Amazon Prime Air: Drone Delivery Coming to a City Near You

When Amazon began its journey in 1999, it was initially an online store. Outside the span of economic opportunity was the chance of enhancing the buyer experience by broadening customers’ options. Creating the world’s first online bookstore was acknowledging that back in 1995, you could not enter any bookstore anywhere in the world to read or buy the millions of books in circulation. Even from the beginning, Amazon was focused on providing the best possible customer experience through a deliberate concentration on convenience as well as the idea of introducing new technological advances as the close of the 21st century was near.

I would like to claim the late Jeff Bezos and many others like me believed that in the 20th century that it would have the convenience of flying cars or getting an annual checkup and not having to visit the doctor’s office or take a taxi to anywhere in your town at the touch of the button. Visit:- https://www.cruxfinder.com/

At the time, many of these technological advances were just the plotlines of The Jetsons and other science fiction. Innovation has allowed all but one of those stories a reality but I’m sure Elon Musk’s working towards getting us those flying cars.

Amazon has been the pioneer in a variety of technological advances through their extensive product lines. Since its beginning it was centered on making each book available to buy online, but the focus has shifted to “selling everything to everyone.” Over the past 16 years they have come closer and closer to their target.

Their most recent and perhaps the most ambitious plan, Amazon Prime Air, will transform e-commerce as much as distribution and logistics. Amazon Prime Air extends the products that the company can offer.

With a mission to lead technological advancement in Unmanned Aerial Vehicle (UAV) delivery, Amazon Prime Air will enhance all of their other product lines by allowing customers to receive the items they want faster thus enhancing customer satisfaction. Amazon user experience.

The skeptical (including myself) have asked themselves how large is the number of customers who would use such a service and why anyone would want a drone to be able to visit their home. Drones certainly get a bad image, and they’re not wrong however, the majority of those worries aren’t relevant within the APA discussion, since drones are not weapons. UAVs are not equipped with cameras or missiles mounted to them.

Therefore, the question is do this product line and technology have a loyal customer base or meet a need outside of its “coolness” factor? Well, let’s take a look at we can learn from the data:

Amazon has been developing UAV technology for some time but it wasn’t until the end of November of last year when the Federal Aviation Association (FAA) announced plans to develop standards for commercial use of Unmanned Aircraft Systems (UAS). It’s clear that Amazon will have to embark on an aggressive public relations campaign to bring the term “U.A.V.” into the discourse of the general public in the place of “drone” in regards to APA as it will enhance the public’s perception once they start launching the platform. And according to the FAA’s UAS commercial integration plan they will have plenty of time to integrate the platform.

Here this is the FAA UAS integration timeline. It is broken down into 3 phases:

The initial stage, Accommodation, extends into 2015. In this period, I believe Amazon will be working to obtain an Certificate of Airworthiness (COA). Second phase: Integration will last until 2020, and in this stage, I think Amazon will primarily focus on beta testing in a few markets. The third and final stage, Evolution, extends past 2021; Amazon would have not only created a UAV that is ready to communicate with the general public, but an UAS which integrates the different aspects of fulfillment, storage, and distribution. At this point, they can anticipate that there will be numerous competitors that will make use of UAVs for logistics like Fedex, UPS, other online retailers, and big box stores like Walmart as well as Target. Therefore, Amazon’s primary focus in the near future should be creating a UAV/UAS which will be safest and the most efficient, and not just be able to meet FAA standards , but also exceed them , with the goal for Amazon Prime Air becoming synonymous with UAV delivery. The FAA has made it clear that it is not a matter of if but when, and if Amazon sticks to its plan, it might be the first to develop a completely new method of delivery.

Google Trends

The day following Amazon Prime Air was announced on the program 60 Minutes happened to be the biggest consumer holiday of this year “Cyber Monday.” Also, it was the first time Cyber Monday surpassed Black Friday in terms of sales. Through this Google Trends tool I was capable of gauging the interest of consumers. Google Trends can be described as a tool that allows users to gain an understanding of Google search data by comparing search phrases. This graph “Cyber Monday” was at 100pts with “Amazon Prime Air” and “Amazon drone” representing 75 and 74 respectively. So for every 4 people who were searching for Cyber Monday deals, 3 were searching to find Amazon Prime Air. It is reasonable to claim that for every 4 buyers who purchased during Cyber Monday, 3 of them would have been a customer of Amazon Prime Air!

The research shows that there is a little curiosity, but whether this is a true reflection of the real potential is yet to be determined. However, a figure of three out of four consumers strongly suggests that they need to conduct more research. The potential and the economics of this business model need to be considered. Amazon Prime Air’s current prototype features a maximum payload of 5 pounds or less, which qualifies eighty percent of shipments as being eligible as eligible Amazon Prime Air. According to their resources the company’s free shipping policy on select orders cost Amazon around $6 billion in the last fiscal year and with FedEx as well as UPS (their delivery partners) raising the rates by 4.5% they can anticipate that this price will will continue to rise over the course of time. The data available on the Amazon Prime Air R&D budget is not publically available, therefore I had to be inventive and create a few assumptions. I calculated the opportunity cost by multiplying 86 percent of their day-to-day shipping rate, which at their peak is 13.5MM by the cheapest ‘one day shipping’ rate , which is the most similar service similar to Amazon Prime Air and then the highest ‘one day shipping rate’, and capturing an amount totaling $52-103 billion. I then took this a step further, considering Amazon’s customer-centric ethos and their current business model of low margins. Even at a 2% margin they would still net 1 to 2 billion dollars. The potential is so huge that Amazon is likely to be a huge consumer of UAV delivery or an enormous provider for UAV delivery.

 

Leave a comment

Your email address will not be published. Required fields are marked *