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Will Amazon Crack The B2C Package Density Code With New 'Day' Service?

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Depending on who one talks to, Amazon.com, Inc.'s (NASDAQ: AMZN) launch of a delivery service allowing customers to pick one day out of a week to receive all their packages is either a boon to Amazon's customers, an opportunity for the company to achieve unprecedented stop density for its last-mile operations, or a bit of both.

To Satish Jindel, the head of consultancy ShipMatrix, the service cracks open the door to a dimension of parcel delivery that few can imagine. At some point, Jindel said today, each street will get its own delivery date when packages are delivered for free. Deliveries to that street on other days will be assessed a charge, he predicted. "This is a start of the future direction that will become the milkman delivery of the present day," he said, referring to the Amazon program. Companies like Amazon are "skating to where the puck will be, not where it is," he said.

The Amazon initiative, available to U.S.-based members of its "Prime" order and delivery service, is straightforward. A customer can pick one day to receive all the weekly shipments whose deliveries would otherwise be spread out over multiple days and trips. Prime customers can continue to order and receive goods outside of the new service, called "Amazon Day."

Amazon, which announced the plan late yesterday, touts it as a convenience for insanely busy customers and an effective carbon-reduction measure. Amazon said it now has the flexibility to combine multiple shipments into fewer boxes because everything would be delivered on the same day. This will reduce the carbon-belch of excessive packaging, according to Amazon.

Beyond the purported customer benefits is the ability of Amazon, whose deliveries are overwhelmingly residential in nature, to build enormous efficiencies into its driver stops. Most business-to-consumer deliveries involve just one package per stop. By contrast, business-to-business deliveries average 3 packages per stop. Those deliveries generate far more revenue and profit per stop.

As B2C traffic overtakes B2B in the digital age, the holy grail for carriers is found in boosting stop density for residential services. Amazon Day may be the company's strongest step yet in that direction.

"This appears to me to be a lot more about delivery stop density, driver productivity and cost control than about customer convenience," said an industry executive who asked for anonymity. Because it is already commonplace for drivers to drop off packages at a front door without anyone being there, "the notion that a shipper is doing someone a favor by offering a single delivery day should be taken with a grain of salt," the source said.

The only scenario where a consolidated delivery makes sense is if a product is comprised of parts coming from separate locations, the source said. In that circumstance, "then I absolutely want to converge the pieces on delivery day so that the customer isn't pissed because they have 2 (out) of 3 needed pieces of their new gizmo," the source said. Otherwise, programs like Amazon Day are "mostly beneficial for the shipping company to drive route package density," according to the source."

The new program also raises the ante in what is increasingly becoming a competitive battle with UPS Inc., (NYSE: UPS) which currently delivers about 20-25 percent of Amazon's stuff. For years, UPS, through its "My Choice" program, has enabled customers to opt for day-specific deliveries. The difference, according to UPS Spokesman Steve Gaut, is that My Choice customers select the desired delivery day after the shipment alert is received, and that the specific day must be chosen for each delivery. The reason, according to Gaut, is that UPS is handling multiple shipper order flows after the package has been tendered. Because Amazon is the shipper in its service, it can manage order flows ahead of the package tender by changing the fulfillment dates, he said.

"The benefit of My Choice is that it's shipper agnostic, whereas Amazon's program is for only Amazon," Gaut said. My Choice allows customers to gain the same day-specific benefits from multiple shippers, not just from Amazon, he added.

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