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

When Amazon began its journey the company was initially an online bookshop. The only real potential was the possibility of enhancing the buyer experience by broadening customers’ selection. The first internet-based bookstore was acknowledging that back in 1995, you could not walk into any bookstore in the world to browse or purchase thousands of books available. Since the beginning, Amazon was focused on making the most enjoyable customer experience, with a clear focus on convenience and the goal of leading other technological innovations as the closing of the 21st century approached.

I believe it’s fair to affirm the late Jeff Bezos and many others who were among us, believed this century’s technological advancements would include the ease of flying cars and the ease of having your annual checkup without having to visit a doctor’s office, or being able to order a ride to anywhere in your city all at the touch of one button. In 1995, all of these technological advances were stories from The Jetsons and other science fiction. Innovation has now transformed almost all of those stories a reality but I’m sure Elon Musk will work towards developing flying cars.

Amazon has pioneered a range of technological advancements through its extensive product lines. At the beginning, the company was focused on making every book available to buy online, but their mission has evolved to “selling everything to everyone.” In the past 16 years, they’ve been getting closer and closer to that final goal.

Their most recent and perhaps the most ambitious endeavor, Amazon Prime Air, will revolutionize ecommerce as well as logistics and distribution. Visit:- https://www.cruxfinder.com/

Amazon Prime Air extends the range of products the company is able to offer. With a goal to be a pioneer in technological advancement in Unmanned Aerial Vehicle (UAV) delivery, Amazon Prime Air will boost all their other products by allowing their customers to receive the items they order much faster which will improve your Amazon user experience.

Skeptics (including me) have wondered how big is the number of customers who would use such a service and what the reason for anyone to request a drone enter their homes. Drones have a negative reputation, and that’s not a bad thing but the majority of those concerns are not appropriate within the APA discussion because these UAVs don’t have missiles or cameras mounted to them.

Therefore, the question is, does this product line and technology have a customer base or satisfy any demand other than the “coolness” factor? Well, let’s take a look at what we can learn from the data:

Amazon has been working on UAV technology for some time However, it was only in November of last year that the Federal Aviation Association (FAA) announced plans to develop an industry standard for commercial use of Unmanned Aircraft Systems (UAS). It’s clear that Amazon has to go on an aggressive public relations campaign to inject the term “U.A.V.” into the public’s discourse instead of “drone” in regards to APA because it will improve the public’s perception when they begin launching their platform. In accordance with the FAA’s UAS commercial integration strategy the UAS will have plenty of time to integrate the platform.

Below are here is the FAA UAS integration timeline. It is broken down into three phases:

The initial phase, Accommodation, extends into 2015. In the meantime I believe Amazon will strive to earn the Certificate of Airworthiness (COA). Second phase: Integration will last until 2020, and in the next phase, I believe Amazon will primarily focus on beta testing in select markets. The third and final phase, Evolution, extends past 2021. Amazon will have not just created an UAV equipped to communicate with the public but also a UAS which integrates the different aspects of fulfillment, storage and distribution. At this point, they could expect that there will be many competitors who would also utilize UAVs to provide logistics, including Fedex, UPS, other online retailers, and large box stores such as Walmart as well as Target. Therefore, Amazon’s primary focus now should be creating a UAV/UAS which will be the safest and most efficient, and not just comply with FAA standards but surpass them , with the goal of Amazon Prime Air becoming synonymous with UAV delivery. The FAA has made it clear that it’s not a matter of if but when, and if Amazon adheres to its plan, it might create a totally new method of delivery.

Google Trends

The day that followed Amazon Prime Air was announced on the TV show 60 Minutes happened to be the biggest consumer holiday of the year “Cyber Monday.” Also, it was the first time that Cyber Monday surpassed Black Friday in terms of sales. With the help of this Google Trends tool I was at a point of knowing the degree of interest that consumers have. Google Trends is a tool that lets users gain insights into Google search results by comparing search terms. The graph below “Cyber Monday” was at 100pts with “Amazon Prime Air” and “Amazon drone” representing 75 and 74 points respectively. Thus, for every 4 users who looked for Cyber Monday deals, three searched for Amazon Prime Air. It’s reasonable to claim that for every 4 people who made a purchase this Cyber Monday, 3 of them would have been a customer of Amazon Prime Air!

The data suggests that there is a little attention, but whether that is a true reflection of the actual opportunity remains to be confirmed. Whatever the case, a percentage of three out of four consumers certainly suggests further research. The potential and the economics of this brand new business line must be studied. Amazon Prime Air’s current prototype is able to pay for shipments of 5lbs or less, which is enough to qualify the majority of orders to be eligible to be eligible for Amazon Prime Air. According to sources that they have, their free shipping policy on select orders cost the company around $6 billion just last year. And with FedEx along with UPS (their delivery partners) increasing the rate by 4.5 percent, they can expect that this cost will rise and keep increasing over time. The information available on the Amazon Prime Air R&D budget isn’t publicly available so I had the need to get creative and come up with some assumptions. I deduced the opportunity cost by multiplying 86 percent of their day-to-day shipping number, which , at its highest, represents 13.5MM by the cheapest ‘one day shipping’ rate which is the closest option in comparison to Amazon Prime Air and then the highest ‘one day shipping rate’. This resulted in an amount totaling $52-103 billion. I then took it a step further by considering Amazon’s customer-centric philosophy along with their present business structure of low margins. Even with the 2% mark, they would still net $1-2 billion dollars. There is a huge chance that Amazon could be either an enormous customer of UAV delivery or a huge service provider for UAV delivery.

 

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