Amazon – Threat against retailers, but fatal for the logistics industry

As rumors started circulating about Amazon’s launch in Sweden, the discussion became centered around the retail industry and the consequences Amazon’s market entry would have on the industry. But with the focus on the dire consequences for retail, most seem to have forgotten what Amazon truly excels at and what industry really should feel threatened – the logistics industry

Few have missed the major news of Amazon’s launch in Sweden, especially among those in Swedish retail. Ever since rumors started brewing of Amazon’s entry, retail has been regarded as the industry that would take the greatest hit. Sure, the majority of physical retail stores are destined for certain death. But not because Amazon is at our doorsteps – rather the death of physical retail is a long-witnessed trend development as a direct effect of people’s general shopping habits shifting from physical to online.

In the shadow of the discussion that vividly paints the fate of the retail trade, there is another industry that might require our future attention: the logistics industry. It’s no secret that for a long time, logistics companies have been criticized due to their continuous inability to deliver packages on time or even arrive at all to the door or collection point – failing to deliver on the most essential part of their business

There are many theories as to why previously dominant logistics players experience difficulties. Some argue that their logistics chains are designed to handle mail and not parcels. Others argue that too much focus has been put on creating efficient flows for long-distance transport when the key to fast deliveries is in optimizing the last mile.

When packages are not delivered in time the consequences are dissatisfied customers, however, there is no guarantee that they will blame those who are responsible – a risk for online retailers, but an opportunity for Amazon. Although the threat of Amazon’s operations does not appear to be great today, we should remember the fate of other markets where Amazon gradually increased its competitive position in other related industries after its establishment. Therefore, to remain competitive, online retailers, and especially logistics companies should follow four principles:

  1. Ensure that the “last mile” is as easy and fast for the consumer as possible

This should be the primary focus of logistics companies and is also one of the main reasons why many start-ups are in the space – such as Budbee or Instabox, in a market with already low margins – they focus on ensuring the last mile

  1. Be equally harsh in the evaluation of each part of the delivery

One of Amazon’s strengths is the decentralized model, where each part is tested against the market while maximizing the advantage of its economies of scale. By gradually expanding its own business, and in the meantime joining partners, Amazon also creates an efficient flow throughout the logistics chain. Therefore, the competition must also be equally sharp at all levels: no one cares if your check-out is smooth if the package is delayed or ends up in the wrong place – all parts are equally important in this regard.

  1. Be the best at collaborating

A threat to Amazon is strong online retailers adopting similar strategies. That is, when several companies in the e-commerce and logistics ecosystem find better ways to integrate their services with each other vis-à-vis customers, and thus make maximum use of everyone’s strengths, leading to less benefits for Amazon.

  1. Use Amazon in the ways you can

Is there anything in Amazon’s process that can inspire you? Or can you use Amazon as part of your own logistics chain to increase efficiency? When you get past the first phase and get a better overview of their business, opportunities are created. As a small player, considering building a connection to Amazon not only guarantees efficient management of orders to customers, but it also frees up time for the actual core business.

These principles are important for the retail industry. But for the logistics industry, it is about survival.

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