Is Amazon’s “Last Mile” the “Last Straw” Breaking Retailers’ Backs?

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\"RR“Friction” is a buzzword probably created by some tech-geek or nerdy consultant. And every time I hear or read the word I feel … well, friction, so much so that I want to throw up.  I hate these buzzwords, all coming out of the technology and digital driven world we now live in. The “last mile” is another one, describing the last part of delivery or shipping fulfillment. Using these terms in discussing commerce is considered cool.  In fact, I know of some millennials who toss techie buzzwords into presentations simply to force older executives, like myself, to reveal their lack of coolness by having to ask what the hell the words mean.

Nevertheless, new buzzwords are here to stay.  So, while they may nauseate me, I must use them.  And taking the friction out of the last mile is indeed a huge nauseating issue in the retail industry.  Eating up to 28 percent of a company’s total supply chain costs, the so-called last mile could be the last straw that breaks their backs, particularly as they try to keep up with Amazon.

Amazon arguably ignited the enormous point of friction (at the angst level) across the retail sector by not only driving free shipping (which every legacy retailer must now adopt to compete), but also by shrinking delivery time down to two-day, one-day, same-day and in some cases, within an hour or two.  And some day soon, a drone will drop stuff on your porch within minutes.

Amazon keeps raising the bar on last-mile speed. They own or lease about 40 cargo planes, and they keep adding to their fleet with the apparent goal to become totally vertically integrated. This, of course, will provide Amazon with total control over fulfillment, resulting in greater speed, flexibility, fluidity and ultimately lower costs.  More importantly, do I have to spell out what it will add to consumer satisfaction and loyalty?  Helloooooo all the rest of you last-milers out there!

The headline of one article I recently read quipped, “Walmart Buys a Jet, Amazon Buys a Plane.” Noting that Walmart has a lot of catching up to do with its online business, which has actually been decreasing every quarter but one since the first quarter of 2014, the article pointed out that Walmart’s $3.5 billion acquisition of Jet.com is intended to jumpstart its online revenues using the skills that Jet brings to the table.  At $13.5 billion in online sales in 2015, and still second largest, they are still eons away from Amazon’s $82.5 billion in revenues in the same year.

UPS and FedEx fly goods into regional airports and then truck them to their final addresses, literally the last mile. Amazon is expanding its use of contract truckers as well as using their own.

According to “Business Insider,” Costco and Nordstrom are collaborating with UPS and the University of Washington’s new research center to research the last mile. The UW Urban Freight Lab will focus on urban areas and how retailers can best tackle common frustrations, like limited parking and traffic congestion, as well as unmarked houses in rural areas.

If You Can’t Beat ‘Em, Join ‘Em: A Distribution Platform For All

As in so many other ways, Amazon is leading the industry in the distribution and delivery of goods.  And while its goal is not to eliminate UPS, FedEx and other carriers (so it says), Amazon certainly can become a formidable competitor in the delivery market.  Just as Amazon has some two million (and growing) third-party users operating on their site, why not also provide those users access to the Amazon shipping and delivery capabilities – charging them of course.

Again and again, and if I have to say it one more time, I will be creating my own nauseating friction: it is the DISTRIBUTION CENTURY!! So you can take that as a cool buzzword.  And, believe me, if you use it in a presentation, the savvy millennials in your audience will probably ask you what the hell it means.  Then you can smile down upon them and say, “gotcha!”

Seriously, give deep thought to what’s going on under the big umbrella of strategic and tactical distribution and all of its applications.  Because if you don’t get it right, when the future arrives (like yesterday), you will be history.

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