“Anticipatory Shipping” ideas from Amazon

An article in the CBS News website (http://www.cbsnews.com/news/amazon-files-patent-for-anticipatory-shipping/) titled “Amazon files patent for anticipatory shipping” provides an outline of the idea. The key is that goods would be shipped out before the customer places the order so that the deliveries are closer to order placement. Data regarding customer searches, purchase history, shopping cart contents etc would be used to initiate shipments before orders. But details of the idea also suggest that while the product is shipped, the delivery address would be specified later, after the item is in transit, to enable lower customer lead times. Given the forecasting models of customer purchase intent, and the goal to speed up shipments, does this new idea merely mimic the goal to move goods to warehouses closer to customer locations ? Should customers be provided some products free if their actual purchase decisions do not match the forecasted intent, with the delivered items being treated as promotions ? Will such moves increase customer loyalty or have other unintended consequences e.g., worries that Amazon has access to a lot more information than the customer intends ? Will such moves enable Amazon to increase its margins because it can provide lower lead times without using premium transportation ?

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20 Responses to “Anticipatory Shipping” ideas from Amazon

  1. Job Hoevenaars says:

    Marketing already involves a lot of data mining. The use of the data for inventory in Hubs (closer to end-user) is also not new, I would say. But actually having products on the way already and later specify the address seems new and very risky to me. It will be a pretty costly operation to keep track on all “anticipated orders” shipped. What will be the positive effect? Shorter lead-times, but by how much? Will this really create more sales or are they anticipating that products / anticipated orders that have been shipped will become orders, because it will be the last push to convince the customer of actually placing the order or adding the anticipated product to the order? The changes in legislation made in Europe the last year (and coming changes) will certainly increase costs when using this structure; specially with the renewed return policies.

  2. It sounds like warehousing closer to customers. UPS and FedEx take on the handling risk while Amazon maintains the capital risk.

  3. Vijay Raisinghani says:

    I like this innovation. As this patent has a very broad application, to focus on operations and logistics part, I see following advantages using this method:
    1. predict geographic demand of products, e.g., based on zip code and manage inventory accordingly in that area
    2. optimize on shipment planning and costs, e.g., instead of overnight air shipment use ground shipment and make it arrive 5 days later.
    Predicting geographic demand will help create virtually brick and motor experience. This would greatly help the “same day delivery” or “4 hour delivery” options.
    Optimizing on shipment is a great financial goal, specially when Amazon has 2 day prime shipment for free.
    This will thrive on “people want things instantaneously”. This can be useful in trends and fashion, e.g., when launching new toys (or variations or new series of existing toys).
    In my opinion, these options are greater impacting from operational and logistics side of planning and costs than customer experience.
    Should the customer be provided a product for free – this is an interesting idea. If you have math on real-estate/warehouse cost per unit and if a balanced tradeoff can be made, it might be effective financial deal to give a product for free as a trial and free up the space.
    Privacy is an issue for sure. I remember hearing about the case where Target used purchasing habits to determine the stage of life of a person, they sent maternity related coupons to a house where the dad was unaware of his daughter’s pregnancy. So, if done smartly, it is an operational excellence without making customer feel uncomfortable.

  4. Julia Eldridge says:

    I agree with Vijay’s points. One of the benefits to both Amazon and the consumers is that the consumers are unaware of which items are packaged close by. At this point the use of data, though there are always privacy issues, can only benefit the consumer who is likely to receive their package earlier. If they were to expand and send items directly to customers through anticipatory purchasing data, then there would be more of an issue. Particularly considering the example of pregnancy related items showing up to a household where a father may not be aware that his daughter is pregnant and thus instigating social consequences.

    As for items being free, that could be a great idea if the cost of repackaging and storing outweighed the cost of giving away the product. Amazon does attempt to pre-empt this with their bundling suggestions. I am unaware of the effectiveness of this strategy especially as it would pertain to actually benefitting Amazon to prepackage these items. They may be able to entice enough people to go for the bundle by reducing the price of the other items.

  5. Kim Coldiron says:

    I can see the potential value to some end users of less lead time to receive desired products but as an Amazon Prime customer, I’m not sure it provides me that much-added value. I already have the ability to receive most of what I want within two days, often less and there is no shipping cost. For me personally, I would be less impressed and more irritated if I was impacted by heavier marketing for specific products because they need to offload them. If it could, in fact, result in decreased product cost, it would be more attractive to me. I also think it will impact the return process. Amazon already processes a large number of returns and often the items are sent to a secondary auction type of merchant to sell for pennies on the dollar just to avoid the restocking and processing costs. If people are subject to more pressure or impulse buying through the use of predictive analytics and marketing, I think the end result could be more negative than positive. Perhaps, the ability to accurately schedule delivery times within a small window (similar to Amazon Fresh) would be a more beneficial option to the end user.

