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Online retail has a last-mile problem for many city dwellers: They’re often not home when the UPS or FedEx driver chooses to show up.
In suburban or rural areas, where risk of theft is low, drivers usually leave the package without a signature. But in a place like downtown San Francisco or New York, they put the package back on the truck and try two more times. If after three attempts the package hasn’t been delivered, it’s sent back to the sender.
Amazon is solving the problem with Amazon locker, automated lockers installed in dense urban areas. These recently went up in downtown San Francisco. I’ve also seen them promoted in Mountain View, Calif. and Northern Virginia. These serve to improve the Amazon experience, reduce environmental emissions, and save shipping costs. It makes shopping online more convenient when you don’t have to worry about waiting at home for deliveries. That presents yet another threat to retailers like Best Buy, Sears, JCPenney, and Barnes & Noble. (Disclosure: I’m short Best Buy.)
Instead of shipping your package to your home, you select a nearby locker location during the checkout process. (The closest locker to me is less than two blocks away.) I’ve seen lockers at 7-Eleven and Staples stores. They’re also at many Radio Shack stores in San Francisco. When the package is delivered to the locker, you get a confirmation email with an unlock code. Walk up to the locker, enter the code, and the right door pops open. See the video below for the process in action.
For the company that invented one-click ordering, the experience is surprisingly kludgy. The touch screen isn’t very responsive. (In the video, you can see where letters register incorrectly or don’t register at all.) In the typical case, I should just be able to insert my credit card and have the right locker open. Or push a button on my phone, with the Amazon app open. The code is necessary only for gifts, where the recipient wouldn’t have my credit card.
But despite my nitpicking of the user experience, this solves a real pain point for online commerce.
Because Amazon designed the process from scratch, it was able to optimize it for speed and self-service. It’s much more convenient than the in-store pick up processes I’ve experienced at Best Buy, Sears and REI. At Best Buy and REI, the customer service staff does double duty for pickup. Best Buy requires that you stand in line to wait for a clerk, the clerk then has to retrieve your package, and then you have to provide ID and sign. I’ve had Best Buy in-store pickups take longer than 15 minutes. If I weren’t recording my Amazon locker experience, I could easily do it under a minute.
Best Buy and Sears have the key advantage that they can offer same-day pickup; the best Amazon can do in most markets is overnight. Although there has been a lot of hype around same-day delivery, I’m so far unconvinced of the need. For most things I buy, the two-day delivery that Amazon offers for free with Prime memberships is fast enough.
Amazon locker has environmental advantages over traditional online shipping: Instead of driving around to numerous residences, shipping companies can drop off a number of packages in one location. They also don’t have to make multiple trips because someone isn’t home. Because of these complexities, shipping companies generally charge higher rates for residential deliveries than for commercial ones. Amazon locker has the potential to save Amazon money on fulfillment costs.
The selection of retailers willing to partner with Amazon is interesting. 7-Eleven really isn’t competitive with Amazon. (I don’t think Amazon sells hot dogs that have been sitting on rollers for hours.) Radio Shack and Staples are more competitive but seem to have made the calculation that even though they compete in many categories, whatever rent Amazon pays them and the increased foot traffic from Amazon customers picking up packages could drive incremental sales. Maybe if I bought a new camera, I might pick up a memory card at RadioShack.
Or it could turn into extreme showrooming. I’ll scan the memory card at RadioShack with the Amazon app, have it shipped to the store and return to RadioShack the next day to pick that up.
Rocky Agrawal is an analyst focused on the intersection of local, social and mobile. He is a principal analyst at reDesign mobile. Previously, he launched local and mobile products for Microsoft and AOL. He blogs at http://blog.agrawals.org; and tweets at @rakeshlobster.
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