Jindel tells SMC3 attendees how Amazon continues to distance itself from other retailers

The widespread impact of global e-commerce Amazon on the global and domestic economies, as well as the freight transportation, supply chain, and logistics sectors truly cannot be understated. That is obvious in its handling of 1.66 billion shipments in 2016, coupled with having 35%, or $113 billion, of the total United States e-commerce market.  Satish Jindel, president of Pittsburgh-based SJ Consulting and ShipMatrix presented those facts, along with many others, to attendees at this week’s SMC3 Connections 2017 conference in Palm Beach, Florida.

While the amount of shipments Amazon handled in 2016 was staggering, the company’s 2016 $16.2 billion spent on outbound shipping and transportation costs is perhaps even more so, he noted.

“If Amazon was a transportation company, it would be among the top 5 based on that spend,” he said, “and instead of focusing on cash flow Amazon said it is focused on "delighting’ its customers.”

This is evident, he said, with its forays into the grocery business through its recent acquisition of Whole Foods, and other sectors, too, such as its Amazon Prime Wardrobe offering, and its physical store locations.

That becomes even clearer, with Amazon’s 2016 shipments coming in at more than double the number of shipments from the next top 10 retailers.

“Amazon has been disrupting the retail business for a long time…and they are forcing retailers to make changes as they are feeling the pain,” he said. “Many well-known retailers have been forced to file for bankruptcy, due to their failure to adapt to the structural changes taking place and the needs of the customers and their expectations.”

As far as what Amazon is doing to ensure it value proposition is at the forefront of consumers while continuing to grow at the rates it has over the last seven years, free shipping is the biggest driver, he said. And in order to meet tight next-day or two-day delivery windows it has built more than 100 fulfillment centers that reach 95% of consumers for next-day shipping.

“It has challenged and defied the traditional model,” he said. “I never believed the two-day model would work because of how expensive it is. But it has the lowest costs of shipping compared to any other retailer.”

One of the contributors to that is its 2012 acquisition of Kiva Systems, whose robots move pallets and goods to within warehouses and distribution centers to expedite delivery and shipping processes.

Another one is its Fulfillment by Amazon service, which Jindel said is larger than the same business being done on this front than all other 3PL providers, with thousands of shippers selling online through Amazon.

And this creates yet another hurdle for retailers trying to–and struggling-to compete with Amazon, with Jindel saying they “will never win that game,” because they are so many years behind.

The massive scale and reach of Amazon, especially when viewing its size, scale, and myriad competitive advantages has led to what Jindel called a “retail cold war” that has only just begun.

“Last week, Walmart told its suppliers that if they are using Amazon Cloud for their business, they need to switch to Microsoft or else be cut off by Walmart,” he said. “And trucking companies have been told by retailers they can do business for them or for Amazon, but will not use any carriers that are moving for Amazon.”

On top of that he observed that many retailers are not seeing a bounce back in consumer spending, with many not having a material response for the changing needs of the consumer, as well as other retailers maintaining consumers will still head to stores to shop.

“What are the options for the other retailers?” asked Jindel. “There is still way to much retail store space compared to what is needed. They need to reconsider the store to door fulfillment model and even provide next-day and same-day shipping and delivery. Sears and Macys have both tried store to door. The concept is valid and has been validated further by Amazon, but the execution [by other retailers] was bad.”