    • Sarah Rosnick says:

      Kim, your comment about marketing is spot on. I order a special shampoo from Amazon, and I’m not sure I’d be thrilled if my products were being pushed on me when I didn’t need them (due to less exercise, or travel or whatever the case may be.)

    • Andres Rueda says:

      I agree with Kim’s comment. I see more risks for Amazon than benefits for both Amazon and the customers. Amazon Prime already brings a very reliable shipping process and uses a freight optimized cost. Implementing this kind of strategy would mean an increase in reworks and costs. I’m talking about incremental costs; labor, packing, logistics, and/or product cost; every time that the forecasting model is wrong. In addition to the risk associated with exposing customer’s habits. The cost-benefit relationship of this strategy would not be financially positive and add more complexity to the business. Delivering products in few hours would not increase customers loyalty because the current Amazon Prime structure already meet most of the customers’ expectations.

  6. Jordan McCroskey says:

    One of my favorite things about Amazon is their ability to use marketing spin to pump their brand and shape public perception of their company as an innovator. From drone delivery on they’ve just kept pumping their brand.

    Kim is right that Amazon ships so quickly and with prime 2 day (and often 1 day shipping) is possible. Here in Chicago we’ve seen Amazon expand their logistics network of warehouses.

    I’m sure there are some aspects of this technology that could be implemented immediately and be successful. Shipping and positioning products to local warehouses before inclement weather could allow customers on the East Coast of the US to get their gloves before the bomb cyclone storm drops in.

    I can’t imagine giving out free product because of overstock issues – Amazon is a tough buyer and typically forces vendors to issue credits for anything necessary to keep Amazon’s margins intact. I tend to think that this is just another opportunity from Amazon to fuel their marketing efforts.

  7. Sarah Rosnick says:

    I guess I’m a little confused. I have an Amazon fulfillment center two hours away from me, and it already offers an incredibly quick turn for me. If I want, I can order subscriptions to items. Why would I suddenly want to receive items when Amazon decides “it’s time.” They’ve already taken the liberty to subscribe me to HBO and some other channel this week, and I’ve been quite displeased with the fact that they were going to automatically charge me. I’m not interested in doing business on their terms. Why would other consumers be any different?

    In terms of the business model itself, I don’t think that giving away free products would help. Perhaps discounted rates on products already shipped would be ok…but at some point, I’d stop ordering early and just wait for the discounted product to arrive.

  8. bairdjb says:

    I think history speaks for itself and that this system has increased customer loyalty and increased Amazon market share. I don’t think customers mind the information shared as long as it makes their day to day life more convenient. Customers are sharing their personal data all day long. The concept that people are worried about sharing their data will become even less of a concern as generation C becomes a larger consumer segment.

  9. Given the number of consumers ordering a particular product, there’s always likely to be a buyer. For example, let’s say the product is in high demand, like the iPhone. If US demand is 100k / wk and you have 50k / wk in transit, you would be likely to sell all transit units!
    Great idea … just need to convince the shippers this is a good idea (they will likely need an incentive to accept this!)

  10. Freddy Horn says:

    I agree that Amazon’s anticipatory shipping ideas will improve the convenience and service levels for many consumers, and I am sure that this will become the new reality for buying many goods and services in the future. Beau mentioned one of the key words, “generation c”. However, I am not sure how the “free of charge if incorrectly anticipated” idea would work. How to prove that consumers did not intend to buy a product? Consumers could take advantage of this policy. On the other hand, if those products would not be free, Amazon could intentionally push more products onto consumers, using this as an aggressive marketing tool in the hope that consumers will buy more than what they initially wanted.

    While my business mindset thinks that anticipatory shipping is part of the future, as a consumer I personally struggle with this concept and would be hesitant to use it, especially for groceries. I would feel uncomfortable sharing my personal information so openly. Also, living in the center of a European city puts me in a different position than if I would live more remotely or in another country. Various grocery stores, butchers, bakers, bottle shops and a large farmer’s market with fresh produce from this region are just around the corner. I can walk there whenever I want and handpick the products I like. I know it’s corny, but to me grocery shopping doesn’t get any more convenient and relaxing than that.

  11. Mike Carter says:

    I know that Amazon is doing something similar to this currently called Amazon Subscribe. My wife has used it form some household products that based on usage can be forecasted better. It has worked to date, but I don’t believe this will become a way of life for most people. Most people prefer to consume in a JIT manner and don’t want to forecast money for consumables. I believe this is a way to help Amazon forecast their inventory more effectively and they are marketing it as a consumer “want” service they are providing.

