Member Article

Will it be a Happy Prime Day for Amazon and the delivery network?

You know you’ve made it as a brand when you have the power to successfully launch a new global holiday. Amazon’s annual Prime Day even has the power to bend time - this year’s “day” extends over 36 hours of frenzied purchasing with more than 1 million deals expected to hit the site in bursts carefully timed for maximum uptake. Amazon is pulling out all the stops to drive excitement around the event with giant live “unboxing” experiences planned for cities around the world, designed to promote the brand’s entertainment services. It’s a fascinating phenomenon to observe as one of the world’s most successful companies flexes its marketing muscles.

As a strategy to boost sales during the traditionally slow summer period, Prime day is undoubtedly a huge success, breaking sales records every year and this year predicted to surpass the $1.6bn mark. More than 5 million items were bought in the UK in 2017 and sales exceeded those of Black Friday and Cyber Monday. Even businesses not directly involved in the day itself get a boost effect as consumers get in the mood to purchase (and if England wins the World Cup the day before you can guarantee consumers will celebrate by spending!)

But fundamentally Prime Day is about much more than offering customers a good deal. That might be the hook, but for Amazon the real motivation is the opportunity to build brand awareness, to get more Prime subscribers buying into the “anything I want, anytime, anywhere” culture and promote its latest brand extensions – as evidenced by this year’s push on its entertainment channels. Prime customers spend twice as much as non-prime customers, so the long-term potential of boosting subscribers numbers more than justifies the investment in the day itself.

What this means is that, on Prime day, Amazon has to get everything about the Amazon experience right. The company learned the hard way during the first event in 2015 when poorly performing technology and misjudged “deals” sparked an embarrassing public customer backlash that continues to endure, with the hashtag #primedayfails resurfacing on twitter during each subsequent event.

Prime’s USP is its superior delivery offering and Amazon needs to secure its territory. Prime subscribers get 2-hour, same day and next day delivery (depending on their location) and it seems that faster is pretty much always better as far as customers are concerned. That said, it’s doubtful that many deliveries will match last year’s Prime Day record that saw an Amazon Echo ordered at 2.46pm, sent out from Amazon’s Erdington delivery station in Birmingham and delivered at 3pm to a postcode in Sutton Coldfield, taking just 14 minutes and 8 seconds from click to delivery.

Can the delivery network stand the strain of Prime Day?

Still, when you launch the world’s biggest consumer event, all of those purchases need to be delivered and there is already speculation that a bigger than ever Amazon Prime Day has the potential to cause major disruption to ecommerce retailers as Amazon exceeds its own capacity and pushes deliveries out to the wider carrier network. The bigger the success of the day, the greater exposure Amazon has to the risk of failed deliveries.

Even without the added pressure of Prime Day, delivery is facing serious capacity issues. A shortage of delivery drivers is causing major problems in the final mile, the most difficult and costly element of the parcel journey. Job postings for delivery drivers on indeed.com are up 200% since 2015 and the transport industry cites driver shortages as its leading concern in 2018. With so much demand for drivers, experienced workers can afford to be choosy and opt for higher salaried roles, leaving many positions going unfilled.

With a shortage of skilled drivers, delivery networks regularly depend on gig economy workers to pick up excess demand. Amazon’s Flex scheme, which enables anyone with a vehicle to carry out deliveries for a set hourly rate, is an example of this. However, by definition these workers want to pick and choose when and how much they work and this doesn’t always coincide with peak delivery periods.

The stakes may be extra high this year after complaints were made to the UK’s Advertising Standards Authority in December questioning whether Amazon could legitimately claim that it offers next day delivery, following a raft of customers reporting delays in receiving their goods. Add to this the growing public concern over working conditions and the number of deliveries that drivers are expected to make and a recipe for a PR crisis is on the cards.

Grow-your-own delivery network

Of course, nothing drives innovation as powerfully as demand and Amazon is flexing its creativity in various bids to solve the final mile challenge. One of the most logical approaches is to grow its own network and I believe the company’s recent announcement that it plans to offer a franchise model, that will allow entrepreneurs to set up their own Amazon delivery service at low cost, is an intelligent move. It will give Amazon greater control over customer experience, lower its exposure to prices hikes from courier companies and give it more certainty over delivery capacity.

This move to bring more vehicles and drivers into the last mile is perhaps an indicator that more hi-tech solutions, such as the much-anticipated drone and robot delivery networks, are further away than we might think. Still, Amazon continues to develop and roll out new offerings such as in-home delivery and in-car delivery, to keep customers on the hook and invested in the brand.

The above-mentioned initiatives are still in relatively early days and certainly, for this Amazon Prime Day, the company will be relying mainly on the traditional carrier delivery network to get its smiley boxes to bargain-hunters. Still, relentlessly pursuing delivery innovation is an absolute long term necessity for Amazon if it is to continue to keep customers smiling by offering the superior experience its brand depends on. Given the strain that its success is placing on its own and the wider delivery network it will be interesting to see how the brand holds up this year and whether it can successfully deliver a Happy Amazon Prime Day.

This was posted in Bdaily's Members' News section by Matthew Robertson .