Amazon's logistics infrastructure is 'its greatest asset'

18 February 2014

18 February 2014 | Laurence Pritchard

Laurence Pritchard, partner at WeightmansA major downside to online shopping as opposed to shopping in store is the delay between ordering and receiving purchases. In a physical store, the customers can see the items they wish to buy, choose them and then take them away home with them.

On the other hand, for online purchases, the delay between order and delivery may dissuade customers from buying items.

The major online retailer, Amazon, has been worrying about this potential barrier to online sales for a while. Last year it announced plans to reduce delivery times by the use of autonomous flying delivery drones.

Now it looks like the e-commerce giant is to cut out the human factor almost entirely from its delivery chain. Amazon has been granted a patent to protect a system it has devised, known as "anticipatory shipping", to deliver packages to customers even before they have ordered them. Amazon will use a customer’s previous orders, product searches, wish lists, shopping cart contents, returns and even how long their cursor hovers over an item, whether or not they even click the order button, to anticipate what products they could be expected to order to ensure that there will be sufficient products at its local warehouses to meet that order quickly when it is eventually made.

Amazon even suggests that products could be delivered to a customer solely on the basis of an anticipated order, even if no order is actually placed. Under UK law, the customer could not be required to pay for such unordered goods and Amazon would have to pay the costs of any returns. Further, Amazon will have to ensure it has the appropriate authority under data protection legislation to process customers’ personal data used for anticipatory shipping purposes, and care will have to be taken to ensure the anticipatory shipping system does not result in inappropriate goods being delivered to a customer, for example, pornography to a child, or children's clothes to bereaved parents.

The anticipatory shipping system will likely require an overhaul of Amazon's existing e-commerce inventory systems, with an expansion of its warehouse network to store both those products which have been ordered and those which the system anticipates may be ordered. Amazon is signalling by this move that it will continue to seek ways to sweat its greatest asset, its logistics infrastructure, to further chip away at the market share of physical retailers, focusing in particular on impulse and urgent purchases. 

 Laurence Pritchard is a partner at Weightmans

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