The future of retail is not linear – the winners are building ecosystems
By Chris H. Petersen
The “last mile” to your door is paved with gold in terms of future ecommerce potential. Home delivery is a current customer expectation, and will prove to be a critical requirement for subscription models delivering regular replenishment orders to households. However, major “potholes” are creating significant barriers. Working customers are not home when most deliveries occur. There is often no place to deliver packages at large apartment complexes and office buildings. “Porch pirates” now follow delivery trucks to steal packages from porches after delivery. Getting to your door quicker is not enough. Secure delivery INSIDE your home or locker is the next frontier.
Why this is important: To grow subscriptions and ecommerce volume in general, retailers must do more than deliver the last mile. Home delivery is NOT a highly valued convenience if the customer has to worry about time slots, access or theft.
The mad race for the last mile is getting much faster and more complex
Change is no longer linear. It will not be good enough to be able to deliver the “last mile”. The future of home delivery will quickly become very FAST – hours not days. Amazon’s very existence and growth depends upon conquering the last mile.
While Amazon has created a consumer expectation of free two-day delivery, in fact local competitors are the ones ratcheting up consumer expectations. Many grocery chains are now doing one day, free delivery for minimum orders. Pharmacies are now delivering customer prescriptions, as well as all kinds of consumables to your door within hours. In today’s retail, home delivery does not differentiate … it is a requirement to stay in the game.
Houston we have a problem … Major “potholes” disrupting satisfaction
With everyone literally jumping on the last mile, there is an increasing shortage of delivery capacity to your front door. Current delivery capacity is real, but solvable for the last mile. Amazon is exploring its own fleet. Enlightened distributors are collaborating on drop shipments.
The emerging “potholes” in home delivery are solving the major pain points of the delivery itself. These apply to both consumers and businesses:
- Scheduling delivery – Most working customers are not home during peak delivery periods. Rerouting deliveries is possible, but adds customer expense.
- Delivery access – Many large apartment complexes and businesses have no access or places to secure packages.
- Porch Pirates – Theft is becoming a major problem as thieves follow delivery trucks and steal packages after delivery. Not only does the customer not get the package on time, they have the added burden of documenting the theft, and trying to get a both a replacement and reimbursement of the costs.
- Subscriptions and Perishables – The convenience of routine subscription orders and grocery delivery goes away if the food perishes on the porch. Delivery inside the home has a “creep factor” and raises all kinds of security concerns.
- Click and Collect – While even Amazon now has physical stores, collecting at a store requires time, a trip and customer expense.
Customer solutions fill the potholes with a portal to your pantry
Customer satisfaction at the end of the last mile is the lifeblood of Amazon’s existence. It is the foundation of Prime memberships. It is the basis for growth of subscription based orders, and Alexa on demand ordering. Given the customer centric approach of Amazon, it is not surprising that they are addressing these “potholes” head on. The last thing Amazon can afford is to have you abandon a shopping cart thinking: “Based on the hassle and expense of that last theft of my Amazon order from my porch, I’m going to click and collect from Walmart.”
Amazon thinks in terms of future holistic solutions and lead the way in innovation. However, the reality is that all ecommerce retailers must address the pain points and customer concerns related to home deliveries. There are a number of alternatives including:
- Pickup lockers – Lockers with secure customer codes are not new. Amazon has piloted them in 7-11 stores, and even has plans for them on buses. Other retailers are installing lockers at train stations and malls. While secure, the remote lockers are not a complete solution. They still require the customer making a trip. The more valuable solution for the customer would be some kind of secure locker at their home/apartment, ideally with refrigeration for groceries.
- Sending photos of delivery – Amazon has starting sending customers photos of the delivery person and where the package was placed. While that alerts you of a delivery, it does not prevent theft.
- Security code to deliver inside – Amazon has been piloting the use of a security code on a door lock that will enable authorized delivery to place the delivery INSIDE the customer’s door. While that might the most convenient and secure, it requires technology plus customer agreement. Customers may have a “creep” factor of letting a stranger in their house, which raises other security issues.
Amazon’s billion-dollar bet on Ring fills potholes and a whole lot more!
Image Credit: Ring
In case you missed the news, Amazon acquired Ring for $1B US. Ring has been very successful at developing consumer monitoring and security products that run on home WiFi networks. On the surface, Ring is a powerful acquisition, which launches Amazon into the IoT space with well know products that will connect to Alexa. The apps and Ring subscriptions will also create recurring revenue. All well and good in itself, but Ring has the potential for so much more!
Amazon (and most every ecommerce player) needs a more comprehensive solution for secure home delivery. Ring devices have cameras that can automatically send customers videos of packages when delivered. Ring devices detect motion and can alert customers of porch pirates, as well as capturing video of the thieves. Ring enables customers to talk to the delivery person on the porch, enabling further instructions. Ring can be potentially programmed to open a door to a locker, or even the door if the customer desires.
The future of retail is not linear – The winners are building ecosystems
Inside the mind of Bezos, you can bet that this strategy has crossed his mind … when Ring gets established via Prime, Amazon can charge all of the grocers, pharmacies and retailers to use the Ring ecosystem as the way to make, document and secure deliveries to your door, and all the way to your pantry/locker.
The rest of retail needs to take note: Ring is much like Amazon’s cloud. Not only will it generate revenue in itself, it has the power to differentiate incredible value to end customers. On top of that, Ring can become a powerful portal for secure delivery, ultimately enabling Amazon to charge all players a “toll” for secure delivery to satisfy customers. Paying a billion for Ring sounds like a steal for creating another incredible cog in Amazon’s ecosystem.