Amazon’s Post Covid-19 Strategy: Innovating Delivery With Drone Technology

Amazon is an american multinational technology company that operates in e commerce sector and also offer services like digital streaming, cloud computing and artificial intelligence. Amazon was founded by jeff bezos in 1994 as an online book store but now the brand has presence across the world (bishop, 2019).the pandemic impacted on the customer preferences and habits as covid-19 forced physical shops to close and consumers to stay home and shop online (semuels, 2020). Due to that, bezos net worth increased to us$203 billion and reported 200% rise in profits because of shift to exclusive online shopping (semuels, 2020). 

The ecommerce industry expected to suffer a loss nearly us$4 billion because of cost related issues but ecommerce sector showed a growth. However, some of issues that amazon faced were related to shipping and logistics system. As business model of amazon in ecommerce sector is mainly based on fast delivery for last minute orders mainly for prime members (yoo et al., 2018). In order to sustain its model in post covid-19 scenario there is need to innovate. Amazon is a customer centric company and the mission of the company is to “continually raise the bar of the customer experience by using the technology and internet”. Considering this in order to compete and survive in the post covid-19 era the company can go for changes in delivery and logistics (bishop, 2019). Here, drone delivery can be an option through which amazon can improve customer experience and retail its business model of the fastest delivery.

In the ecommerce segment, this threat is high because new firms can enter in the market when profits are higher. With that in this segment there are many small players that are serving the niche market. However, for brands like amazon it is quite a moderate force. Because the brand development and presence of amazon in online segment weakens the influence of new entrants on the performance of bigger entities like amazon (alassaf et al., 2020). For new entrants it would take years to develop the brand image like amazon in the market.

The low switching costs of consumers is the reason behind the high threat from substitutes. Such as consumers who buy from amazon can easily decide to buy from wal-mart. The low products costs and higher availability of substitute impact on the existing players in the industry. Hence, in this industry threat of substitutes is also higher.

In the present situation, e commerce industry has flourished because of growth of technology and internet. Due to that, customers are well informed as now they have access to high level of information this influence consumers decisions.

Along with that, the entry of brick and mortar retailers in the ecommerce segment impacted on the barging power of buyers in the industry.  In order to reduce the brand bargaining power, there are factors such as quality of products, brand image and prices can be useful to reduce the impact. Hence, in ecommerce industry bargaining power of buyers is high.

In this industry, bargaining power of suppliers is moderate as the dependence of companies on suppliers is low. Such as changes in prices of raw material by one supplier cannot impact on the company. However, to some extent the moderate forward integration and moderate degree of control that suppliers have in the sale of their products to firms that impact on e commerce brands. Suppliers in this case have to follow set of rules developed by brands. This makes less impact of this force.

E-commerce retail firms tend to be aggressive having a strong competitive rivalry among each other. There are many competitors for amazon in this industry such as wal-mart, alibaba, flipkart and ebay. Amazon offers its consumer greater ease of use over other retail e commerce websites. Its superior query and search, one click ordering, recommendations based on past purchases, multiple consumer ratings and review and most recently dash buttons for automatic reordering are key differentiators. Hence, it can be said that in this industry competition is higher.

The business process of amazon includes a website, logistics and fintech in order to improve experience of customers and to meet their demands at the right time. In this manner, it can be said that logistic play an important role in case of amazon. So use of technology like drone can help in improving operational efficiency.

The operational process of amazon is much larger in scale and is mainly focused on range of technological development. The operations of the company include entire process from product procuring, warehousing, pricing and delivery. For the brand it is important to optimize each of the elements to ensure that everything is working efficiently and smoothly (alassaf et al., 2020). 

So here in delivery area, drones can be used and these can be acquired by partnership with firms or on contractual basis. Such as amazon can get drones from austria’s facc aerospace and spain’s aernnova aerospace (rikap and lundvall,  2021). Use of drones for delivery of packages weighing up to five pound can improve efficiency and ensure sustainability of the present model.

How would you generate revenue for your business?

Revenue can be generated from activities such as by eliminating the human factors and focusing on technological aspects such as use of drones. Real-time can be anything from microseconds to milliseconds and even seconds (nobre and nobre, 2020). This play a significant role in case of amazon. This can contribute in generating more revenue. With this technology, the driverless car projects can be continued. One of the biggest benefits would be the sheer amount of savings in shipping costs. Use of delivery automation, robots and drones can contribute in the biggest cost reduction (nobre and nobre, 2020). In case of last mile shipping, amazon can reduce nearly 80% of costs.

Premium ground like fedex: $6 to $6.50

Mid tier carriers like ontrac: $4 to $5

Usps for last mile alone: $2

Robots and drones: Less than $0.05 per mile of delivery

Reduction in delivery cost directly benefits customers and also benefits brand. Amazon even can charge $1 for a drone delivery in 30 minutes this can lead to delivery of packages in few hours and also save costs from the side of customers and help amazon to boost sales and customer experience (cureton, 2021). 

Product:   The product will be the same as amazon offer online retail services such as services like prime day delivery. However, customer experiences can be improved now by offering delivery through robots and drones (rikap and lundvall, 2021). This addition helps the company to continue its diversification and expansion. So here the product will be prime delivery in few hours in order to meet the on time demands of customers in a day.

Price:  The price strategy will be cost plus pricing as in that drone delivery costs will be added and other charges such as maintenance and investment done on automation and infrastructure. So that the cost incurred by the company can be recovered. Hence, prices for drone delivery could be $1 as delivery charges and additional charges will be included as per weight and time of package delivery (rai and kannan, 2018).

Promotional mix:   Amazon has a strong brand value but the drone delivery concept can be promoted by demonstrating it on different platforms. With that conducting campaigns can be useful that includes showing consumers how can they control delivery and track their orders and opt for quick last minute delivery options (rai and kannan, 2018). Demo can be given on how to use delivery options so that customers get aware about new services offered by the company.

Place (distribution strategy): This included use of website as no need to download any other application. Customers can track order and select delivery options as per their convenience while placing an order. Hence, online platforms would be the best options mainly company’s website so that customers can avail and use services to the best possible manner (rai  and kannan, 2018).

There are different sources of funds such as personal investment, venture capital, debt and equity. Here amazon can get funds through equity as this help to maintain the debt equity ratio for the company and strengthen the financial position of the company. Drones range in cost from a few hundred dollars to millions of dollars. A drone can cost $1000 to $3000. Amazon can do a capital investment of $1,536,000 that includes purchase of 384 drones (cureton, 2021).