Dave and I sit down for a sharp session on what we can expect to see for your Amazon operations in the next 5-10 years.
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In this episode we discuss:
[0:00:00] George Reid: Welcome to It's Always Day One. My name is George Reid, a former Amazonian turned Amazon consultant. Each week on the podcast, you're gonna hit industry experts, brand owners on Amazon employees share their answers to the basic yet fundamental questions You should be asking yourself about your Amazon business. Now let's jump in. Hello again, Dave. Thank you. Thank you so much for kicking off the New Year very kindly and joining me for a a short chat on Amazon operations. Trust you had a good new year. I want to get straight into this. I don't think we need an introduction because you performed brilliantly last time. You're still the most listen to. Podcast will be pleased to hear eso Let's get straight underway. What changes do you see coming in the kind of Amazon operations world in the next five years?
[0:00:54] David Glick: I think one of the big ones. First of all, thanks. Thanks for having me, George. But that's the I lost the word anyway. You know, one of the big changes we'll see an Amazon logistics is you know, they've been catching up and catching up to ups, um, and FedEx over the last, you know, 56 years, and I think they're going to surpass that. And so, um, as you know, I'm sure that the key to transportation is density. You know, you can talk about all kinds of different things, but the way you bring down your costs and the way you get to scale of density. And so you know, Amazon has, as in the UK, does I think like 90% of their own packages delivery and in the U. S. They're getting towards that. I read something that said, Maybe they'll do 87% in 2020. That's, you know, somewhere between five and 10 billion packages ish. But the Internet continues to grow. Amazon continues to grow, you know, sort of broadly Amazon. And the e commerce grows a 20% and so they just become more and more. Um, we don't like the word dominant, but if you come bigger and bigger, um and you know, what we've already seen is they've added support for third party merchants as well as people who are unassociated with Amazon in the UK. I'm not close to that, but I see posts on it in Lincoln eso I expect they had a pilot going in the US until, you know, until Cove it started and they shut that down. But I respect that to pop back up and you'll see Amazon being a package carrier not just for their own stuff, but for everybody. I think that's the That's the headline.
[0:02:29] George Reid: Just stuff everyone s Oh, I'm taking notes at the same time for everyone. So that was interesting. You say that a client I've been working with, they a part of a new beater program that's kind of rolling out in the UK first part of this year, where Amazon are basically giving you there operations their tech inside of your own warehouse on. Then you are able to utilize that to fulfill orders on the Amazon marketplace. But is that sort of what you mean by that where I believe they're actually calling it flex bizarrely, which is a bit confusing because I always thought Flex was more of the delivery drivers. So I'm presuming you've only heard of that operation, right? Yeah, this is
[0:03:16] David Glick: Seller Flex. I think, uh, seller flex and vendor flex on, but but the idea is, and this is I don't know if I could take credit for this. Something I used to talk about, which is, You know, if you could build a lightweight W. M s and you give it away to the cellar, you know it's great for them because they don't have to pay for it. And it does exactly what they needed. Manage their inventory allows you to pick and pack and ship very quickly. I would think it's good for Amazon because you effectively then get a feed of all the sellers inventory. And, you know, just as it's important to understand the availability when you're selling from drop shippers or from distributors, it would be great to understand inventory position of your salaries as well.
[0:04:01] George Reid: Yeah, particularly given the challenge over the last nine months. If Amazon are able to help salads in any way with forecasting Andi, ensuring that they could remain in stock by giving Mawr accurate recommendations of when they could look are ordering, for instance, from their supplier. That's gonna make the customer experience better because no doubt that reduce out of stock as well, right?
[0:04:26] David Glick: Yeah, I mean, if you think about there's a big buzzword of supply chain visibility this year, which is, you know, which. It means lots of things to different people, but knowing where your inventory is important. And if you think of, um, you know the world in 10 years, where Amazon is the supply chain of the world and every product that has a barcode on it comes out of out of a manufacturing facility in China. It gets received into Amazon supply chain network, whatever that exactly means, and it doesn't necessarily mean own fulfillment centers. It doesn't necessarily mean Amazon's trucks, but, you know, writ large, the supply chain network and Amazon or you know, anyone else, I guess, could have visibility that every piece of inventory that has a barcode on it in the world, Um, and that's good for good for Amazon, Good for the merchant. But most of all, it's good for customers because you can have that Visibility translates availability for customers
[0:05:23] George Reid: on Maura. Accurate information on one exactly an item might be back in stock again, rather than just a guesstimate, which seems to be the case nowadays. But you're making a big kind of call there in 10 years time. You say Amazon is a supply chain of the whole world like, are we removing the lights of FedEx and USPS and going Amazon is dominating a lot mawr of that and have their fingers in all of the pies in the supply chain, um, marketplace, I guess.
