This article on Shippit was originally run by The Australian and can be found here.
By the time you read this, Amazon will be close to finishing its third annual Prime Day bonanza shopping event. Over a space of 30 hours, hundreds of thousands of deals were provided to an estimated 85 million Amazon Prime-only members from televisions to video games to bulkier furniture items. If last year’s sales were any indication, this year’s Prime Day should be Amazon’s largest day of sales — ever.
For this to happen, Amazon will use a combination of metro and national delivery services as well as its own fleet of planes. 24 Prime Air cargo planes were fuelled and ready to support Prime Day in the United States for the first time. And that’s not just because it’s Amazon’s home market but its company promise to deliver anything to its American Prime members in two days or less.
This is crazy. Especially on an extremely busy day like Prime Day (or other seasonal events like Mother’s Day, Christmas, Black Friday, etc.).
Being at the arse-end of the online retail industry — organising fulfilment and shipping parcels to the paying customer — (I run Shippit, an online logistics management platform), the challenge of organising national two-day shipping when order volumes multiply exponentially is more complex than you may think.
When a customer places an order, Amazon’s platform and technology will decide which fulfilment centre the product will come from. They’ll obviously try to ship from a location as close to the customer as possible but for some items, whether they are large or hard to find, they’ll need to use its Prime Air cargo planes to ship from one side of the country to hit their shipping time promise.
In an interview with Bloomberg this week, Dave Clark, Amazon’s SVP of worldwide operations, said Amazon had 150 million square feet (roughly 14 million square metres) of fulfilment space to store 50 million SKUs — that’s 50 million unique items across different colours, sizes, and other attributes. Considering the average Woolworths has around 85,000 unique SKUs in store, this range is unfathomable.
For all the talk about Amazon in Australia which I am sure the majority are sick of by now, the question then becomes: Could Amazon’s Prime Day actually work here?
Without owning large distribution warehouses in each of the metro cities around the country, it will be a challenge but not impossible; reports suggest they’re investigating distribution centres in Queensland, New South Wales, and Victoria as well as murmurs of partnerships with existing warehouse owners to share their space. So if warehousing is solved, what about speed?
Australia is big. Heck, if you want some real scale, Australia is nearly the same size as continental USA. Our population spread and the large distances between major cities and regional towns (when compared to Amazon’s other key markets including America, Europe, or India) means the demand for air-based shipping is going to be critical. If you look to the capabilities that already exist in Australia like Australia Post’s Express Post service then the Prime experience may not be so far out of reach — but this is only true of smaller items.
Now consider the last time you bought something large and heavy like a mattress or a dining table online. How many weeks did it take to get to you? If it was less than two weeks then you were extremely fortunate. From receiving your order from their shopping platform, the online retailer would then have to find where the dining table was in its warehouses, prepare it for delivery, wait for the weekly courier (that specialises in furniture) to pick it up along with several other customer orders, and then deliver it to a local distribution centre where it will get tagged, sorted, and then arranged to be shipped to your house in smaller truck or van. If you are lucky enough to live in Perth but have Sydney-taste, ordering from East Coast-based retailers (as many of them are) … then this will take a very long time (if nothing is delayed along the way).
Most retailers are moving quickly to speed up delivery times and offer customers delivery experiences worth paying for. The reality is Amazon-like capabilities have existed in Australia for decades; the technology just hasn’t been there to bring it to the online retail sector (think about the shipping speed for organ transplants).
However, in Australia, we don’t promote this as a key value add. The closest thing we have to Prime Day is the infamous Click Frenzy. While they touch upon the vast range of products they offer over at steeply discounted prices, like many online retailers in Australia, its discounting and not shipping speed being used as the promotional tool. Perhaps retailers are hesitant to promote shipping speeds as they know that with increases in demand, they will struggle to maintain the speed of packing orders in time for speedy delivery.
If you’re an online retailer, you can (and should) already take advantage of capabilities like that of Australia Post’s Express or DHL Express and using these services as effective promotional tools. Where Amazon has the advantage right now is in large and bulky goods, a sector lacking innovation locally — Prime Day also includes discounted large items like trampolines and furniture. This is something that will take time for any new entrant to get right from the outset in Australia and something that many online furniture stores locally should start perfecting now if they are not already.