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- “On My Way” is a new service that Amazon (AMZN, Financial) is trying to start. Here we analyze the main problems, advantages and disadvantages.
- New service and challenges ahead of Amazon.
- "On My Way” will join both big tech companies, ecommerce and tech company for the app.
- “On My Way” startups looking beyond established delivery services such as FedEx (FDX, Financial) to cut costs and delivery times.
The e-commerce giant Amazon is considering tapping ordinary people to make deliveries through a mobile app and paying them on a per-package fee.
Imagine you use an app to know where to take and drop off goods while you are on your way to the office, gym, shopping...
Currently, Amazon predominantly uses UPS (UPS, Financial) to deliver packages that cost UPS an average of about $8 to deliver in the U.S.; in the last two quarters UPS had over $1 billion in net shipping losses so this is an issue for it after its shipping costs swelled about 31% last year. The low-tech-meets-hi-tech move is the latest in a long list of schemes; they want to develop an Uber-like courier service using crowd-sourced drivers to cut the costs of one of the most expensive parts of the Amazon business model.
Maybe Amazon wants to turn the U.S. into a nation of couriers by this new service and, in the meantime, the Seattle retailer is developing a mobile application that would, in some cases, pay ordinary people rather than carriers.
Amazon got this idea from seeing all these Ubers driving around and moving people and got the idea to stick a package in the trunk.
Uber is an American international transportation network company that uses a smart phone application to connect passengers and drivers and in April 2014, Uber announced a courier package delivery service called Uber Rush, with pickup from anywhere in Manhattan.
Of course Amazon is not the only company thinking about how to get physical objects as cheaply and efficiently as possible in a world, and there are multiple players in the delivery space, but most of them focus on relatively small areas, such as tech-smart urban centers in San Francisco and New York.
This new delivery system would open a new pool of potential drivers, but there are some big challenges:
- The big challenge is the public acceptance that whether people are going to be "comfortable having their products delivered by their neighbors” is acceptable.
- Another challenge will be reaching deals with retailers for storage space and I think Amazon can handle it because it has a network of lockers installed in 7-Eleven stores, parking garages and other locations where customers can pick up packages or make returns.
For the first challenge, I think if it costs people less and they get it faster it would be acceptable to them; for the second challenge we can say they know how to resolve it since in May Amazon reported they are considering recruiting retailers who will be used to store packages from which normal people can pick and drop goods. The service will be made possible by an app that will allow regular people to know where exactly they can pick goods already purchased.
Advantages over "On My Way" :
- Crowd-sourced delivery can help Amazon to escape valve for the shipping woes. For example it suffered around the 2013 holiday season, when it had to compensate customers after some packages failed to arrive by Christmas.
- It will be helpful to cut costs considering shipping costs increased to about 9.8% of sales, compared with 8.9% the prior year and shipping costs grew 31% last year, faster than revenue.
- The service can give Amazon more control over the shopping experience.
- It can give the retailer negotiating leverage with the largest carriers.
Crowd-sourced delivery systems are here to give a chance against parcel delivery or regional carriers that dominate the landscape. There are many things that still has to be done, some of them are as below:
- Amazon ships an average 3.5 million packages a day, so it would need a lot of couriers to make a meaningful impact.
- It is not clear who would be responsible if packages are damaged or go missing for example “What will stop these people from simply taking the package for themselves instead of leaving it on someone's porch?”
- It also has to link up with retailers in urban areas to store the packages. Amazon will likely rent space from the retailers or pay a per-package fee.
In my opinion, Amazon will finally make it work; even so Amazon has much to do, and of course last year, Amazon made a test on delivering packages in San Francisco via yellow cabs and Uber vehicles, paying about $5 per parcel. It was a limited experiment to gauge the feasibility and cost of such deliveries.
I think with the new app that will allow people to know where exactly they can pick goods already purchased the worry of missing goods would be somehow resolved if Amazon could find a way to track the goods that now are being delivered by regular people and also to get more details of who is delivering the goods. I mean to let people be hired this way, Amazon must get complete details of the person so in case of missing or damaged goods it could easily charge people in a legal way: of course Amazon will have to do a lot with this new app.
Since this new service mostly cuts many costs for Amazon (and it certainly would be cheaper for customers) in my opinion people would welcome this new service considering costs, easy and fast delivery even so to take goods from neighbors would not be easy but I am sure people will welcome it. A good market research made with polls can show if people prefer strangers or neighbors to carry their goods.
Conclusion
Regarding the fee structure of "On My Way," it was recently being worked out, and it would be paid with cash or credits to be used on its website, but for this service they did not yet say how it would be.
However, the system is already facing some challenges before unveiling. The biggest concern at the moment is who has to be held responsible in case a package disappears or gets damaged while in transit to the end user. On this issue they still have to work and give more details. But what is clear is that they want this new service to work for them and of course with the new app that will allow regular people to follow the goods they already purchased they will put a kind of “check-my-good” service.
Finally, this will let new job positions be available by expanding and using full control on app and from other side let people to have extra income while going office! Who would not like to be paid while going to the office?
