Editors' pick: Originally published Feb. 11.
Amazon (AMZN - Get Report) has recently been gaining attention for its intentions when it comes to delivery. The company has publicly shared plans for drone delivery, has filed patents for trucks that 3D print orders as they approach a customer's home and has registered to be an official ocean freight forwarder from China to the U.S. Plus there are reports that the company is in talks to lease its own jets for faster delivery.
One of the more underexamined aspects of Amazon's shipping ambitions, though, is its secretive warehouse robots, which it obtained when it acquired Kiva Robotics in 2012.
This technology is invaluable to Amazon's efficiency and bottom line, and as the company prepares to stop supporting the robots used by Kiva's former customers, other competitors are stepping in to offer similar products.
When Amazon first acquired Kiva for $775 million, the goal was to automate its warehouses and make them more efficient. Amazon rebranded the robots into a division called Amazon Robotics, but it has since been pretty tight-lipped about its plans.
The most recent numbers from Amazon claim that the company has 30,000 robots in 13 fulfillment centers, up from 15,000 robots in 10 fulfillment centers at the end of 2014. The company also plans to install the technology in all of its new fulfillment centers under construction, according to Amazon spokesperson Nina Lindsey.
The robots carry a shelf full of various items to a picking center, where a human employee can then finish the sorting so that the items get sent to the appropriate customers.
"Our intent is to use [the robots] more widely -- and stay tuned," said Amazon CFO Brian Olsavsky during the third-quarter earnings call last year.
During the same call, Amazon's Director of Investor Relations Phil Hardin added a bit more color, while still remaining vague:
"It's a bit of an investment that has implications for a lot of elements to your cost structure, but we're very happy with Kiva," he said. "Pairing our associates with Kiva robots to do some of the hauling of products within the warehouse has been a great innovation for us. We think it makes the warehouse jobs better and I think it makes our warehouses more productive."
Though it's certainly not cheap to equip a warehouse with robots, the technology cuts down on the time warehouse associates wasted walking to and from shelves grabbing products. By adding Kiva robots to its warehouses, Amazon saves 21.3 cents per unit shipped, cutting that cost by 48%, according to logistics consulting firm MWPVL International.
"That's quite a bit of money when you think about the fact that Amazon is stocking across  warehouses in the U.S.," said Marc Wulfraat, the founder and president of MWPVL. UBS analyst Eric Sheridan estimates that Amazon Robotics could save Amazon about $900 million a year in personnel costs.
Amazon declined to share exact savings from its robotics, but told TheStreet that the company gains "significant improvement in storage [from the robots], which allows us to have more customer products on-hand and enables our vast selection."
The looming question, though, is what's next for Amazon Robotics and warehouse automation.
Considering how important delivery is to the e-commerce giant, it should come as no surprise that Amazon would probably want to keep Amazon Robotics for itself.
The problem, though, is that Amazon Robotics started off as Kiva, which came along with 25 previous customers, including big-name retailers such as Toys 'R' Us, Staples (SPLS) , Walgreens (WBA - Get Report) , Gap (GPS - Get Report) , Dillard's (DDS - Get Report) , and VF Corp's (VFC) Timberland.
Once Amazon took over Kiva, though, these customers -- who, according to Wulfraat, had shelled about $4 million to $6 million per warehouse -- were placed in a sort of limbo.
As of 2019, Amazon will no longer support those Kiva clients, according to multiple sources familiar with the matter. They will be forced to either handle the technology on their own or find a new robotics company.
Some, like Toys 'R' Us and Boston Scientific (BSX - Get Report) , a medical devices manufacturer, have already phased out their Kiva robots. Others, like Dillard's and Quiet Logistics, a fulfillment service provider, are still using the technology.
But come 2019, Amazon will be closing the doors and keeping its robots in-house.
Amazon declined to comment on that date, simply saying that the company continues to support existing Kiva customers.
"Their intent is not to support other people with this technology; it's more to support their drive for efficiency and labor headcount reduction in warehouses," Wulfraat said. Amazon wants to hold its cards close and use robotics as a competitive advantage rather than sharing the benefits with others.
For that reason a nascent market is developing. Players large and small are realizing the opportunity in warehouse robotics, and now that Kiva will essentially be out of the picture , it's anyone's game.
One company that's hoping to fill in the gap is Locus Robotics, which was actually spun out of Quiet Logistics, a Kiva customer. Quiet Logistics handles delivery for other merchants, and once Amazon acquired Kiva, Quiet Logistics realized there was a need to figure out another solution to warehouse automation.
Al Dekin, who was formerly the senior vice president of sales and marketing at Quiet Logistics and is now the senior vice president of sales and marketing at Locus Robotics, explained that for now, one of the Quiet Logistics warehouses still utilizes Kiva robots and the other uses Locus Robotics technology.
"When Amazon bought Kiva, that pushed us to think about how you would do things differently given the state of technology," he said.
Kiva's robots were first developed in the early 2000s and functioned separately from human associates, handling the moving of shelves independently of the laborers. Locus Robotics took that idea one step further to develop robotics systems that work in tandem with human associates.
Dekin compared it to the differences between subways and taxis. Subways work really well if you're trying to get from one fixed place to another, but if you have a unique path and destination, you're better off using a taxi. In this case, Kiva works really well in a warehouse that is set up for a fixed path, but Locus Robotics is trying to develop a technology that can work in any warehouse and move on any path.
Of course, Locus Robotics isn't the only one trying to fill Kiva's shoes.
One prominent player is Home Delivery Services, a new company from Louis Borders, one of the founders of the dot-com instant delivery company Webvan. HDS has two components: one is a consumer-facing e-commerce experience, but the other is the back-end logistics called RoboFulfillment System, which will automate warehouses and manufacturing facilities. Right now, HDS has signed up one customer which will be leveraging the RoboFulfillment System in its warehouses -- Toyota Motor (TM - Get Report) .
Some of the other companies trying to figure out warehouse automation are Kuka, Knapp Logistics Automation, AutoStore, Swisslog, Dematic, Fetch Robotics, and GreyOrange.
"It's going to become more common to have automation in the warehouse, and it's driven by a need to compete," Wulfraat said. "Amazon's certainly shaking up the neighborhood."
With customers growing to expect two-day delivery, thanks in large part to Amazon, any retailer that wants to compete is going to need to catch up on speed and efficiency, and warehouse automation is one of the main areas to focus on.
The question is who will be providing that warehouse automation.
"It's a field that is wide open right now," said Dan Levine, the managing partner at investment firm Tenfore Holdings. "There's a number of players trying to figure it out. People see that there's a need for this in the warehouse management space. This is the year we'll see breakthroughs in terms of robotics."