By Kevin O'Marah / www.forbes.com / June 17th, 2015
Amazon’s plans to develop an Uber-like app will probably fade well before making an impact on the dizzyingly difficult world of omnichannel logistics. The Wall Street Journal yesterday reported that Amazon is working on yet another twist to the complex last mile e-commerce fulfilment problem – this time by creating a mobile app that would be used like Uber, but for parcels. The urgency is high as shipping costs continue to grow faster than revenue for a business that still rarely makes a profit. Unfortunately, early trends suggest this effort will be a flop.
Worth a Try…
Before completely dismissing the notion let’s recognize why it’s worth a try. Uberization in supply chain is a useful idea, offering as it does a natural way to improve utilization of otherwise idle assets. It’s happening in short-haul trucking already and is under discussion for a whole range of other asset-based services in the physical supply chain.
The best example may be Instacart which is embraced by retailers like Whole Foods and Costco who gain incremental sales without adding any physical infrastructure, special inventory or dedicated labor. This is in marked contrast to most other e-commerce fulfilment options including click-and-collect, fulfil from store, and classic DC-to-home all of which add operational complexity and cost.
…But Ultimately Self-Defeating
The problems however are too big to skate over. First of all is the issue of reliability. Amazon’s most vital asset in the long run is consumer trust. As the ultimate collector of shopper demand information Amazon is banking on our readiness to click “buy” without a second thought. It is the reason Amazon Prime is strategically critical and also why it is successful. As for long-term potential to actually make profit it is also essential to Amazon’s burgeoning content business. Betting the brand on a bunch of amateurs looks risky, especially considering how often stories emerge about Uber drivers molesting customers or AirBnB hosts ruining someone’s holiday.
A second huge question surrounds legality and liability. UPS has been delivering to our doorsteps for decades. It’s obvious who’s accountable when something goes wrong and there’s no question about whether drivers have a commercial driver’s license, adequate insurance or a 1-800 number to call with problems. Plus, the periodic banning of Uber in cities around the world and the regulatory crackdowns on AirBnB show that firm legal foundations for this business model are not yet set. This may be fine for start-ups positioning themselves as technology platforms, but it is hardly safe for an asset heavy giant like Amazon.
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