First it was delivery drones, now Amazon is planning to start sending you items you didn’t even order, but think you might like. Based on it’s new “anticipatory shipping” algorithm, the online retail giant is hoping to move the needle on multichannel retailing by literally parking items in cities waiting to deliver them, according to a recent Gartner article.
From the article:
Citing “predictive analytics” Amazon feels it can be reasonably certain that you will buy product X, even if they have to give you a special incentive to complete the transaction. But are they really using predictive analytics or an advanced version of analytics driven by past purchases combined with wish list items? For example, it’s relatively easy to determine that a consumer of conservative views from a given commentator will be interested in his next book. Even if the Amazon customer buys these items as a gift for a loved one chances are good they will be interested purchasing again. Contrast this with a much more complex form of prediction able to determine through a variety of indicators that this person’s views are changing and therefore predicting an alternative purchase. The latter of course is much more complicated but offers both a higher risk and reward.
Let’s get back to the question of the impact on multichannel retailing. Look beyond the hype to the realities. In this case Amazon seeks to improve its availability in order to solve the instant gratification that consumers crave and multichannel retailers rely on. No question that this represents risk for the traditional model, just as almost everything that Amazon has done from day one. This is however I think a little different as it shows just how important it is for Amazon to get product into the local market and takes them a step toward being a multichannel retailer. As I noted in a previous post, Just how far can ecommerce push the home delivery model before it breaks?, there are fundamental issues with the home delivery model. Most notably in this example increasing costs will be a factor. Not just the cost of shipments that will perhaps never end up on a customer’s door step, but the costs of additional discounting that avoid the complete waste of profits caused by returning un-purchased products. One day Amazon’s retail operations will have to make a profit, and with every additional pool of inventory and node in the supply chain it is growing costs which will make this challenge even more difficult.