amazon attract a new customer group that has long been loyal to Walmart and its more than 4,700 U.S. stores, many sprinkled throughout rural and lower-income communities. But it also comes attached with some risk for the shoppers: For example, Amazon’s newest credit card’s interest rate tops 28 percent.

 “This kind of greed makes the poor even poorer,” tweeted frequent Amazon critic, Sen. Bernie Sanders (I-Vt.), adding that he and Rep. Alexandria Ocasio-Cortez (D-N.Y.) will introduce legislation to “outlaw it.”

Amazon spokeswoman Paruul Batra declined to comment on Sanders’s tweet. Amazon is “committed to making it easy for all customers” to use Prime, Batra said. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)

Over the past two decades, Amazon has grown from an online bookstore to selling everything from toilet paper to couches. Revenue grew rapidly as the company persuaded consumers to do more and more of their shopping online, eventually approaching nearly half of all U.S. online spending, according to analyst estimates. But in the first three months of the year, revenue growth in the company’s core North American business slowed to 17 percent from a pace that topped 46 percent in the same period in 2018.

Meanwhile, Walmart and Dollar General, known for rock-bottom prices, have maintained strongholds in rural towns and low-income communities where they are often the only big chain retailers. In 2013, Walmart executives said an estimated 18 percent of the country’s food stamps had been redeemed at the company’s stores, amounting to about $13 billion in annual sales, a number analysts say has stayed constant. Walmart also offers check cashing, bill payments and other financial services for shoppers without bank accounts or credit cards, and it recently brought back its holiday layaway program.

Now Amazon is trying to attract those customers, too.

They may seem like an odd target for a company that owns premium grocer Whole Foods and sells Kindle e-readers that can cost as much as $350. But they could help propel growth of Amazon’s Prime membership program, which has largely saturated wealthy households in the United States. Those customers tend to spend twice the money their nonmember counterparts shopping on the site, according to analyst estimates.

To attract lower-income consumers to its fold — many of whom don’t have easy access to credit cards, a safe place for delivery or the Internet — Amazon needs to change buying habits for shoppers who are accustomed to making purchases at brick-and-mortar stores where they can use cash or government-assistance programs to pay for items. Amazon is betting programs such as its new credit card will persuade consumers who rarely, if ever, shop online to give it a shot.

“It’s about diverting customers away from Walmart,” said Andrea Leigh, a former Amazon executive who is now vice president of Ideoclick, a Seattle firm that helps brands sell on Amazon.

That means catering to customers such as Mary Harrington, who took two buses from her home in Southeast Washington to a Walmart on the other side of town on a recent weekday morning. Harrington, 60, makes the hour-long trip each way two or three times a week because she likes shopping in person. She has never bought anything online.

“I’m on Social Security, so I can only buy so much,” Harrington said. “You can’t find better prices than at Walmart.”

Consumers with household incomes of less than $50,000 are less likely to shop online than their more affluent peers. Those households do about 3.4 percent of their shopping online, compared to 9.7 percent for households with annual incomes of $50,000 and more, according to economists at Stanford University.

Meanwhile, roughly half of all U.S. households had Prime accounts in January, the investment firm Cowen & Co. estimates, based on quarterly surveys it conducts. But membership growth has slowed as the market among wealthier customers becomes more saturated.

Low-income consumers are the group least likely to have Prime memberships. Just 31 percent of households making less than $25,000 are Prime members, compared to 60 percent of households making more than $150,000, according to a 2016 Cowen survey, the last time the firm released data on Prime members’ household income.

“They are trying to pull the levers to boost that number,” Cowen analyst John Blackledge said.

Amazon began offering discounted membership for $5.99 a month to its Prime frequent-shopper program last year to the roughly 20 percent of the U.S. population that is signed up for Medicaid. That’s in addition to the discount it already offered to people who obtain government assistance with cards typically used for the Supplemental Nutrition Assistance Program, often called food stamps. The company usually charges $12.99 a month for Prime memberships.

