The clock is ticking — holiday shipping deadlines are approaching and the last of the holiday shopping procrastinators are either rushing to order online or resigning themselves to a last-minute trip to a crowded mall or shopping center to tough it out in line with all the other procrastinators.
Which makes it no surprise that so much of the news out of the race for the consumer’s whole paycheck this week was shipping-centric — and delivery times are about to take on a whole new meaning this week. Amazon released the final rundown of shipping dates, and defended its record for the season so far. But there were bigger elements in the news mix — Walmart’s ongoing eCommerce personnel structure drama added another chapter this week with a big exit, while Amazon put a coda on its HQ2 expansion soap opera with an unexpected move.
There was even an ugly Christmas sweater scandal thrown in for good measure, because what are the holidays without passionate arguments about odd topics?
Big News of the Week: Amazon To Take the Delivery Volume Throne
FedEx and UPS beware — it looks like Amazon will soon be displacing both at the top of the package delivery pecking order. According to a report by Morgan Stanley, Amazon is already delivering roughly half of all its own packages, and that it will soon surpass FedEx and UPS in terms of volume.
“Our AlphaWise analysis shows that Amazon Logistics already delivers ~50 percent of Amazon US volumes, focused on urban areas,” Morgan Stanley said.
According to the report, Amazon Logistics has “more than doubled its share” of the amount of packages it ships, and that the volume is up 20 percent from a year ago, bringing annual shipping volume of 2.5 billion a year. As a point of comparison, UPS is estimated to ship 4.7 billion and FedEx 3 billion.
“We see more of this going forward as our new bottom-up US package model assumes Amazon Logistics US packages grow at a 68 percent [compound annual growth rate from 2018 to 2022],” Morgan Stanley said.
If that estimate is correct, that would mean that by 2022 Amazon’s package volume would be in the area of 6.5 billion packages a year in two years, putting it ahead of FedEx and UPS.
Amazon’s effect, however, may be a bit uneven, given that its focus is on urban and suburban areas — which represent 28 percent and 61 percent, respectively, of its shipping volumes. Only 11 percent come from rural areas, where FedEx and UPS have a deeper focus.
But just as news was breaking that Amazon is going to be the biggest force in shipping, it also found itself in a bit of an argument about the volume it is currently pushing.
Defensive Action of the Week: Amazon’s Timeliness Ratings
According to the consulting firm ShipMatrix, Amazon.com Inc. van drivers saw their on-time delivery ratings plummeting coming off of Cyber Monday in the latest week. Amazon enjoyed record sales during the Cyber Monday shopping blowout, but according to the report, bad weather and over-saturation left Amazon’s on-time rating at only 93.7 percent, down from the 98.2 rate the week before.
Amazon, however, is pushing back on those figures as inaccurate, saying that though they were in fact impacted by bad weather during the holiday shopping weekend and week, its full record is much better than what is being reported.
“Some deliveries were briefly impacted by weather, but we worked quickly to re-balance capacity across our network,” said Amazon Spokeswoman Rena Lunak in a statement to Reuters.
A slowdown for van drivers is a big deal for Amazon since van drivers handle the vast majority of Amazon’s own deliveries, which often originate from local hubs in primarily urban areas. And they have a big job ahead of them in 2019 — with expectations they will drop off roughly 275 million packages between Thanksgiving and Christmas, more than double last year’s number.
And finally, in unexpected outcomes …
Surprise of the Week: Amazon’s Heading To NYC After All
A little under a year after the deal blew up the first time around, Amazon has inked a deal to open its next headquarters in midtown Manhattan at Hudson Yards. The previous deal would have seen the HQ II site in Queens.
The agreement will see the firm leasing 335,000 square feet at 410 Tenth Ave. between 33rd and 34th streets. The space will be made to accommodate over 1,500 employees when it opens in 2021. Amazon said it is taking the space in the property, which is being redeveloped, without any of the special tax credits it had been offered previously.
“It’s clear the main reason Amazon wanted to be here was the availability of a skilled tech workforce plus the synergy with related industries,” said James Parrott, an economist at the New School. “And New York City still retains that attraction.”
Amazon is not alone in its New York City expansion plans: Facebook has also leased a massive space in Hudson Yard and Google has plans to add 7,000 employees to the city over the next 10 years. Alphabet also signed a lease earlier this year for 1.3 million square feet at a Hudson Square neighborhood and in two other buildings nearby.
From 2009 through 2018, tech-sector job growth in New York City has grown almost four times as quickly as the city’s overall private job growth, according to Parrott’s analysis.
