Amazon reportedly is considering a plan in which it will launch an Uber-like courier service using crowd-sourced drivers to pick up packages and deliver them to customers.
The Wall Street Journal reported earlier this month that the service, tentatively known as “On My Way,” would hire brick-and-mortar retailers in urban areas to store the Amazon packages for some form of fee. Then, a pool of drivers with their own vehicles would be alerted to the delivery needs so drivers could pick-up one or more packages and deliver them to customer residences.
It is unknown when Amazon might pilot such a program. However, if Amazon does use the service, it could enable the company to significantly cut costs and delivery times. Amazon had over $1 billion in net shipping losses in each of the last two quarters, so this is an issue for them, Colin Gillis, a senior technology analyst with BGC Financial, says in a USA Today article.
“You see all these Ubers driving around, people going from point A to point B, and you say to yourself, “‘Couldn’t I stick a package in their trunk?’” Gillis says in the article. “So it makes sense for Amazon to be looking at this.”
Amazon isn’t the only company with executives thinking about new approaches to delivery. There are multiple players in the delivery space, though most focus on relatively small areas, such as tech-smart urban centers like San Francisco and New York, a USA Today article notes. Some of the larger include GrubHub, in which restaurants make the food, but GrubHub provides both the ordering website and drivers to deliver food while it’s still hot, and Instacart, in which the service conducts customers’ grocery shopping then delivers to them, using an Uber-like army of part-time workers and their cars, the USA Today article notes.
For now, anyway, there appear to be plenty of challenges. Amazon would need, for instance, to implement accountability safeguards to prevent theft, damage or carelessness. Company officials also would need to determine how to assign blame and penalties in the event that a package is lost or damaged. Furthermore, it remains to be seen whether or not consumers would even be comfortable having their packages delivered by their neighbors or even friends.
Then there’s the issue of basic economics. The current cost advantage of UPS and FedEx in terms of delivery “density” will be hard for any company to match, even in urban environments, an article on SC Digest points out. UPS’ marginal cost to deliver the next package can be as low as just $1.50, for example, and it’s hard to picture Amazon, Uber or anyone coming close to matching that. Perhaps Uber could greatly increase its density by leveraging off taxi riders, combining that service with parcel delivery—but even then, reaching UPS and FedEx’s cost scale seems unlikely, the article notes.
Be all of that as it may, Amazon’s plan would open a new pool of potential drivers, which is needed today. There’s a large community of individuals who don’t feel comfortable with having strangers in their car, but they’d be completely comfortable having a package in their trunk, Brendan Witcher, an analyst with Forrester Research, says in the USA Today article. So it would seem, that Amazon wouldn’t encounter a shortage of potential drivers.
What are your thoughts on Amazon’s potential new courier service? Secondly, what potential challenges do you see for such a service?