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Covid-19 bolstered expectations of two-day and next-day shipping for “free” with Amazon Prime. Just before Jeff Bezos stepped down in 2021, Amazon added 50 million subscribers during the pandemic. At the time, Prime cost $119 per year, a price set in 2018.
Now it’s $139 a year. Amazon recently announced that it has updated its inventory management system and search algorithms reduce the number of contact moments in the delivery system to keep delivery times short. A $1 fee has also been added for returning packages when an Amazon pick-up/return center is reasonably close. These and other minimum order limits have demonstrated the shift towards shifting costs back to consumers for home delivery. It’s not just Amazon, though.
Walmart has been less fortunate in terms of this shift, recently received vocal outrage on Twitter about their high delivery prices. If you’re not a Walmart Plus member, you pay up to $9.95 for delivery on regular orders. “Express” delivery costs an additional $10 whether you are a Plus member or not.
So why now?
Amazon was trying things out during Covid-19, like any major e-commerce company. There were new problems to solve and a lot of money coming in, but now they’re done throwing spaghetti against the wall. Amazon is cutting back, with more than 27,000 layoffs this year and programs such as the Scout delivery robots, brick-and-mortar bookstores, and Halo health equipment shutting down. Now that the experimental phase is over, it is mainly about making costs.
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Bezos is gone, so there is a responsibility to shareholders. Amazon is too big to be a completely pared-down organization, but its core delivery service (using 200 million subscribers) has to work. To meet consumer expectations, they have moved to AI and robotics, with an emphasis on the “regionalization” techniques to get products delivered faster. They have turned to AI and robotics to meet consumer expectations. And it works. It is well. But…
While Amazon has such extensive warehouse distribution, it will never be perfect. Whatever you have, logistics and robots, 90% will be good… but never 100%. The fully automated sci-fi future is still a long way off, so for now we need to be aware of the human element in the delivery.
Drivers, both short and long haul drivers, are an important human element in the delivery system. It takes people to move products, between warehouses or to someone’s front door. The working conditions are tough. There is no time for breaks and parcels are expected to go to as many doors as possible each day. In California, an Amazon Delivery Service Partner organized a trade union with the Teamsters to secure security measures and pay raises.
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My dad is a long-distance driver and it takes a lot of planning to maintain the semblance of work-life balance. In order to train, he had to find a gym membership with locations along his New Jersey routes. The human element is a boundary that cannot be moved within the delivery infrastructure, otherwise you risk dehumanizing your workforce.
There has been talk of drones as an option for smaller products. Amazon even announced it new drone last year, but it’s still limited in where and what it can deploy – it drops its payload from 12 feet in the air. There is a “last meter problemwith delivery by drone. It has to be safe for the package and everyone on the ground.
For now, drones will be expensive to monitor and maintain. DroneUp, a Walmart-backed startup, had to cancel part of the workforce, and says new employees will be joining in the future. Scaling up drones to cover the delivery process will eventually work, but it will take time.
Where does that leave the consumer today?
Do you remember in 2020 when everyone could only talk about the supply chain? Container rates were rising. Delays at The ports of LA grew. It was all we could talk about – until we all called it quits. For a moment, however, there was a collective understanding of how difficult it is to move products around the world.
Related: What Does “Free Shipping” Really Mean For Retailers?
As the world slowly recovered from Covid and many companies, like Amazon, came out on top with the monumental shift to online buying, consumers forgot about those supply chain issues. It’s easy to forget – until it starts hurting their wallets.
And that’s exactly where they don’t want to feel it. Consumers don’t necessarily want fast. They want cheap. In a survey, shipping costs were 2.85 times more important than the transmission speed. Consumers like to get their products faster, but not at the cost.
It’s a wonder that two, one or same day shipping is possible. The amount of progress in delivery options and logistics over the past decade amazes me. I remember when a four to six week labor was average. As our expectations for fast delivery have been exceeded, this may mean we have to slam on the brakes to catch up with the infrastructure.
Perhaps consumers are learning to pay the extra price for delivery, or companies like Amazon and Walmart are introducing a new, relaxed delivery tier; there are ways to reduce the burden on the system, and it may be that the concept of “free” shipping is being lifted. Consumers should know that fast delivery is not magic and it is not free.
