Monday, December 02, 2013

The Amazon drone kerfuffle

I wasn't going to hop on as it's already all over the place, but a few quick thoughts so I can call it a day.

You may or may not buy the claim that this was orchestrated to distract from a recent unflattering book and other, albeit rather minor, PR hits. I'm not sure I do. What I do know was that this was pretty much a puff piece airing the night before the biggest online shopping day of the year. That makes it a huge PR coup in any case and one which 60 Minutes--which at least purports to be a serious journalistic institution should have taken no part in. For appearances sake if nothing else.

Amazon, like others, is seriously interested in same day delivery. As such, it only makes sense that they would be experimenting with and investing in various delivery channels and logistics approaches in support of that goal. In that vein, prototyping a delivery drone makes perfect sense. So would putting out feelers and even doing a little lobbying around the concept to feel out what's possible and what isn't--and maybe influencing regulations a bit even if, realistically, delivery drone-friendly regulation is years or decades away. Amazon has a history of taking the long view.

But, make no mistake about it, this is a long and speculative play--for innumerable reasons that many others have articulated. Fundamentally, I'm not sure when or if we as a society will happily countenance swarms of small drones (excuse me, UAVs) swarming through the skies. And it's hard to imagine them functioning in cities at all--in there words, precisely where population is densest.

Finally, we actually know how to do a pretty good job of same day, even 30 minute, delivery given sufficiently close "distribution centers." It's called Dominos. In all fairness, pizza shops can operate at a lot smaller scale than warehouses. But same day delivery doesn't have to mean 30 minute delivery and it's not hard to imagine some sort of multi-tier distribution system from a warehouse outside an urban core to local delivery people in the city or around a set of suburbs. To be sure:

Those with memories that stretch back a dozen or so years (or who have watched the documentary “E-Dreams”) will remember The start-up offered free delivery of videos, toiletries, and snack foods in about an hour, thanks to a fleet of drivers and bike messengers. The company raised $250 million — including $60 million from Amazon — but couldn’t make the economics of same-day delivery work. Kozmo was out of business by 2001.

Amazon is at a different scale point today and is probably much closer to making the model work--even without drones. Which brings us to the fundamental point. This isn't really about drones.

There's no problem getting stuff from point A to B--assuming the stuff is in stock at point A and assuming a route that can be traversed at some speed between the two points. A are called warehouses. The route is called a road. The "only" challenge is doing so in a way which is economically feasible--which is to say it doesn't lose the retailer money because the buyer is willing to pay the retailer's average costs of delivery, perhaps subsidized in part by the profit margin on the purchase.

That's one of the big lessons of the dot-com crash. It's great that people want things. I want things. But to get them, I need to pay for them. 


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