WHY IT MATTERS: Digital Transformation

WHY IT MATTERS: Amazon spends 14.2% of its net sales to fulfill orders and 12.2% to deliver them to consumers. Thus a quarter of the costs of products sold is allocated to logistical costs and this is the biggest hurdle to eCommerce wide adoption. Amazon and other pure plays have a number of key advantages over established brick-n-mortar retailers (no retail store costs, no store employees, etc.) but they have to battle with order preparation and delivery which traditional retailers delegate to their customers as they push their carts in the store aisle. In that context, recent announcement of Sobeys to leverage Ocado's automated warehouse technology or recent Amazon announcement to create a parcel delivery solution that competes with FedEx and UPS makes sense. Any retailer thinking of scaling its eCommerce operation should thus make sure that its business model is viable regarding fulfillment and shipping - all other elements of eCommerce are not an issue.

- Amazon SWA service: http://fmcs.digital/blog/amazon-package-delivery-service-to-compete-with-fedex-and-ups-swa-ecommerce-disruption-retailapocalypse/ 

- Sobeys Ocado partnership: http://fmcs.digital/blog/u-k-s-ocado-taps-into-canadas-online-grocery-market-with-sobeys-tie-up-is-canada-mature-enough-to-have-automated-grocery-fulfillment-centers-ecommerce-robots/ 

- Ocado's technology: http://fmcs.digital/blog/video-shows-ocado-warehouse-technology-that-sobeys-has-acquired-to-prepare-grocery-orders-is-based-on-an-army-of-small-robots-working-on-3d-hive/ 

WHY IT MATTERS : the video provides a great review of the state of technology when it comes to robots and robotics today from one of the leading researcher in the field. The talk is peppered with short videos of actual robots so you get a good sense of what's possible today. But remember that we live in an exponential growth era, so things improve very fast.

WHY THIS IS IMPORTANT

A key piece of eCommerce and retail has to do with delivering packages from warehouse to customer homes or offices. Amazon spends 12% of its revenue for shipping and is expected to ship more volume than FedEx in 3 years. To reduce this cost and improve customer service by allowing more frequent and faster delivery, Amazon has been doing a number of things:

1- putting trucks on the road with its AmazonFresh grocery delivery service;

2- building delivery infrastructure between its warehouses and distribution centers and delivery spokes;

3- now it is planning to become a broker between small parcel delivery providers in a UBER like model (this article)

4- self-driving vehicles have been targeting trucking industry as their primary focus, with UBER recently investing in startup OTTO and demonstrating a 2000 case beer delivery via self driving truck

Combine all these innovations and you have a profound disruption in the delivery and logistics industry. Retailers should now consider Amazon no longer as an online marketplace and third-party logistics company (3PL) but also as a parcel delivery solution provider that can compete FedEx and UPS provide last-mile delivery solutions and eliminate the need for retailers to maintain or lease their own delivery vans and trucks.

Links in this post:

• amazon net shipping costs 4.7% of revenue: http://fmcs.digital/blog/new-e-commerce-strategies-threaten-ups-fedex/ 
• amazon total shipping costs 12% revenue: http://www.beyonddevic.es/2014/02/03/amazons-prime-problem/  http://www.wsj.com/articles/amazons-newest-ambitioncompeting-directly-with-ups-and-fedex-1474994758 
• amazon fresh trucks: http://sco.lt/7i9FbN 
• self-driving truck: http://fmcs.digital/blog/tesla-brings-self-driving-hardware-to-its-entire-fleet-see-the-video-for-a-glimpse-into-the-future-of-driving/ 
• amazon competes fedex: http://fmcs.digital/blog/jeff-bezos-amazon-wont-compete-with-fedex-and-purolator-usps-i-dont-believe-him/ 
• FBA 3PL: http://fmcs.digital/blog/27-tips-on-how-to-build-fba-strategy-via-cpcstrategy/