[0:05:56] David Glick: Well, you know, certainly. If you think about the last mile on you talk about UPS and FedEx and the Postal Service and Royal Mail. Um, if you look at the number of packages Amazon's going to deliver or did deliver in 2020 and you look at the number of packages that USPS and the postal Excuse me UPS Postal Service FedEx delivers, You know they're less than order magnitude away, and Amazon is growing at 20% per year. And these other guys they're growing at 3 to 6% per year on DSO in the Internet grows a 2020 25% per year. So you know, if you just do the math, you know the macroeconomic math of how many packages there each of these companies delivering this year next year, all the way through 2030. It's very clear that Amazon is going to dwarf all the rest of these Amazon logistics will dwarf the rest of these in the next few years
[0:06:50] George Reid: on touching upon that them with with Amazon logistics, particularly the UK How do you see that? Developing further in terms of do you see any new technology? Do you see any new ways of doing things? What? What do you think we can expect to see in the next five years?
[0:07:08] David Glick: Um, yeah, We built a lot of technology, and they continue to have, you know, hundreds of engineers if that thousands of engineers working on, you know, both optimizing the routing, optimizing the driver app and so on those air marginal changes. Uh, you know, transportation is a very simple thing, right? You have to pick up back in somewhere. You have toe, get his dense around, it's possible, and you have toe, you know, deliver the package. And the key to that is things like the cost of the cost of delivery is all about the cost of driving, right? It doesn't take you very long to get out of your truck, walk up to the doorstep, ring the doorbell and leave a package. The cost is in the drive. The time between those stops because you don't get paid, you get paid for the stops. You don't get paid for the driving on DSO if you can shorten the drive time just like they've shortened the pick time with Kiva robots in the warehouses. But if you can shorten the drive time, uh, you're going toe your economics get way better, and in order to shorten the drive time, you need more density. And so, if you want to know one thing about transportation, you want to remember one thing about transportation is density, and then the second thing is density. And the third thing is density come. And so that's why it makes total sense for Amazon to start picking up the merchants packages and start picking up people who are not associate with Amazon's practice and become a really carrier. You know, there are ideas about, um, you know, autonomous vehicles comes up all the time. Uh, the, you know, in the middle Mile, meaning driving full truckloads from from the manufacturer from the port to the warehouse, from the warehouse to the sort center. Um, you know those air very likely to be turned into auto autonomous routes, right? You get on the highway. Is that the M one or what's the Beltway around London? Yeah, yeah, yeah, yeah, And it's Ah and like the lines air well, well marked and, you know, autonomous truck and drive on that. It's a much harder problem to drive in the city. On DSO, you'd expect the first autonomy to come out with the autonomous trucks. Um, and then, you know, even if you could get autonomous driving, you know, I drive a Tesla and it's pretty good, like that's not level five autonomy, But it's definitely easier to drive that than to drive a you know, a non autopilot car. Eso it lowers the stress level, but even if you do that you have autonomous cars running around the city. You still have to do what we call the last 100 ft, which is who's going to get the package from the truck to the door or from the car to the door? And you know there's various ways to skin that cat. One is the, you know, one is to have a little R two D two robot that you think of an aircraft carrier model where you drive a bunch of these R two d two robots out, and you have an arm that sets them down on the street and they make their way to your doorstep. Drop off the package and the meat. The meet the aircraft carrier back on the street. Another way is to have called client side robotics. Or you would have your own robot at your house and it would know you would know how to go out onto your porch down your driveway and meat the meat, the car at the street as opposed to having a robot, which has to figure out the path from the street to your doorstep on, you know, a million different doorsteps. You have a robot that figures out the path to the street to the doorstep just for yours, and that's your own personal robot. And it could be any, you know. It could be in any package delivery on the street.
