Blog: Where’s the Profit in Home Delivery?

As a society, can we afford last-mile convenience?

Angel Abcede, Senior Editor/Tobacco, CSP

Amazon Prime boxes

OAKBROOK TERRACE, Ill. -- Behind my townhome in Chicago, I share 12 industrial-sized garbage cans with my neighbors. Four of the cans are bright blue for recyclables.

I get frustrated when my neighbors don’t break down their cardboard boxes and set them flat in the cans. The recycling trucks only come once every other week, and we need to conserve space because they won’t empty overflowing cans.

The other day, I noticed Amazon Prime packaging tape on several of the boxes and got to thinking about the waste in packing materials that we as a society are creating. With more and more people finding convenience in having everything from appliances to groceries delivered to their homes, the sheer amount of cardboard and filling paper used to keep from jarring flat-screen TVs or bruising lettuce is becoming unimaginable.

Yet Seattle-based Amazon seems to be making a transformative statement in its Prime service. The two-day delivery offered to subscribers may not in and of itself be profitable, but from what so many tech and retail analysts can surmise, it’s game changing.

In an article from Wired, editor Marcus Wohlsen said Amazon Prime’s "hodgepodge" of offerings—everything from its streaming-video content to the two-day delivery on products—“builds a moat” around customers to keep buying things from Amazon, everything from movies to diapers.

Whether two-day delivery loses money or not, Amazon’s business model creates an irritant for other retailers and foodservice operators who now have to compete with that added convenience.

You’d think some businesses already have figured it out. I’ve ordered pizza and Chinese takeout from any number of neighborhood establishments for years. They’ve got to have some profit formula that includes hiring and paying drivers.

Will convenience stores have to invent that model to survive? It’s hard to say. Casey’s General Stores out of Ankeny, Iowa, is sold on pizza delivery. Officials on their last investor call said it adds 20% to 30% in prepared-food sales.

Sounds impressive, and probably stirs a whole lot of intangibles such as brand recognition and foot traffic.

Will it work for stores without a robust pizza offer? Who knows?

What I already regret is the Chewbacca-sized carbon footprint that will undoubtedly come in filling paper, packaging tape and cardboard boxes.

Angel Abcede is a senior editor at CSP magazine, covering industry trends, investigative topics and technology. His 25-year history with the channel fortifies his perspective and motivates him to seek out what's relevant, innovative and telling. Reach him at [email protected].

Angel Abcede, CSP/Winsight By Angel Abcede, Senior Editor/Tobacco, CSP
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