  12. Paul Aoun says:

    With the increased maturity of AI (artificial intelligence) and its accelerating adoption for managing the customer experience, I think this is a first of many steps, focused on anticipating the customers’ behaviors and influencing them. I don’t think this idea is to mimic the goal of moving goods closer to the customer, since they will need to forecast local demands for all their customers who’ll be served out of a given warehouse, and different optimization algorithms will apply, when the goal is to have products closer to the customers (same day delivery).
    The free idea could work, especially if the costs of shipping and restocking to Amazon are higher than the product’s cost, and this will certainly improve the customer loyalty and satisfaction. Risk is the customers might start abusing the system, and canceling on purpose knowing that Amazon will give them the products for free. So, some guardrails need to be put in-place for this to work.
    In this day and age, customers’ worry about the privacy of their digital lives is fading away very quickly, due to both acceptance and inability to do anything about their privacy, once they get online. So, a new customer service like this one shouldn’t cause any concern with their customers, from a privacy perspective.
    Yes, it will improve Amazon’s profitability, since it will allow Amazon to optimize the flow rate out of its warehouses, reduce inventories, and maximize profits. In addition, once they start rolling-out their delivery drones, the cost of delivery will drop very significantly and might provide them with new flexibility in managing returns, moving them closer to a demand-driven (Kanban) process to manage their supply-chain.

  13. Michael Minor says:

    Mimicking product lines across warehouses may not be the best idea but would reduce delivery time. We’ve learned in marketing that if consumers have time to think, you’ll likely miss a sale. Amazons’ forecasting models and logistic processes have taken the time of thinking away. The time between ordering and receiving for prime customers can be as short as the same day. No, I don’t think free promotional goods for outlier purchases benefit Amazon or the supplier. Amazon as marketplace and distributor does not require loyalty to a product but creates value through pricing and its logistic processes.

  14. Rolando Saca says:

    I honestly don’t believe this is a good idea for Amazon unless you’re talking about basic, repetitive and/or perishable goods being order on a somewhat predictable basis by the customer. This is because Amazon might end up with additional shipping costs and excess inventory if things don’t turn the way the model has predicted. While I do believe you can pull this off with certain specific product categories, it would be catastrophic to assume it can be done with most goods.

  15. Anna Dietrich says:

    I remember when I first heard of this idea I immediately thought, creepy, but kind of intriguing. The “creepy” aspect of this was the idea that a retailer would be able to predict that I needed something before I knew I needed to order it. And then interesting when I think about the incredible convenience of a potential service like this. As a frequent on-line shopper, I think I’ve grown accustomed to the idea that producers pretty much have access to know everything about their consumers. While I appreciate the “other people who looked for this ultimately bought this” or “because you bought this, you might like this, too” there is certainly a dark side to having even more detail about my buying habits and timing.
    From a business perspective the ability to predict demand to this extent would be beneficial for an inventory and planning perspective, as we’ve learned in our Ops homework to date.
    Through reading this article I could imagine another possibility where it’s more of a subscription based service that understands your buying patters and needs, predicts the needs, then notifies consumers of such, and then asks for your permission to order. This could help with forecast and the risk associated with the supply that’s not met with demand. The service would still “push” to the customer, versus the customer having to actively shop.

  16. srinivas tadepalli says:

    My friend Mike and Paul have good comments. In fact we also used the subscribe feature for a couple years ( and still use it today for certain items) when we had our baby where we have automated the process of buying certain goods such as diapers etc. mostly for non-perishable goods. In this age and day, “Data” is the new currency and amazon probably has the most customer data on the planet than any other retailer/ closest competitor. Since Amazon does not have any physical store presence ( until a few months ago where they opened their first physical Amazon go store, and a few brick and mortar book stores) they are exploiting technology to the fullest extent in terms of shopping experience and delivering it to consumers. Advances in Data analytics and delivery mechanisms will certainly propel new ways in which producers (amazon and sellers on Amazon) will interact with the end consumers delivering new consumer experiences.

  17. Jennie Dekker says:

    Outside of cultivating the fear that technology is taking over which could harm future sales by propagating the already stirring notion that Amazon is taking over the world, I have to wonder if this anticipatory shipping does not just transfer the cost of premium shipping (borne by buyers, with exception of Prime members) to a business cost in the form of PP&E. By increasing the regional warehouses and other equipment needed for the re-addressing, sorting, etc. they are vastly increasing their fixed assets and eating these costs only in depreciation which will make their margins increase, but falsely as it was really just a shell game of expense. Amazon at this point would be outpacing demand for the sole purpose being on the forefront of technology – not because consumers are demanding quicker delivery. This also poses the opportunity for warehouse inventory buildup and the visualization of all of the items left in the cart by shoppers worldwide.

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