Amazon — along with Walmart — is also part of a pilot program by the U.S. Department of Agriculture to allow SNAP participants to select and pay for groceries online.

Amazon’s new card, called Amazon Credit Builder, is aimed at customers trying to establish or rebuild their credit. To obtain it, consumers need to deposit funds, and the amount they deposit becomes their credit limit. Cardholders who are members of Prime — which includes speedy shipping as well as video and music streaming — can earn 5 percent cash back on purchases.

The card’s 28.2 percent interest rate is higher than the median for retail cards, 25 percent, according to Ted Rossman, an industry analyst for CreditCards.com.

The online retailer has also added Amazon Cash, a reloadable prepaid card for customers who don’t have credit and want to shop on the site. Customers can reload their accounts at 7-Eleven and Coinstar machines, among thousands of other locations.

Earlier this year, Amazon said it would begin accepting cash at its Amazon Go stores after mounting criticism that the cashier-less convenience stores discriminated against those without credit cards, bank accounts or smartphones. The cashier-less stores ask shoppers to pay using an app on their smartphones.

As Amazon tries to grow its customer base, it faces increasing pressure from Walmart, which is in turn encroaching on the online retail giant’s turf by chasing upscale shoppers in more urban areas. Walmart acquired Jet.com for $3.3 billion in 2016 and subsequently bought up a number of higher-end niche brands, including ModCloth, and Bonobos. Walmart.com has become more upscale too, offering brands such as Brooks Brothers, Calvin Klein and Ray-Ban.

Last year, Walmart introduced JetBlack, an invitation-only personal shopping service in New York that competes directly with Amazon by offering personal shopping services over text messag




Inside Amazon Go: The camera-filled convenience store that watches you back


Shopper Ela Ustel walks through the Amazon Go store in Seattle on Jan. 22. After more than a year in beta, Amazon opened the cashier-less store to the public. (Stephen Brashear/Getty Images)

By    Drew Harwell and   Abha Bhattarai   Jan. 22, 2018 at 6:00 p.m. EST

The retail giant Amazon.com opened a new convenience store to the public on Monday with none of the hurdles of a traditional supermarket: At Amazon Go in Seattle, there are no cashiers, shopping carts or checkout lines to slow shoppers down.

But there’s a trade-off. In this store, the shoppers are on display, too, tracked by hundreds of cameras and sensors from the first swipe of their phone to their last step out the door.

The futuristic grab-and-go market represents a test of new technology that could soon spread nationwide, as Amazon and other grocery giants seek to win business from shoppers craving selection, ease and speed.

“The number one problem for people is time poverty,” said Dilip Kumar, vice president of technology for Amazon Go, while standing in the store during its grand public opening. “People want good food fast, and they want it to be convenient.”

The store relies on a vast and sophisticated data-gathering operation to transform the shopping experience, and privacy experts worry that Americans may not fully understand what they’re giving away in every aisle.

“It’s not just the transaction,” said Danielle Citron, a law professor and privacy expert at the University of Maryland’s law school. “Powerful companies like Amazon don’t just have what you bought at the grocery store, but they’re also connected with and combined with nearly every aspect of your life,” including where people live and what they buy, read and watch.

Shoppers walking into the store scan their phone on a subway-station-like turnstile, connecting their presence in the store (as well as their family members or other fellow shoppers) with their Amazon

‘Introducing Amazon Go’

This promotional video from Amazon describes how its upcoming Amazon Go store in Seattle will work. (Amazon)

The boxy, black cameras in the ceilings don’t have the look of classic surveillance cameras — a benefit, some said, given that hundreds of them blanket the 1,800-square-foot space — but they operate in a similar way, tracking shoppers’ movement and what items they pick up or put back down.

The store’s cameras include infrared sensors, but the company says it does not employ facial recognition. Some items have large, camera-friendly codes to help the cameras understand which items have been grabbed; the computers combine that information with data from weight sensors installed in every shelf.

