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Amazon’s End Game

Amazon’s End Game
Amazon’s End Game
February 3, 2020   //   

By Marc Emmer

Last year, Amazon surpassed the milestone of 100 million Prime members. In an era when loyalty is impossible to achieve, Amazon is fulfilling the ultimate promise to satisfy our every whim — on the same day.
It has long been evident that Amazon’s motive is to own every major consumer segment. Yet the end game is now clear: to control the supply chain that fuels consumerism. In 2013, Amazon operated 65 fulfillment centers. Today it has over 400.
The mechanism by which products are delivered to your doorstep is becoming far more sophisticated. At the 2017 Consumer Electronics Show, Mercedes-Benz unveiled a delivery system that included delivery vans outfitted with drones that could be dispensed to any neighborhood. Drone delivery startups are a hot segment.
All this technology is an attempt to solve an age-old problem in commerce known as “the last mile of distribution.” According to Anne Goodchild of the University of Washington, the last mile could represent half of the cost to distribute a product from its source.
Amazon’s competitive advantages, which include selection and cost, extends to a stranglehold on the supply chain. Amazon’s recently announced separation from FedEx could be a telltale of what is yet to come. The company has even taken steps to exclude its resellers (who represent more than 60% of volume) from using third parties to ship merchandise.
Once Amazon controls distribution, other advantages will be magnified. Not only will it have shipment information on countless product categories, it will have even more data on customers and their movements. AI-enabled algorithms will allow the company to source and inventory closest to the point of distribution, which will expedite shipments and lower costs.
Given its perishability, food delivery may be the most complex of consumer categories. It is unlikely that Uber, DoorDash, Grubhub and a litany of local food delivery startups can build infrastructure and technology that can compete on such scale. It is more likely that such companies consolidate and fold in under a larger umbrella-like Amazon. Amazon already offers perishables under Amazon Pantry, AmazonFresh and Whole Foods. The company also announced an alliance with Rite Aid, and other retail partnerships are expected. Imagine a world where Amazon owns the distribution of prescription drugs.
While this potential monopoly on the supply chain may feel suspect, there could be societal gains from a more efficient system. Today, the supply chain burdens our environment with tremendous waste as a result of gas-hungry supply vehicles, use of cardboard, etc. Solutions offered in this new world will introduce new problems, such as the security and safety concerns of drones and robots in our neighborhoods. The Federal Aviation Administration is positioning to launch new standards that will require every commercial drone to be registered and equipped with chip technologies that will track their movements.
Amazon may choose to sell its logistics to other companies or lever it to punish competition. While the U.S. government has been passive in terms of anti-trust action, Amazon appears to be one of several technology companies that could be in the crosshairs in the future.
To survive in this world, competitors, resellers and providers will have to meet Amazon’s growing requirements, and in particular will need multiple distribution points.
As we enter 2020, consumers will have an endless number of choices. Perhaps, soon, pizza delivery by drone.