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

When Amazon was founded the company was initially an online bookshop. Beyond the realm of economic possibilities was the possibility of enhancing the buyer experience by broadening their options. The concept behind the world’s first online bookshop was an acknowledgement that back in 1995, you could not go to any bookstore around the world to read or buy the millions of books currently in circulation. Even from the beginning, Amazon was focused on creating the best customer experience, with a clear attention to convenience and the desire to lead other technological advances as the close of the 21st century was near.

I believe it’s fair to say the late Jeff Bezos and many others, including myself, believed that the future of technology would bring the convenience of flying vehicles and the ease of having your annual check-up without having to visit the doctor’s clinic, or being able to arrange a ride to any location in your town at the click of the button. At the time, many of these technological advances were stories from The Jetsons and other science fiction. Innovation has now transformed all but one of those stories a fact – but I’m sure Elon Musk will work towards getting us those flying cars.

Amazon has pioneered a number of technological advances through its extensive product lines. When it was first founded the company was focused on making each book available for purchase online.

However, their mission has evolved into “selling everything to everyone.” In the past 16 years, they’ve come closer to their objective. Visit:- https://www.cruxfinder.com/

The company’s most recent and possibly the most ambitious project, Amazon Prime Air, could revolutionize the world of e-commerce, as well as logistics and distribution. Amazon Prime Air extends the products they offer. With a goal to be a pioneer in technology in Unmanned Aerial Vehicle (UAV) delivery, Amazon Prime Air will increase the quality of all their other products by allowing customers to receive the products they order much faster and thereby improving customer satisfaction. Amazon user experience.

Many 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 want a drone to visit their home. Drones are definitely getting a bad rap, and rightfully so however the majority of these concerns are out of place in the APA discussion because they aren’t armed with any kind of weapon.

UAVs don’t have missiles or cameras mounted to them. The real issue is what is the product’s market share? Does this line of and technology have a loyal customer base or satisfy any requirement other than it’s “coolness” factor? Let’s take a look at we can learn from the data:

Amazon has been working on UAV technology for a while but it wasn’t until November of last year that Federal Aviation Association (FAA) announced plans to develop a standard for the commercial use of Unmanned Aircraft Systems (UAS). It is obvious that Amazon will have to embark on an advertising campaign to bring the term “U.A.V.” into the public’s discourse in place of “drone” in regards to APA because it will improve the public’s perception once they launch the platform. And according to the FAA’s UAS commercial integration strategy the UAS will have plenty of time to integrate the platform.

Here are here is the FAA UAS integration timeline. It is broken down into 3 phases:

The first phase, Accommodation, extends into 2015. During this time, I believe Amazon will be working to obtain that Certificate of Airworthiness (COA). The second phase, Integration continues into the 2020 year, and in this stage, I think Amazon will focus on beta testing in select markets. The third and final stage, Evolution, extends past 2021. Amazon could have created an UAV ready to interact with the public , but a UAS that integrates various aspects of storage, fulfillment and distribution. At this point, they can assume that they will face numerous competitors who could utilize UAVs to provide logistics, such as Fedex, UPS, other online retailers, as well as large box stores like Walmart and Target. The primary goal of Amazon in the near future should be developing a UAV/UAS system that will be the safest and most efficient, and not just be able to meet FAA requirements but even exceed those standards with the intention for Amazon Prime Air becoming synonymous with UAV delivery. The FAA has stated that it’s not a question of if but when, and if Amazon sticks to its plan, it could be the first to develop a completely new method of delivery.

Google Trends

The day after Amazon Prime Air was announced on the TV show 60 Minutes happened to be the biggest holiday for consumers of this year “Cyber Monday.” It was also the first time that Cyber Monday surpassed Black Friday in terms of sales. With the help of Google Trends, the Google Trends tool I was able to gauge consumer interest. Google Trends is an research tool that allows users to gain an understanding of Google search data by comparing search phrases. On this chart “Cyber Monday” was at 100pts with “Amazon Prime Air” and “Amazon drone” representing 75 and 74 respectively. For every 4 people who were searching for Cyber Monday deals, three searched for Amazon Prime Air. I believe it is fair to estimate that for every 4 people who made a purchase for a purchase on Cyber Monday, 3 of them would have been a customer of Amazon Prime Air!

The research shows that there is a little attention, but whether that is a true reflection of the actual opportunity remains to be determined. Whatever the case, a percentage of 3 out of 4 respondents is definitely a sign of further study. The opportunity and economics of this business model need to be considered. Amazon Prime Air’s prototype has a max payload of 5lbs or less. This qualifies 86% of their shipping to be eligible for Amazon Prime Air. According to their resources, their free shipping policy on select orders cost the company about $6 billion last year. With FedEx along with UPS (their suppliers of shipping) increasing the cost by 4.5 percent, they could anticipate that this price will increase and keep increasing over time. The information on the Amazon Prime Air R&D budget is not publicly available therefore I had to be creative and also make some assumptions. I determined the cost of opportunity by multiplying 86 percent of their day-to-day shipping total which at their peak is 13.5MM by the lowest ‘one-day shipping’ cost, which is the closest that is comparable to Amazon Prime Air and then the highest ‘one-day shipping rate’ and captured the sum of $52-103 billion. I took this one step further by considering Amazon’s customer-centric approach as well as their business strategy that has low margins. Even with an 2% profit margin, they could still earn around $1-2 billion. The potential is so huge that Amazon could be either the largest user of UAV delivery or a huge supplier in UAV delivery.

 

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