Amazon’s Prime subscription service has been growing exponentially, with more than 20 million members from its 2005 launch. But will Amazon’s new drone delivery better their customer’s delivery experience ?
Amazon has discovered that among these customers, one of the main reasons for the shopping cart abandonment is “higher-than-expected shipping costs”. Therefore, it worked on developing a solution: the Amazon’s drone.
Last week Amazon was given the permission by U.S. flight safety officials to begin testing its outdoor drone delivery service in the U.S. Offering 30-minute low-cost delivery could boost Amazon’s e-commerce and retail market share. The use of drones in the supply chain is expected to drive down delivery costs.
Amazon has the flexibility to guarantee cheap one-hour, same-day, one-day and two-day shipping at low costs, while enabling local retailers to get their inventory out to customers at a competitive rate at a time when 75% of total retail spending still happens within 15 miles of a shoppers’ home, according to the U.S.
Why will it work?
Drone deliveries will translate to instant cost savings, part of which will be passed on to consumers. It costs far less to operate a fleet of unmanned aerial vehicles than it does a fleet of ground vehicles. It costs 10 cents to deliver a 4.4-pound (2 kg) package over six miles (9.7 kilometres) using a drone. That’s far cheaper than the $2 to $8 per package that it costs Amazon today using ground transportation for deliveries over this last mile. Moreover, it helps reducing Amazon’s cycle times to less than 15 minutes from an hour or more previously while creating 50% more room for inventory.
The majority of purchases made on Amazon are low in weight and would be eligible for drone delivery. The current drone model that Amazon is testing is capable of flying at a speed of 50 miles per hour while carrying a 5-pound (2.3-kilogram) payload; approximately 86% of orders shipped by Amazon weigh less than this amount, according to company documents.
Drone deliveries would improve the efficiency of a same-day delivery service that already has tremendous reach. Even without drones, Amazon is already capable of offering same-day delivery through conventional means to 15% of the US population, and will increase this reach to 50% of the population within a few years.
Additionally, Amazon has simultaneously been streamlining its fulfilment centres, launching 15,000 Kiva robots in 10 U.S. fulfilment centres in 2014.
But this is not all. Two weeks ago it announced the new plan for the Dash Button, which will enable consumers to order household items mindlessly with the touch of a button.
Interesting news that may change the future of e-commerce.