Analysis

Giant flying warehouses: 0. Deliveries on behalf of sellers: 2bn. Five ways Amazon did develop its business in the last year

The giant flying warehouse that Amazon filed a patent on back in 2014, and that is grabbing headlines this week, seems more science fiction than a thing we’ll be seeing any time soon. But 2016 saw the trader, an Elite retailer in IRUK Top500 research, make big strides in other, more down-to-earth areas of its business in the UK, and beyond.

Here are the key developments that stayed with us.

Fulfilling orders for its sellers
The retailer said this week that it delivered more than 2bn parcels for its sellers in 2016. During the year, the number of active sellers using the Fulfilled by Amazon (FBA) service grew by more than 70%. Overall, Amazon sellers from more than 130 different countries around the world fulfilled orders to customers in 185 countries during the course of last year. On Cyber Monday alone, sellers around the world received orders for more than 28m items.

“2016 was another record-breaking year in sales for sellers across the world on Amazon Marketplace,” said Francois Saugier, VP, EU Seller Services. “One of the biggest innovations for small businesses selling on Amazon Marketplace has been FBA, whereby we store, pick, pack and deliver items to customers on behalf of smaller businesses to help them scale, increase sales and create jobs.”

Simon Johnson, director of seller services UK, cited independent research showing that UK sellers employ 74,000 people as a result of their involvement in Amazon Marketplace. “It is great to see UK businesses going from strength to strength, and our role is to continue to support their growth and success,” he said.

Read more: we analysed the development of the Fulfilment by Amazon business in the latest IRUK Top500 Operations & Logistics Performance Dimension Report. Read the piece here, and explore the report here.

First drone delivery
In December, Amazon [IRDX RAMZ] made its first delivery by drone – in the UK. The flight took place on December 7 in the Cambridge area and, according to a tweet from Amazon chief executive Jeff Bezos, took just 13 minutes from the click to order to the parcel arriving.

In a video, Amazon, an Elite retailer in IRUK Top500 research, said the first Prime Air delivery was part of a private trial to customers in the area. Customers taking part in the trial can choose from a range of thousands of items for delivery by what Amazon says is an entirely autonomous drone.

“For this initial trial customers can choose from the latest tech gadgets to their dog’s favourite biscuits,” Amazon said in the video. “We will use the data gathered during this data test and the feedback gathered by customers to expand the private trial to more customers over time.”

The initial trial involved just two customers living over a hill from the Prime Air fulfillment centre, but Amazon says the number of people who can use the service will expand steadily over time. It aims to use the drones to enable routine deliveries within 30 minutes of the order being placed.

The world-first delivery has took place in the UK less than six months after the Civil Aviation Authority (CAA) took the step of working with Amazon to trial the use of drones to deliver small parcels weighing up to 2.3kg. It granted permission that went beyond the US’s Federal Air Authority, which insisted testing must be in the line of sight.

Amazon Dash – and the Internet of Things
Amazon brought its Amazon Dash Button to the UK in 2016. The button, positioned strategically next to items that shoppers might run out of around the house, from toilet rolls to razor blades, enables on the spot one-click ordering without the need to turn on a more conventional device. But it was the related Amazon Dash replenishment service that was arguably more interesting. This took the shopper out of the equation and enabled connected items from printers to washing machines to place orders directly for the items they run out of, such as printer ink and laundry liquid. It’s significant as one of the first uses of the Internet of Things in retail.

“We’ve all experienced the frustration of running out of something we need — Dash Button and Dash Replenishment Service are designed to make that moment a thing of the past,” said Daniel Rausch, director of Amazon Dash, at the time. “Dash Buttons offer the convenience of 1-Click shopping from anywhere in the home—they can be placed near those frequently used items you don’t want to run out of, and when you see supplies running low, the Dash Button makes it easier than ever to order more. Just press the button and your item is on its way.”

The move into fast grocery deliveries
Amazon disrupted the way groceries are sold and delivered in the UK with two key innovations this year. The first was when it launched the Amazon Prime grocery delivery service , and the second was when it teamed up with Morrisons to sell the supermarket’s goods wholesale. It then combined the two with the launch of the Morrisons at Amazon service.

It enabled Amazon Prime customers to order their Morrisons shop via the Prime Now app, with orders picked at a Morrisons store and delivered within an hour for £6.99, or for free in two hours. At launch, the service was available in selected postcodes in areas including London and Hertfordshire.

At the time, Morrisons’ David Potts explained why the service worked for it. “As food maker and shopkeeper we have unique skills to help build a broader new Morrisons through capital light growth,” he said. “‘Morrisons at Amazon’ is another exciting joint opportunity and makes Morrisons good quality, great value-for-money products available to even more customers.”

Amazon channelled Uber on deliveries
The launch of Amazon Flex was hailed as the Uber of the retail logistics world. It aimed to cut delivery times still further with a new service that started in Birmingham and enabled anyone with a valid driving licence and appropriate insurance to sign up to deliver its parcels, following a criminal record check.

The move was billed as a way for these ‘delivery partners’ to turn their free time into extra income – with earnings put at between £13 and £15 an hour, including tips. The retailer made it clear that work allocations, through delivery blocks that can total up to 24 hours a week, might change from week to week and were allocated randomly.

Amazon said in its blogpost at the time: “At Amazon, we believe that the most meaningful inventions are the ones that empower others. We love it when we find a new way to better serve customers and create opportunities for small businesses, entrepreneurs and individuals.”

We said five – but here’s a sixth, that’s not from the UK but nonetheless is very interesting.

Amazon Go
Amazon questioned the way stores operate when it opened the doors of its first Amazon Go store last month – and removed the need to pay.

Customers at the Seattle grocery store use a dedicated Amazon Go smartphone app to enter the shop. There, they take what they want from the shelves, and the technology adds items to their virtual basket, or takes them away if they put them back on the shelves. When they leave the store, their purchase automatically registers through the dedicated app, and they are sent a receipt.

“What would shopping look like if you could walk into a store, grab what you want and just go? what if we could weave the most advanced machine learning, computer vision, and AI into the very fabric of a store so that you never have to wait in line?” asks the Amazon video.

As yet the store, in Seattle, will initially be open only to Amazon employees as part of a beta trial, but it is expected to open to the general public next year.

Commenting, Nick Lansley, formerly head of open innovation at Tesco Labs [IRDX RTSC], said this week that the store replicates the shoplifter experience – in a good way.

Mentioned in this piece…

Amazon

Amazon

IRDX: RAMZ

Amazon is a market-leading eTailer with global reach and a broad array of product types. (more…)

Tesco

Tesco

IRDX: RTSC

Tesco is the largest British supermarket chain. Tesco has a comprehensive multichannel offering, including mobile and tablet websites, click-and-collect options and home delivery. (more…)

Image credits:
  • Amazon