When shoppers are done, they simply walk back out through the porcelain-white turnstiles — and their phone updates with a receipt, along with a “trip timer” telling them how many seconds they spent on the shopping trip. The process was so breezy that first-day shoppers like Harriet McClain said it felt “like shoplifting.”

“Even in a small town, people shoplift,” McClain said, before motioning toward the overhead cameras. “But a local grocery store could never afford to put in this kind of stuff.”

Amazon has not shared details on the methods involved in its “Just Walk Out” technology, but says it mimics some of the techniques seen in self-driving cars, including machine-learning systems that improve over time, as well as computer vision, the image-processing technology used in Facebook photo tags.

“The majority of sensing is from above,” said Kumar, the Amazon Go executive. “Cameras figure out which interactions you have with the shelves. Computer vision figures out which items are taken. Machine-learning algorithms also determine which item it is.”

John Verdi, the vice president of policy at the Future of Privacy Forum, a think tank that counts Amazon among its corporate donors, said the data collected by Amazon’s store is no more than what most people give away at other supermarkets by using their loyalty and credit cards.

“Are consumers comfortable with that level of data collection and use? I suspect many are,” he said.

Alvaro Bedoya, the executive director of the Center on Privacy & Technology at Georgetown University’s law school, said “it’s highly likely” that Amazon Go collects “more information than any retail setting out there now.”

“When you shop with a discount card, you know what information the store’s collecting,” namely what things you just bought, Bedoya said. “But Amazon is tracking you throughout the store. Are they really only tracking you when you lift the item off a shelf? Or are they tracking where you move throughout the store, what you’re looking at, what sections you’re dwelling in?”

If the cashier-free technology expands, the stores could deeply erode the need for America’s second-most common job: About 3.5 million Americans work as cashiers nationwide, federal data show. Amazon and other retailers say employees will work on different tasks, including helping guide shoppers to the right items. Amazon Go’s few employees check drivers’ licenses for alcohol sales, stock shelves or prepare meal kits like a $19.99 salmon donburi plate.

“Grocery stores work on a very thin margin, so a cashier-less store is financially very appealing for the industry,” said Ryan Hamilton, a professor at Emory University’s Goizueta Business School. “This has the potential to cause as much upheaval to cashier jobs as self-driving cars could to truck drivers and taxi drivers.”

But the store’s format, consumer psychologists said, could also help Amazon redefine one of retail’s core moneymakers, impulse buying, by eliminating the few lingering barriers that might make shoppers rethink what’s in their bag — a process Amazon has already mastered online through techniques like one-click purchasing.

“The less time we have to think about how much we’re spending, the more removed we are from the process,” said Kit Yarrow, a professor of psychology and marketing at Golden Gate University. “What Amazon Go does is take away all of the negatives. It doesn’t give you time to consider how much you’ll be spending or how that will impact your budget. It puts all of the emphasis on the pleasure of what we’re consuming in that moment.”

Amazon has not shared any plans of a nationwide rollout, though some analysts expect it: The company now runs roughly a dozen brick-and-mortar bookstores and spent $13.7 billion last year buying hundreds of Whole Foods grocery stores nationwide.

The company will likely have competition from retail giants like Walmart and Kroger, America’s largest stand-alone grocery chain, which are rolling out or planning ways in hundreds of stores for shoppers to skip the cashier by, say, scanning their items with their phone.

Privacy experts say Amazon will likely face questions about what data they’re gathering on shoppers if the technology continues to grow.

“It’s really blurring our offline and online lives together,” said Joseph Jerome, policy counsel for the Washington nonprofit Center for Democracy & Technology. “You now have a full record of everything you’ve purchased — but it’s going to exist for all time, and it’s going to be owned by Amazon.”

The first day of shopping brought out some demonstrators, including Joy Carter of Seattle, who wore a cat mask, she said, to avoid the cameras.

