Same Day Delivery, Amazon & its Destiny
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
What if you could order something and receive it instantly? Well, that’s already being done with many platforms including music, movies, books, and some smaller-in-size software.
I remember when Netflix (NASDAQ: NFLX) defined itself as a technology company not long ago saying the DVD business was simply not as profitable, and their goal was bringing movies over as fast as possible.
Some companies seek to define themselves as the business model they are attempting to achieve, others work behind the scenes using an attractive offering to bring in other revenues. Take for example gas stations, the money is not made from the gas but the high margin products they sell in the store. A similar note could be observed about movie theaters, which are actually snack and candy shops that sell movies to bring people in.
Now, here are some other companies it doesn’t take a rocket scientist to know their business: Google equals the collection of data, Apple leads in consumer electronics, and Nike is the best athletic wear. That’s not too hard, so let’s define what Amazon’s (NASDAQ: AMZN) business is?
I know they sell merchandise online, so they are an e-tailer with no physical stores, and never enter a brick and mortar building, right? Well not exactly, remember the Kindle is sold in many stores so it’s not completely online. I got it, they are in the business of instant everything.
Instant everything is this model I’ve defined for the company that basically means everything they do has to be able to achieve instant results. The company has been for some time in the content business of music, movies, and books so the concept makes sense. It also does not conflict with selling the Kindle in retail stores, since it’s instant.
The company recently expanded its warehouse presence in Texas, Virginia, California, and New York. What these locations all have in common is that they are near large metropolitan populations that would surely benefit from faster delivery. Is it possible the company is gearing up for instant delivery?
The plan makes perfect sense and explains their most recent initiatives. Why else would the company be content with having their content appear on Apple’s (NASDAQ: AAPL) iPad, and Google’s (NASDAQ: GOOG) Android devices. In contrast Nintendo (NTDOY) has avoided its software appearing on the iPhone even though the hardware can definitely handle the workload.
The business model is very simple; a typical store operates in a commercial neighborhood where consumers frolic. So picture a mall, or large warehouse building like Best Buy (BBY). In order for the retailer to cover costs they typically need to sell large quantities of items at low prices, or high margin items. Apple does high margin easily, and Wal-Mart achieves volume easily.
Having products instantly would allow Amazon to undercut everyone by being in nearly every location in the country. I remember waiting in line to buy an iPhone at the Apple Store, just imagine ordering the same phone using same day at Amazon. I wouldn’t have had to even go into a busy mall and waited in line, had I just ordered using same day delivery.
It may also force enemies like Apple to partner with the company as they would at that point be a major distributor, but also a competitor to the company’s own retail presence.
But with all things there is a catch. For one it would be expensive to setup that type of distribution. Second, the company could face a consumer backlash from ‘buy local’ consumers that would be upset about one company shutting down small businesses.
Finally the company during its most recent conference call had the following statement to make:
“On the topic of delivery speed to customers, we are trying to get closer to customers, but in terms of same-day delivery, we don’t see a way to do same-day on a broad scale at the moment,” Tom Szkutak CFO said.
Well I guess we can daydream. But that leads me back to the question of what makes up the company’s main goals then? So they are not looking at instant gratification, and instead looking to become a third tier hardware company? The poor response in my opinion makes me give up on what their long term goals are.
I get excited watching Google’s Glasses, or Apple’s product unveilings thinking about the future. I worry about a tech company that can’t outline its vision of the future, and am embarrassed to say what it might be. It reminds me of Yahoo!, the company that never figured out if it was a tech company, or a content machine, as Steve Jobs pointed out during his motivational pep talk with the struggling search, or news machine.
muhammadbazil owns shares of Google. The Motley Fool owns shares of Apple, Amazon.com, Google, and Netflix. Motley Fool newsletter services recommend Amazon.com, Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.