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3 Key Initiatives That Make Amazon A Last-Mile Delivery Winner

The last mile is the most expensive part of the fulfillment process, and shipment expenses have become increasingly rich. Today, we look at what Amazon has done to make last-mile delivery cheaper.

E-commerce is a low margin business. Most products are easily found across different marketplaces and competition is tight. Companies do what they can to cut expenses and still gain an advantage over their peers. In this fight for market relevance, fulfillment has become crucial: ship and deliver as fast as possible, spending as little as possible.

Shipment and delivery costs can be lowered through efficiencies – the higher the volume transported, the better. The challenge has been last-mile delivery. Leaving each product at each doorstep is much harder to scale. Not a surprise, last mile accounts for 53% of overall shipment costs.

Today, we look at how Amazon  (AMZN) - Get Amazon.com, Inc. Report has been addressing the question of last-mile delivery and cost management. More specifically, we highlight three initiatives that will make Amazon stand out at getting products to customers as efficiently as possible.

Figure 1: Amazon's six-wheeled delivery bot, Scout. 

Figure 1: Amazon's six-wheeled delivery bot, Scout. 

(Read more from the Amazon Maven: Rivian’s Importance To Amazon’s Long-Term Strategy)

Delivery Service Partner Program

Through a program called Delivery Service Partner, or DSP, Amazon teams up with entrepreneurs interested in starting a logistic business. The process is simple: the partner invests around $10,000 and assembles a delivery team. Meanwhile, Amazon comes in with the demand, the technology, and the packages to be delivered from its warehouses to the customers’ doorsteps.

Amazon currently has around 2,000 third-party delivery partners in the United States. Still, some of them have been struggling to hire new drivers amid the pandemic-related labor shortage. Therefore, through the partnership program, wage increases and lack of resources can still impact last-mile delivery costs in the next several months.

(Read more from the Amazon Maven: Amazon: An Unlikely Battleground, An Underrated Opportunity)

Prime Air

Since 2013, Jeff Bezos has been pushing for a more convenient and faster way to deliver packages with drones. Now, Amazon has Prime Air. The Federal Aviation Administration, or FAA, has given Amazon authorization to test and research the use of this technology in the US.

Amazon claims that the use of drones is not only safe, but also ecofriendly. The devices are electric powered and meant to be charged with renewable energy. Amazon has shared its vision to make all shipments carbon emission-free, pledging to achieve 50% of the goal by 2030.

Amazon Scout

Not unlike Prime Air, Amazon Scout is a fully electric robot designed to deliver packages directly to customers' homes. According to Amazon’s website, Scout deliveries are currently only available in Snohomish County, Washington. County executive Dave Somers sounded excited about the initiative:

“We are delighted to welcome Amazon Scout into our community. Similar to Amazon, we are always looking for new ways to better deliver service to our residents. From the latest Amazon innovation to cutting edge technology, Snohomish County is a great place for entrepreneurial creativity”.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)