“We’re rejecting the future they’re imposing on us,” Carter said. “This grocery store is a fantasy like there’s innovation here. But the implications are that the workforce is split into two classes: the people making $100,000 and up and others who have to scrape to survive.”

But most of those who showed up were fascinated. Jing Chou, 26, a University of Washington engineering student from the city of Changsha in southern China, and a fellow student from Beijing spent much of their Monday-morning visit snapping photos of the shelves, trying to figure out how Amazon did it.

They noted how their home country has similar cashier-less stores, but shoppers there have to meticulously scan each item before leaving. “I want to know how they track it,” Chou said, gazing at the ceiling cameras. “And if you bring something back, how they know.”



Amazon’s strategy to win over congressional critics: Tours of its giant warehouses

More than 560 federal, state and local policymakers and their staffs have visited warehouses this year as President Trump and several of his Democratic would-be rivals rip the retailer’s tactics.

A worker at an Amazon warehouse in New York’s Staten Island in June. (Kathy Willens/AP)


Jay Greene

August 21, 2019 at 8:00 a.m. EDT

From the White House to the campaign trail for the Democratic presidential nomination, politicians have found a popular punching bag in Amazon, accusing the retail giant of paying subsistence wages to warehouse workers while dodging taxes.

That’s one reason Amazon has aggressively courted members of Congress to walk the floors of its vast warehouses, afterward noting those visits on its social media accounts. Like last Thursday, for example, when the Twitter account for the company’s policy arm retweeted a post from Sen. Marsha Blackburn (R-Tenn.), noting her “great” tour of Amazon’s warehouse in Chattanooga.

Blackburn has been a critic of big tech and chairs the Senate Judiciary Committee’s tech task force, which is looking at privacy, data security, censorship and antitrust. Her spokeswoman did not respond to a request for comment.

For years, critics have accused the company of underpaying and overworking warehouse employees. In the United States, Amazon employs about 250,000 typically hourly workers, many of whom perform strenuous and mundane jobs such as walking many miles a day, picking items off shelves or packing up boxes. In response, the online retail giant has started a campaign to try to turn the tide — particularly as regulators take a closer look at the company for possible abuse of power.

The efforts, though, haven’t seemed to tone down the political rhetoric.

(Amazon founder and chief executive Jeff Bezos owns The Washington Post.)

The company unleashed a squad of warehouse workers on Twitter about a year ago to rebut the narrative of harsh working conditions. “FC Ambassadors,” who have written that they tweet during their shifts, have opposed unionization efforts, and one even noted that he can “use a real bathroom when I want.” Some of the tweets have been ridiculed on social media for their bot-like responses.

Amazon also caught heat last year when raising its minimum wage to $15 an hour — after facing criticism from politicians and others for low pay — included plans to take away some bonuses and stock grants for warehouse workers.

That move came shortly after Sen. Bernie Sanders (I-Vt.) introduced the Stop Bad Employers by Zeroing Out Subsidies Act, or Stop BEZOS Act, which would require large employers such as Amazon to pay the government for food stamps, public housing, Medicaid and other federal assistance their workers receive. The bill currently sits in the Senate Finance Committee.

Amazon has come under fire from other politicians, as well, including Sen. Elizabeth Warren (D-Mass.), a presidential candidate. She has called for breaking up Amazon, as well as tech giants Facebook and Google parent Alphabet, claiming their anti-competitive conduct thwarts rivals and harms innovation. President Trump has spoken out several times against Amazon and Bezos, most recently instructing newly installed Defense Secretary Mark T. Esper to reexamine the awarding of a major military contract over concerns that the deal would go to Amazon’s cloud-computing division.

Amazon has increased efforts to push back against its critics, including offering tours at 23 warehouses in the United States to let visitors see firsthand how its facilities operate. The company said more than 150,000 people have toured this year, including more than 560 federal, state and local policymakers and their staffs, a pace that is likely to far surpass the number of visits it had last year. And with Congress now on its summer break, the company has welcomed a bevy of politicians to warehouses nationwide in recent weeks.