[0:10:51] George Reid: That's about yeah, that's really quite interesting. I never, never even thought about it flipping around that way, but it would make a lot more sense because you're on Robot just memorizes that one route over and over again. What I think is also very interesting about hammering home that density Point Onda. How Amazon are obviously opening up their text they can utilize. I'm not utilized. They can accept as many packages as possible. What that brings me kind of onto a little bit, though, is what lies ahead for the likes of cellars filled prime onboard the power that will give essentially Amazon. If they're picking up all of these packages, what does that then mean? I've got an idea of what it means for sellers and then does a like What do you think it means when Amazon are picking up more and more and mawr? How does that What does that power in tail?
[0:11:43] David Glick: Yeah, I mean, in the end, it's good for customers like the There was just a conversation I was having on linked in with Someone with Rick Watson who, you know, he felt like he conflated f b m the film and by Merchant with Seller fulfilled Prime. And you know they're raising the bar on Seller fulfilled Prime. I don't know if you've seen this in the UK or if it's come out there, but the idea was that if you are seller fulfilled, prime if you qualify for that. And if you're getting the prime badge like, the bar is high because it's the prime brand. And so, you know, one way to get the prime badges FDA, right, That's the easiest way. And the next way is self fulfilled. Prime. But you have to be as good as people have come to expect from prime, which means, you know, you're doing, you know, two day delivery at 100% you know, potentially, you know, they're driving toe one day delivery. Um, you know, Amazon delivers on the weekends on Saturday and Sunday in the US I don't know if they do that in the UK, because they sort the product. And so if you think of the prime promise being, you know, 1 to 2 day delivery delivering 363 days a year to your porch, like if you want to be part of the prime package, you need to meet that bar and nobody meets that bar. And so I expect you will see Amazon sort of insisting on higher standards there.
[0:13:10] George Reid: Yeah, which is where we saw the most recent stat, which Rick recently shared a swell. But I've seen it before about fewer than 16% of products sent through center Phil Prime actually met that two day delivery promise. I think that that conversation around what does this mean for May I really do think it means it's just gonna be forcing more and more people thio to adopt Amazon's own logistics or Amazon, then in turn, pushing people to go. This is your option if you want your full range to be on prime or prime eligible, as they say on did. You don't want the ball ache of having to manage your inventory, sending it into Amazon on dealing with inventory restrictions. Then you're very simple. Solution is we handle it'll for you and you don't use anyone else. Um, it suddenly becomes a very kind of obvious choice for people, right?
[0:14:09] David Glick: Yeah. And if you think about 20 years ago, if you think about fulfillment and transportation as sort of the two components of fast delivery to customers 20 years ago, nobody did. Fulfillment. Well, write ups and Royal Mail did did, um, delivery about like they do today, right there, you know, 98% 95% on time delivery and so on on DSO fulfillment was the problem. Like Amazon put a lot of effort into fulfillment. It turns out that other people have gotten good at fulfillment, like Flex can get your package out on the same day and hand it to a carrier. Um, the And now you're seeing a lot of variability in the carrier network due to, you know, ship again caused by co vid or or Amazon just raising the bar. And so, if you are, you know, today Amazon fulfillment both their fulfillment and their logistics is better than UPS is is better than Royal Mail's is is better than the Postal Service. And so, in order to maintain that prime promise and that prime standard, you know, one of the leadership principles is insisting on high standards, insist on the highest standards, and some people will believe these air unreasonably high is part of the subtext. Um, like if you want to be part of the prime program like you could be part of Amazon Merchant business and there is a bar right, you have to have some standards you have to deliver when you say you rule. If you want to be a part of Amazon's gold standard prime program. You have to have a high standards, very high standards, unreasonably high standards, potentially. And it's not clear that over the fullness of time that anybody is going to be able to do that as well as Amazon.
