What’s the Future of Just In Time for Consumer?

It’s the holiday season, which means retail is in overdrive. This means on-line retail is in overdrive, and this means shipping is in overdrive.

Shipping which relies on postal services or private carriers. Postal services which are in dire straits and which are getting costlier by the year and private carriers which are also getting costlier. The USPS recently announced yet another round of price increases for 2017, just six months after it raised prices almost 10% (which followed price increases barely six months before).

Costs just keep increasing, and it’s hurting small retailers who can’t negotiate Amazon and eBay bulk shipping rates (and offer free shipping @ 35 or low cost shipping on individual orders). People aren’t going to pay a $20 shipping fee to ship a $10 product. And they’re not going to buy from retailers where this is the case.

So, we’re entering the age where the Amazons and their ilk are going to do in the online world what the Walmarts and their ilk did in the offline world — kill the little guy unless the little guy falls in line. Prepare to see even more Amazon and e-Bay storefronts popping, piggy-backing off the already in place infrastructure in exchange for a small piece of the profit. And prepare to see the closure of even more independent storefronts that wanted to compete without having to give a cut to the new digital mafia, as they just won’t be able to compete.

This means that sales will centralize, but shipping rates won’t necessarily standardize. The Amazon resellers also use the Amazon warehouses will be able to take advantage of the lowest shipping rates, and the rest, like the e-Bay storefronts, will be subject to reduced rates, but not the Amazon warehouse rates. And these rates will keep increasing as fuel goes up, labour goes up, and the carrier rates go up even more. Stores were invented for a reason — it’s much more cost effective to ship a pallet to one location than 100 items to 100 locations. Even with route optimization, right turns only, last-leg optimization with the local post, and so on — package delivery costs can only go so low. As long as a human is involved.

This says that the future of just in time for the average, cash-strapped consumer, is likely one of two futures. The past where physical stores regain their supremacy. Or the pre-SkyNet future where drones rule the skies.

However, the best future for just in time consumer delivery might be one where the old mail order model is modernized for the e-Commerce world. Back in the day, if you were in a rural community or small town, and you wanted something from a big box store (like Sears) you’d go to a local mail-order outlet where you would hand over some money (which could just be a deposit or the entire amount) to order something from a catalogue. Then, a few weeks later, you’d go back to pick it up. Amazon has revived this with the Amazon locker where you can get faster delivery and pick up by agreeing to pick up at a nearby locker, which is essentially a digitized bus locker system where you scan a code which opens a locker with your package.

The best future is one where a third party opens a lock location that can be rented by any online merchant that wants to use a locker for delivery where carriers offer lower rates to ship to the locker location. It would require at least USPS to agree to offer lower rates to ship to a locker location, which would require a large number of locker locations for the locker owner to negotiate better rates. This means that, in the short term, for this concept to take off, Amazon will have to go heavy into it, offer not only faster shipping but significantly lower shipping rates to get them to take off, and then offer these rates to their resellers at cost, or a loss, to get everyone using them. But it would then be able to capitalize on yet another revenue stream, as it could allow third party non-Amazon storefronts to ship to these locations for a small fee, and get an even bigger footprint in the physical world — which would allow it to create Amazon stores with “best sellers”, the same way Apple was able to create Apple Stores.

In summary, the future of just in time for consumer is still a bit cloudy, but it should be a hybrid locker / storefront model where costs can stay down, but customer satisfaction can stay high. Thoughts?