Politicians often visit local employers during their breaks, something that allows them to hobnob with constituents, learn more about the company and promote their agenda.

Rep. Susan Wild (D-Pa.) said she decided to visit an Amazon warehouse outside Allentown, Pa., on Aug. 14 to learn more about the operation. That operation came under fire eight years ago after an investigation of working conditions by the local Morning Call newspaper found ambulances parked outside during heat waves waiting to treat employees suffering from heat stress.

Despite the hot day, the warehouse was comfortable inside during her visit, she said. Amazon’s public policy Twitter account spotlighted her visit, but it “should not be construed as an endorsement,” Wild said. And she didn’t tweet about the tour, even though she did post pictures to her Twitter account of her visit the next day to HindlePower, a manufacturer in Easton, Pa.

Amazon spokeswoman Jodi Seth defended the company’s safety record and noted that, in addition to a $15 minimum wage, the company provides health and retirement benefits.

“We encourage policymakers and the general public to tour our facilities because we want them to see all of this for themselves,” Seth said in a statement.

When politicians do pose for photos at the facilities, Amazon is quick to note it. Like on Aug. 13, for example, when Sen. Cory Gardner (R-Colo.) donned a neon yellow safety vest and boxed a few items at an Amazon fulfillment center near Denver.

“It was a pleasure hosting @SenCoryGardner at our #DEN3 fulfillment center today,” Amazon tweeted from its Twitter public policy account, including pictures of the senator with company employees.

Gardner stayed mum on Twitter about his Amazon tour, even though he tweeted about visits to Maxar Technologies in Westminster, Colo., and Swisslog Healthcare in Broomfield, Colo., the same day. Gardner spokeswoman Annalyse Keller declined to comment.

Although it’s somewhat routine for politicians to drop by Amazon operations, the calculus of those visits has changed as political pressure on Amazon mounts. Rep. Ilhan Omar (D-Minn.) tweeted about a visit to a warehouse in March, although last month she pushed for an investigation of warehouse conditions, saying on Twitter that warehouse workers have died on Amazon’s watch. Amazon’s Seth said Omar’s tweet is not an accurate portrayal of activities in the company’s warehouses.

Sen. Cory Booker (D.-N.J.), who is running for president, posed with a passerby in front of Amazon’s headquarters during a visit last year but during a presidential debate lumped the retailer with Halliburton among companies “that pay nothing in taxes.” Seth declined to comment on Booker’s statement.

The spate of warehouse visits hasn’t toned down any of the opprobrium from Amazon’s fiercest critics. Sanders, who is also running for president, had said he would visit an Amazon fulfillment center. But in his ongoing sparring with the company, he has said he’s “not interested in a photo op at an Amazon warehouse.”



Amazon ripped over product safety concerns

A top regulator in charge of reviewing antitrust issues raised questions about the company misleading consumers about product safety

Amazon New York offices in February. (Mark Lennihan/AP)

By    Jay Greene and    Todd C. Frankel   August 23, 2019 at 4:25 p.m. EDT

A top consumer protection regulator raised concerns about whether Amazon committed “widespread deception” by selling thousands of products without any warnings despite federal agencies deeming those goods to be unsafe, deceptively labeled or banning them altogether.

“This article raises real concerns about whether Amazon is profiting from widespread deception on its platform,” Federal Trade Commissioner Rohit Chopra tweeted. “Deceptive acts or practices can threaten our health and safety, and are unlawful under the FTC Act.”

Sen. Richard Blumenthal (D-Conn.) echoed Chopra’s concerns, saying in a tweet that the company needs to “prioritize safety over profits.”

The remarks come after a Wall Street Journal investigation found 4,152 unsafe items listed for sale on Amazon. The company removed many after the news outlet made it aware of a variety of safety issues.

 (Amazon chief executive Jeff Bezos owns The Washington Post.)