[0:15:55] George Reid: No, it's XYZ interesting, you say, 20 years ago, no one was good at fulfillment. Having Bean in Australia, I can confidently say, one year ago and two years ago, no one was good at fulfillment. It's been a bit of a joke how quickly they have to raise their own bar. Andi Australia, obviously, because presents a very large and logistical challenge. But I think it is very good all round for customers as well as for for merchants and brands, the whole toe have people like Amazon and Amazon logistics, raising the bar and creating better services. Andi, in my opinion, in this particular case, Amazon do lots of things that could disrupt many industries. Sometimes good, sometimes bad. But I think with the logistics, if you're able to deliver things faster, more accurately and, um, or enjoyable experience, I don't really see a downside. Whether that's or nor off Amazon, you're using the Amazon Logistics Service for overall. I see it is a very big positive. What do you think?
[0:16:59] David Glick: Yeah, I mean, customers like fast free delivery. End of story, full period. Stop. And, you know, I always tell the story that when I was a kid, I watched TV and they were selling K tel records. And, you know, you would pay 9 99 for the record and, like $3.5 shipping and handling, you had to wait 4 to 6 weeks and they would, you know, sell the whatever record that month. And then they wait till they get 100,000 orders or they wait till they got a ton of orders. They picked them all at once, and so they're variable. Cost was very low, but you had to wait six weeks. I had forgotten that I I had ordered it by then and then, you know, Amazon came along and said, like, you know, we can do it. Super saver shipping. You know, we can ship it within a week, and it's free. Uh, and that was good. And so you got within two weeks for free and then prime launch and Holy shit. You could get things in two hours for free or you are two days for free and then prime now launched and it was two hours for free. So Amazon is continually driven. You know, we all know that the important things in retail are low prices, big selection and fast delivery or or customer experience is the third one, and proxy of that is fast delivery. And Amazon has continually driven prices down, added selection and reduce delivery times and customers love that, and it z good for customers. And the, you know, it's it's mind boggling that the carriers and the other retailers didn't detect this 10 years ago.
[0:18:32] George Reid: Yeah, I mean, I made a statement about that the other day, but I think that I think that's very true off. You could feel sorry for what's happening a little bit. So lots of FedEx USPS etcetera because their market shares just getting gobbled up. But ultimately you had this dominant position yourselves, and you rested on your laurels. You weren't perhaps thinking about the customer at all times, like what's it called Post Australia Australia Post? When I first arrived two and a bit years ago, they wouldn't give tracking and they would deliver in 10 days. But what did you expect? That they had the ability to improve that service? Because they now provide tracking on it's much faster. You always had the ability. They just didn't focus on it. I but I've got one final question. Then we'll shoot some conscious of your time. And I like keeping these short and sweet. What conversations? This could go on for longer than I'd expect. But let's try and keep it brief. What conversations do you think are happening inside the Amazon transportation team right now?
[0:19:39] David Glick: You know, I think they have. I think six months ago it was like, How do we survive? How do we survive? Like we need to have more drivers. We need to train them. Um, and you know, my guess is they just went through the biggest peak in the world, and they're recovering, and, you know, they've scaled up. They scaled up to survive last year. Um, the other carriers scaled up survive as well. Um, now they're scaled, and, you know, it's like cost right way spent. Whatever we needed to to scale up last year and then Now it's How do we reduce cost per unit Cost per delivery. Guess what? The answer is density, right? Take other people's packages. And so I would expect that they're trying to figure out, you know, do we have a strong foundation by which we can expand in tow, carrying third party packages? That would be my guests of the conversations.
[0:20:36] George Reid: Love it. They Thank you so much for the very short. 2020 minutes, 20 seconds of conversation today on Bond. Really enjoy speaking to you. And thanks a lot for for taking some time out and giving us that five year, 10 year roadmap that you could see.
[0:20:54] David Glick: Yeah, thanks for having me. And I'll try to keep keep my traffic driving high. Stay ahead.
[0:21:01] George Reid: Good man. Dave, I speak to you very soon. Okay. Bye. Bye. Hey, guys, just a quick one. If you are enjoying the podcast on either have some actionable next steps or new ideas I'd really appreciate if you could one subscribe to the show and leave us a review. Thes are really, really important to us. As you probably know, being in the Amazon world, Aunt to if you're looking for additional support with your brand head over to the website. It's always day one dot co dot UK. We've got links to other resource is as often our guys speak soon.
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