Earlier this month, the Wall Street Journal uncovered a patent filing by Amazon.com for what it calls 'anticipatory shipping.' The patent suggests that the online retailer might take its already efficient supply chain and amp it up another notch, by boxing and preparing for shipment orders that customers haven't placed yet.
Details are few and Amazon isn't saying anything about the patent, but it appears to be aimed at recurring purchases — for instance, consumable items that a given customer orders with some regularity. Under this system, the retailer would look at order history and go ahead and get future shipments ready to go — boxed, labeled and pushed forward down the shipment path — so that if and when the order does come, it is simply released for delivery. If the trigger is pulled too soon and a package is delivered that the customer did not order, the patent said it might just let the customer keep it "as a promotional gift ... used to build goodwill."
On the one hand, it seems like a logical use of all that consumer data that Amazon is collecting on buying behavior and habits. On the other hand, this is a company that took to national television to tell the world how it was going to deliver packages via drone, so perhaps one or more pinches of salt are called for.
We assembled several of our RCE bloggers to get their thoughts on what this patent could possibly mean.
Bob Phibbs: There's nothing Amazon can put out there the media won't herald as "just around the corner." Forget the energy it would take to do this, the returns or the multiple walls to hurdle. My favorite is the line that, where it fails, it would gift customers.
Also, what hackers wouldn't want to mess with a predictive shipping model on their browsers?
Micah Solomon: Well, of course, Amazon is already doing this. They have, as close as they can predict, the right number of items of each type in stock, located where they think is appropriate. So this is kind of patenting what they're already doing, and maybe taking it a little bit further.
Now, something like this has to be very sophisticated. The appropriate comparison — if they do it right — should be to the Ritz-Carlton's understanding that if you order a drink once in a particular way, that should not be noted by the hotel as a preference; it may just have been a whim, and "I've got your drink ready for you, sir!" as you belly up to the bar, will be annoying if you have to pretend to drink that drink you didn't really want (an action on your part which, inevitably, will trigger the assumption by the hotel that it is a REALLY strong preference). What the Ritz does is wait until you've ordered something the same way three times. THAT, they feel, is clearly a preference. And honoring it in an anticipatory manner will be appreciated by, and tend to generate the loyalty of, the guest.
If you cross over that line, you're not really going to feel as close to the customer as you were perhaps aiming for achieving.
Dr. Chris Petersen: A good analogy for "anticipatory shipping" is what the electric companies do in routing power. Based on predictive patterns of usage and weather, electric companies are able to route power on their grids to the areas where it will most likely be needed and used.
Amazon is most likely to be successful with peak users — Prime members first — primarily because of the volume of data and frequency of purchases.
Amazon will be more successful in some categories than others. Consumables like consumer packaged goods follow predictive use patterns. If you get enough mothers ordering diapers, soap and baby food on a regular basis, it's much easier to do anticipatory shipping.
But anticipatory shipping might also work for certain key "launch" items like movies, gaming, etc.
It's not the end all and be all, but it is a strategic competitive advantage that Amazon has due to their copious amounts of data, and the ability to harvest it due to predictive analytics and algorithms.
Mike Wittenstein: I agree with Chris' comments.
Anticipatory shipping is a really old concept. For example, oranges from California hit the rails and are sold by commodity traders as they travel eastward. Horse-drawn wagons selling pots and pans is an even older concept.
Using customer history to predict what might be needed is more efficient for a group of customers, but doesn't really wow any one customer. Anticipation is another way to frame the predictive shipping equation.
I think that anticipatory shipping will also work exceptionally well with gifts, especially those that are time-sensitive (tickets, flowers, food items such as live lobsters). Auction models and time-sensitive marketing gimmicks will probably emerge as this way of ordering becomes more common. CPG-funded buy-downs of the cost of a product may also be great for new product introductions with the promise of a free or highly-discounted product. Stocking the channels with a new product is exorbitantly expensive. Just putting it on trucks and letting the people who want it ask for it will be hyper-efficient.
Also, Amazon should just ask the obvious question, "What would you like us to carry on the truck in your area?" Whether people buy or not, the answer to that question will be quite valuable (and maybe sellable to Amazon's sellers).
James Tenser: Amazon's anticipatory shipping announcement made me visualize an "inventory cloud" in constant motion throughout the distribution last mile, continuously tuned and re-configured based on clues derived from the flow-through predictive model.
In that cheerful sci-fi scenario, there would be no warehouses at all to concentrate inventory, just items on trucks and in lockers dispersed across the landscape — very likely with drone launch pads on their roofs.
This is rather entertaining for me. I think Mr. Bezos is doing his best to keep his competition off-balance by presenting speculative fiction as imminent reality. Is tuning the supply chain using predictive analytics relevant and realistic? Absolutely yes. We should expect such innovation from Amazon, but I believe the real competitive differentiators will happen behind the interface, not in the press releases.
Doug Stephens: We tend to measure the merits of Amazon's ideas based on the world we know today. I don't think that Jeff Bezos operates that way. I suspect he's probably innovating for at least ten years out. So, for us to comment on how valid predictive shipping would be, it's difficult, because most would bias their opinion with the current market reality. Like the old adage about Wayne Gretzky, Jeff Bezos isn't skating to where the puck is, he's skating to where it will be.
With the above in mind, I don't think that Amazon is filing this patent with their current selection of goods in mind but rather is thinking more about the grocery category. Amazon Fresh is just getting traction. Given the frequency and habitual nature of grocery shopping, it would become quite easy to begin predicting what a given household will want and when. Once you get loyalty on the grocery side, other household items (cleaners, maintenance items, small appliances, etc.) come along for the ride and they too can be better predicted for demand.
Lastly, if 15 years ago you were told that Amazon would be transacting 426 sales per second (almost 37 million sales per day) over the holiday shopping timeframe, most of us would have balked. This was the actually velocity of sales that Amazon posted. So, we can never say never.
What do you think about Amazon's 'anticipatory shipping' plan? Talk about it in the comments.