It sounds like something straight out of a James Bond movie: A secret operation called “Dragon Boat,” kept under wraps from the public.
Recently we wrote about Amazon’s purchase of the French shipping company Colis Prive’ and what it meant for their shipping and fulfillment strategy going forward. This week it was reported that “secret documents” leaked by Bloomberg seemed to confirm Amazon’s strategy of building an international shipping and logistics company, contrary to statements made in their most recent earnings call in which the company stated they were simply look to supplement the services already provided by third parties.
The internal documents from 2013 that were sent around to Amazon’s senior management recommended a bold plan for expanding Amazon Fulfillment Services into a global delivery network.
The project was given the covert sounding name of “Dragon Boat,” possibly an elusion to its goal of expanding into Asia. Besides the incumbents in the North American market, the report indicates that Amazon has set its sights on the rapidly expanding Chinese market, with a particular focus on AliBaba – its greatest Asian rival.
Why Are They Striving to Enter This Space?
From a strategic standpoint, owning the entire supply chain from the initial ordering of a product to the last mile makes perfect sense.
- Shipping is Amazon’s #1 expense with costs nearly double revenues
- It helps them overcome the overloading of distribution channels during peak times of the year. On several occasions, during peak times of year such as holidays, Amazon has been unable to get deliveries to their destinations on time.
What Dragon Boat Means for the Global Shipping Industry
So what does Operation Dragon Boat, if it turns out to be authentic, mean for the global shipping industry?
Well, it does seem to solidify that their purchase of Colis Prive’ was one piece of a larger plan to completely own the supply chain. It also supports the conclusions we made previously that Amazon had tested a variety of options for shipping and fulfillment and found that going this route had the greatest economic benefit to the company.
It’s also important to note that these documents seem to show that Amazon’s aspiration is to not just own their own supply chain, but become a full on shipping company. Meaning they won’t just offer shipping when purchasing product on Amazon.com; they want to become a shipping choice for purchases from anywhere.
Amazon is Trying to Disrupt the Shipping Industry
Amazon is trying to disrupt the shipping industry the way it did with publishing, retail and cloud computing. That’s what Amazon is known for. They are also known for operational efficiency and the use of technology to help maintain its fulfillment operations.
Can they do it? No one knows for sure, but there are ways that incumbents can mitigate the risk of disruption.
How Incumbents Can Retain Their Positions
There are a few interesting facts that illuminate the changing expectations of the modern consumer when it comes to shipping and the delivery experience:
Delivery Speed is Important to the Modern Consumer
- 64% of online consumers say delivery speed is important (Accenture)
- 61% of survey respondents stated they would be willing to pay more for same-day delivery (PricewaterhouseCoopers)
- Same-day delivery will grow to over $4 billion by 2018 – an 150% annual growth rate (BI Intelligence)
These facts indicate that same-day delivery options are needed in order to capture the larger market in the coming years.
In order to facilitate this kind of delivery speed, legacy infrastructure used to manage the distribution of orders to drivers need to be updated. It’s important to look for a solution that is flexible enough to be layered on top of already-existing technology to help level-up the management of drivers and the optimization of dispatching.
Consumers Want to Know Where Their Package is and When it Will Arrive
We live in an age of an empowered consumer. No longer are customers willing to wait around for a 5 hour window when their package might arrive. Giving customers visibility over their delivery: when it’s on its way, real-time tracking of the driver, precise ETAs, and notifications of when it has arrived are all things that people now expect.
Services such as UberRush, DoorDash, Postmates and others all offer similar features and it is part of the reason they are so popular.
The shipping industry has already begun to implement technologies like this, such as text messaging of when an order is on its way, but there is more than could be done. Real-time tracking through mobile phones, easy communication with drivers, rating the delivery experience – these are all features that will help consumers choose which shipping company to go with.