Amazon Online Business Strategy – Whenever we, as a customer, buy anything from any e-commerce website, one thing that we crave for, is fast delivery. Be it a daily use item or some items of great value what we all want is faster delivery that too at low cost. In the early days when e-commerce was still gaining momentum, logistics was a huge problem for many businesses. And, delivery of items on time was another problem. Amazon online braved all these problems to establish itself as the e-commerce giant!
But, as time passed, businesses beautifully adapted to online business conditions and started setting up infrastructures to support a robust online business. Within a matter of a few years, the problem of logistics was solved. And, businesses also started improving the speed of delivery. And the delivery of items soon became pocket friendly!
Many businesses were gradually improving on all these points and Amazon was one of the many. But, the pace and scale on which Amazon online established its network and built its infrastructure were unbelievable. In the year 2005, they launched their prime OTT platform and prime members would be given higher preference in shipping. Non-prime members could also avail themselves that by paying extra money. Even a two-day delivery option was rolled out.
At the start of 2019, Amazon doubled its delivery speed – from two days to one day. But before prime launched in 2005 one-day shipping was an exorbitant luxury. Now, in 2021, it is the standard shipping speed for Amazon’s 100 million Prime subscribers. And this is not it, this faster delivery speed is available on more than 10 million products.
With this one-day delivery, they have changed the game completely. So now they excel at getting an object from creator to consumer within no time. This facility of theirs is as flawless as any facility could be. But, behind this is the hard work of tens of thousands of employees. Not to forget the huge investment done by Amazon in infrastructure to facilitate smooth functioning of one-day delivery.
So, how does Amazon ensure consistent fast-paced delivery?
Amazon spends 10 of billions on shipping every year. In the last quarter of 2018, Amazon’s shipping cost jumped 23%, reaching a record of $9 billion. Also, they set aside $800 million just in the second quarter of 2019 to start making the one-day shipping the norm. But, the difference with e-commerce is the costs never end. The pick, pack, and ship happen every time a unit is sent out. Thus, in the near future, the cost is only going to increase.
To better control this process and its large cost, Amazon online is cutting down its reliance on the UPS and the US Postal Service. It has started investing heavily in its own logistics network. Now it handles around 26% of that total online orders. They now have at least 50 airplanes, 300 semi-trucks, 20k delivery vans, and it also operates ocean freight service between the US and China.
In 2018, Amazon leased 10 additional Boeing 767-300 planes from ATSG. And, FYI, Amazon is not in the commercial airline business!!
Because of Amazon’s online fast-paced delivery customers have come to expect consistent fast delivery of anything on earth. Customers expect the same from other retailers. While other retailers are also spending a lot to keep up with the fast shipping expectations Amazon has created, these expectations are not easy to be met. For many retailers, this is simply too much. Amazon is changing people’s expectations, and they’re perpetually improving that expectation which is good for customers but bad for other e-commerce businesses.