Sent Items #141: Sunday, August 13, 2023

Hi!

Six weeks since my last post. I received a notification from Beehiiv asking if I had been locked out of my account 😆

My excuse, that some of you know, is that that Ryan and I are baking a new product that we are excited to launch early next year. Stay tuned.

While I’ve been away from Sent Items, a few headlines that caught my eye:

God Bless Taylor Swift (link). Swift apparently gave $100,000 bonuses to each trucker supporting her Eras tour. There are said to be about 50 workers who’ve been driving Taylor’s props and sets around the U.S. over the last 5 months.

Many fellow operators will appreciate learning that the next hot thing in eSports may be spreadsheets (link).

After a two-year lull, eCommerce sales as a share of retail sales is trending higher again.

TikTok is launching an eCommerce business in the U.S. to sell made-in-China goods to consumers, rivaling Shein and Temu.TikTok’s foray into the new eCommerce model is aimed at expanding its seller ecosystem to earn more money and diversify beyond ads. TikTok aims to quadruple the gross merchandise value, or the total transaction amount of goods on the platform, to $20 billion this year globally from less than $5 billion last year, the people said. (link)

Let’s talk about Amazon. They released quarterly earnings on Aug 3. I was most interested in one specific theme that came from the management conversation during the investor call (link): Their (continued) focus on speed. Specifically, the potential for faster delivery speeds from a more regionalized US fulfillment network, leading to a growing Same Day delivery footprint.

Their Same Day facilities are located in the largest metro areas, store their top-moving 100,000 SKUs, but also cover millions of others from nearby fulfillment centers that inject selection into these Same Day facilities. These facilities have a design that streamlines getting items from order to being ready for delivery in as little as 11 minutes.

Amazon is planning to double the number of these facilities. In their words, “We believe that we are far from the law of diminishing returns and improving speed for customers.”

Further, regionalization has delivered a 20% reduction in number of touches for packages, a 19% reduction in miles traveled to deliver packages, and more than 10% increase in deliveries fulfilled within the region, which is now at 76%. Let the record be clear: while Amazon is chasing faster speed, they are at an inflection point where their cost structure is becoming less as they ship faster, and, it increasingly matters to customers.

CEO of Amazon Andy Jassy said the following with respect to cost and speed:

“There are two things to note. First, customers care a lot about faster delivery. We have a lot of data that shows when we make faster delivery promises on a detail page, customers purchase more often, not just a little higher, meaningfully higher. It's also true that when customers know they can get their items really quickly, it changes their consideration of using us for future purchases too.

Second, when shipments come from fulfillment centers that are closer to customers, they travel shorter distances, which cost less in transportation, arrive faster and are better for the environment. There's a lot of goodness in that equation. This ability to have shipments closer to customers is the result of a lot of work and invention on the regionalization side, placement logic and local in-stock algorithms. It's also driven by our development and expansion of Same Day fulfillment facilities, which is our fastest fulfillment mechanism and one of our least expensive, too.”

Amazon’s speed of delivery has never been faster. In this last quarter, across the top 60 largest U.S. metro areas, more than half of Prime members' orders arrived Same Day or Next Day. So far this year, they've delivered more than 1.8 billion units to U.S. Prime members the Same or Next Day, nearly 4x what they delivered at those speeds by this point in 2019. They now have more than 300 million items available with U.S. Prime free shipping, including tens of millions of items with free same-day and 1-day delivery.

It’ll be hard for anyone to catch Amazon. Their scale and infrastructure is unparalleled. While speed clearly matters to Amazon and its customers, how much does it matter to all other merchants? Tough to fight the trends created by the leading eCommerce logistics influencer of the last 25 years 😉

Cheers!

- Matt

Please hit reply with any feedback, or email me at [email protected] and follow me on Twitter.

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