Amazon didn’t dispute the Journal’s reporting. In a blog post, though, the company listed steps it takes to vet products it sells, as well as the third-party merchants that sell on the site and were responsible for the items the article cited.

“We invest significant resources to protect our customers and have built robust programs designed to ensure products offered for sale in our store are safe and compliant,” the company wrote in its post.

Lawmakers have stepped up criticism of tech giants in recent months, and much of their concern has focused on the companies’ inability to control the massive platforms they run. Facebook, for example, has been at the center of disinformation campaigns that have targeted the 2016 U.S. presidential election as well as campaigns elsewhere around the world.

Amazon’s massive platform traffics in products. Amazon has long pushed to build its vast selection, opening the site up to third-party merchants whose products are listed alongside the goods that the company sources from vendors. The company has said that those merchants generate 58 percent of the sales of physical products on its site.

Those sellers have helped Amazon create a store with roughly 500 million items for sale, said Juozas Kaziukenas, chief executive of Marketplace Pulse, a business intelligence firm focused on e-commerce. Amazon has built its catalogue by making it easy for sellers to list goods, an approach that makes it difficult for the company to police every item for potential safety concerns.

“In many ways, Amazon has built themselves into a corner,” Kaziukenas said. “The building blocks of Amazon prevents them from fixing it.”

Amazon has long aimed to provide the widest selection of goods at the lowest prices with rapid delivery, “but not at the expense of our customers’ safety, and this insinuation is simply wrong,” spokeswoman Cecilia Fan said.

Product safety regulators for years have been worried about the rise of online platforms and how their responsibilities are different from those of traditional retailers and manufacturers. The Consumer Product Safety Commission can go after a bricks-and-mortar store if it fails to report a defective product or sells a recalled one. The same is true of a company that makes a bad product. An online platform such as Amazon falls under neither of those categories.

Still, Amazon talks about product safety with the CPSC and is a member of the commission’s retailer reporting program, which includes a handful of major retailers that send consumer safety complaints as a kind of early detection system for problematic products.

“The CPSC continues to work with platforms for third-party sellers to ensure safe consumer products and to stop sale of recalled products,” acting chairwoman Ann Marie Buerkle said in a statement to The Post.

Consumer advocates, too, have argued that protecting people from unsafe products is complicated by Amazon’s gray-area role in many purchases.

“Do we need to change the laws of product safety to close a loophole?” said Rachel Weintraub, general counsel for the Consumer Federation of America. “Consumers expect products are going to be safe and shouldn’t be at disadvantage if they’re going online.”





Amazon Has Ceded Control of Its Site. The Result: Thousands of Banned, Unsafe or Mislabeled Products

Just like tech companies that have struggled to tackle misinformation on their platforms, Amazon has proven unable or unwilling to effectively police third-party sellers on its site

By    Alexandra Berzon     Shane Shifflett    and   Justin Scheck Aug. 23, 2019 9:56 am ET

Many of the millions of people who shop on Amazon.com see it as if it were an American big-box store, a retailer with goods deemed safe enough for customers.

In practice, Amazon has increasingly evolved like a flea market. It exercises limited oversight over items listed by millions of third-party sellers, many of them anonymous, many in China, some offering scant information.

A Wall Street Journal investigation found 4,152 items for sale on Amazon.com Inc.’s site that have been declared unsafe by federal agencies, are deceptively labeled or are banned by federal regulators—items that big-box retailers’ policies would bar from their shelves. Among those items, at least 2,000 listings for toys and medications lacked warnings about health risks to children.

The Journal identified at least 157 items for sale that Amazon had said it banned, including sleeping mats the Food and Drug Administration warns can suffocate infants. The Journal commissioned tests of 10 children’s products it bought on Amazon, many promoted as “Amazon’s Choice.” Four failed tests based on federal safety standards, according to the testing company, including one with lead levels that exceeded federal limits.

Of the 4,152 products the Journal identified, 46% were listed as shipping from Amazon warehouses.

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