Sunday, April 2, 2017

Amazon Will Use A Combination Of Artificial Intelligence, 3D Printing, Drones, Autonomous Trucks, Quantum Computers and Robots to Deliver Your Stuff (AMZN)

But what about the rockets? For the 30 minute delivery option?
This is a year old but an interesting reminder.

From Supply Chain Quarterly, Spring 2016:

So you think Amazon rules the world? New report says you ain't seen nothing yet.
A new report says Amazon is prepared to force out other intermediaries that stand between the producer and the consumer.
That Inc. is transforming the way commerce is conducted has become obvious even to the casual observer. But if Satish Jindel, who is hardly a casual observer, is correct about where the Seattle-based e-commerce giant is headed, it hasn't gotten started yet.

Given Amazon's relentless pace of innovation, there will likely be no finish line. But at the company's present rate of development, it will become the world's ultimate retail monster, with its only rival being the Chinese firm, which dominates its own market using similar strategies and execution, Jindel reckoned.

In a 50-page study accompanied by more than 25 charts and tables, a summary of which was made available to our sister publication, DC Velocity, SJ Consulting Group Inc., a transport and logistics consultancy founded by Jindel, said that Amazon's goal is to be the primary conduit between manufacturers and customers. Everyone in the middle will be forced to work with Amazon or disappear, and producers will have no choice but to do business only with Amazon because there will be few, if any, alternatives available, according to Jindel.

Traditional retailers such as Bentonville, Ark.-based Wal-Mart Stores Inc., Richfield, Minn.-based Best Buy Co. Inc., and Minneapolis-based Target Corp. will survive only if they build models similar to Amazon's, which at this stage seems highly unlikely, Jindel said. In fact, while Amazon's strategy stands to badly hurt Wal-Mart's bricks-and-mortar profit margins, Wal-Mart's e-commerce channel will not threaten Amazon's position, Jindel said. Wal-Mart generated about $355 billion in total sales last year, nearly four times as much as Amazon.

Retailing practices will change forever as a result, SJ forecast. Free shipping will become a universal service; retailers that don't offer it will be unable to compete, according to the report. Amazon, which currently charges a $99 annual fee for two-day deliveries under its "Prime" service, will eventually offer two-tier pricing for delivery services, Jindel said. One will be a "Gold Prime" membership costing $199 to $249 a year that covers next-day deliveries, the other a platinum membership for $399 a year that includes same-day deliveries. Jindel said the pricing scheme will take effect only after Amazon builds out its distribution infrastructure, which is a work in progress. However, it will be a template that all retailers will need to follow to recover their shipping costs and remain relevant to the demands of modern-day consumers, according to the report.

Jindel said Amazon plans to leverage its massive procurement power to force logistics companies to either work with it on an exclusive basis or be pushed out of business. Amazon will rely on specialists for the blocking and tackling, but it will become so deeply embedded in its partners' operations that it will be able to buy services at wholesale prices instead of at retail cost, and will become the exclusive partner of the providers it chooses through its massive and growing volume base, Jindel said....MORE
Oddly enough, although we subscribe to logistics mag. DC Velocity, I don't recall anyone pointing out the  SJ study. I shall make inquiries directly.

HT: Next Big Future who has a couple other links as well.

Coming in from a slightly different angle is The Economist, March 25, 2017: 

Amazon, the world’s most remarkable firm, is just getting started
Amazon has the potential to meet the expectations of investors. But success will bring a big problem 
AMAZON is an extraordinary company. The former bookseller accounts for more than half of every new dollar spent online in America. It is the world’s leading provider of cloud computing. This year Amazon will probably spend twice as much on television as HBO, a cable channel. Its own-brand physical products include batteries, almonds, suits and speakers linked to a virtual voice-activated assistant that can control, among other things, your lamps and sprinkler.

Yet Amazon’s shareholders are working on the premise that it is just getting started. Since the beginning of 2015 its share price has jumped by 173%, seven times quicker than in the two previous years (and 12 times faster than the S&P 500 index). With a market capitalisation of some $400bn, it is the fifth-most-valuable firm in the world. Never before has a company been worth so much for so long while making so little money: 92% of its value is due to profits expected after 2020.

That is because investors anticipate both an extraordinary rise in revenue, from sales of $136bn last year to half a trillion over the next decade, and a jump in profits. The hopes invested in it imply that it will probably become more profitable than any other firm in America. Ground for scepticism does not come much more fertile than this: Amazon will have to grow faster than almost any big company in modern history to justify its valuation. Can it possibly do so?

It is easy to tick off some of the pitfalls. Rivals will not stand still. Microsoft has cloud-computing ambitions; Walmart already has revenues nudging $500bn and is beefing up online. If anything happened to Jeff Bezos, Amazon’s founder and boss, the gap would be exceptionally hard to fill. But the striking thing about the company is how much of a chance it has of achieving such unprecedented goals (see article).

A new sort of basket-case
This is largely due to the firm’s unusual approach to two dimensions of corporate life. The first of these is time. In an era when executives routinely whinge about pressure to produce short-term results, Amazon is resolutely focused on the distant horizon. Mr Bezos emphasises continual investment to propel its two principal businesses, e-commerce and Amazon Web Services (AWS), its cloud-computing arm.

In e-commerce, the more shoppers Amazon lures, the more retailers and manufacturers want to sell their goods on Amazon. That gives Amazon more cash for new services—such as two-hour shipping and streaming video and music—which entice more shoppers. Similarly, the more customers use AWS, the more Amazon can invest in new services, which attract more customers. A third virtuous circle is starting to whirl around Alexa, the firm’s voice-activated assistant: as developers build services for Alexa, it becomes more useful to consumers, giving developers reason to create yet more services.

So long as shareholders retain their faith in this model, Amazon’s heady valuation resembles a self-fulfilling prophecy. The company will be able to keep spending, and its spending will keep making it more powerful. Their faith is sustained by Amazon’s record. It has had its failures—its attempt to make a smartphone was a debacle. But the business is starting to crank out cash. Last year cashflow (before investment) was $16bn, more than quadruple the level five years ago.
If Amazon’s approach to time-frames is unusual, so too is the sheer breadth of its activities. The company’s list of current and possible competitors, as described in its annual filings, includes logistics firms, search engines, social networks, food manufacturers and producers of “physical, digital and interactive media of all types”. A wingspan this large is more reminiscent of a conglomerate than a retailer, which makes Amazon’s share price seem even more bloated: stockmarkets typically apply a “conglomerate discount” to reflect their inefficiencies.

Many of these services support Amazon’s own expansion and that of other companies. The obvious example is AWS, which powers Amazon’s operations as well as those of other firms. But Amazon also rents warehouse space to other sellers. It is building a $1.5bn air-freight hub in Kentucky. It is testing technology in stores to let consumers skip the cash register altogether, and experimenting with drone deliveries to the home. Such tools could presumably serve other customers, too. Some think that Amazon could become a new kind of utility: one that provides the infrastructure of commerce, from computing power to payments to logistics.

A giant cannot hide...