Big Play of the Week: The Next Leap Forward In Robotic Delivery
Walmart is signing on to a recent trend and has announced it will be partnering with autonomous vehicle company Nuro to launch a new pilot program to test autonomous grocery delivery in the Houston market.
The service will use R2, Nuro’s custom-built delivery vehicle, along with autonomous Toyota Priuses, all powered by Nuro’s proprietary software and hardware. The service carries products only; there are no onboard drivers or passengers.
“Nuro’s vision of using robotics to improve lives runs parallel with Walmart’s mission of helping customers live better,” Tom Ward, senior vice president of digital operations for Walmart U.S., said in the release.
The cars will be able to hold up to 12 grocery bags at a time in two customer compartments designed to hold six apiece.
“We consider delivery to be a natural extension of the shopping experience, and an important way to bring the benefits of the on-demand economy to more people,” Nuro said in its own press release. “Through the pilot, we’ll gain insights that will enable us to further develop and refine our service, while helping Walmart create the best end-to-end customer experiences.”
The Nuro pilot is now Walmart’s second of the kind; the first was with Udelv to test autonomous grocery deliveries in Arizona. Over the summer, the retail giant partnered with autonomous vehicle startup Gatik AI to pilot grocery delivery from Walmart’s main warehouse in Bentonville, Arkansas.
“Our unparalleled size and scale have allowed us to steer grocery delivery to the front doors of millions of families — and design a roadmap for the future of the industry,” Ward said in the release.
But as Walmart’s digital efforts were expanding this week, they were also in a way contracting, as a high-profile player is stepping away.
Departure of the Week: Bonobos Founder Andy Dunn Is Signing Off
When Bonobos CEO Andy Dunn joined the Walmart team in 2017 along with the retail giant’s acquisition of his bespoke men’s clothing company, the thought was that he would be a big piece of how Walmart was reinventing its digital arm.
As of this week, it seems, his work there is done, as Dunn announced he will be stepping away from his role at Walmart as senior vice president of digital consumer brands.
By all accounts the separation seems to be amicable — Dunn titled his public announcement of his departure on LinkedIn “A Love Letter to Walmart.”
“When I joined Walmart in the summer of 2017, my goal was to leave the company better than I found it,” Dunn said in the post. “What I am certain of is how much I gained from my time at Walmart.”
Dunn also wrote that he had learned a lot about transforming retail in the digital age during his brief tenure at Walmart. A tenure, according to reports, that will go on for somewhat longer, despite his announced departure plans.
“Andy will remain onboard through January and will work closely with Merchandising and brand leadership to ensure a smooth and successful transition,” a Walmart spokeswoman told Reuters.
And a smooth transition might be just what the doctor ordered, particularly after this week’s slight spike of controversy over a Canadian seller’s suite of goods on their marketplace.
Surprise of the Week: The Bad Santa Sweater
It’s actually kind of hard to go wrong selling ugly sweaters at the holidays, particularly those that feature Santa on them — but one Walmart marketplace seller in Canada managed to do it this week, and do it so badly they got their host company in trouble worldwide.
Walmart got to kick off this week apologizing to consumers for an adults-only Christmas sweater that by all appearances features a Santa who looks to be about to snort a large pile of cocaine, with the phrase “Let It Snow” plastered across the top. The item’s description on the page clarified that the image on the sweater was exactly what it looks like.
“We all know how snow works. It’s white, powdery and the best snow comes straight from South America,” the description read. “That’s bad news for jolly old St. Nick, who lives far away in the North Pole. That’s why Santa really likes to savor the moment when he gets his hands on some quality, grade A, Colombian snow.”
Walmart, in its apology, quickly noted that the sweaters were “sold by a third-party seller on Walmart.ca, do not represent Walmart’s values and have no place on our website.”
The sweaters are gone — and Walmart, to be on the safe side, also filtered out some Santa sweaters with questionable themes, including one that featured a pants-less Santa roasting his “chestnuts” in front of a fireplace.
The lesson Walmart has learned? Marketplaces are a great way to create the endless aisles effect consumer have come to love. But endless aisles come with a price — if one doesn’t keep a close eye on those marketplace sellers and what exactly they are putting out there, it might mean apologizing to the world for the items that end up on the shelf. Generally speaking, if the words “Santa” “cocaine” and “pants free” show up in a new story about your retail establishment or marketplace — it might be time to consider going back to the innovation drawing board.
And, if this week’s stories are any indication about the next major competency in the war for the consumer’s whole paycheck, maybe use that time at the drawing board to think of new innovations in shipping and logistics.