There are many companies using data to drive their business model in many unique and powerful ways, but none of them have blown my mind nearly as much as Amazon’s reliance on data, which has reached a new level of being able to shape their business model. Amazon’s data usage has taken a new step forward through their usage of data on customer behavior to put into direct action of predicting what customers will purchase and sending them the item before they actually make the purchase. It’s like they’re reading your mind - sending you what they know you will buy before you even buy it! They have patented this capability known as “anticipatory shipping”.
Amazon has vast amounts of customer data that they are utilizing to enable anticipatory shipping. Amazon, being the largest e-retailer (in terms of revenue), can leverage its data on customers’ purchase history, wish lists, items that have been searched for, shopping cart contents, etc. By using this data with predictive algorithms, they believe they can predict what their customers will purchase before they actually purchase it.
Once Amazon’s algorithms make a prediction of what will be purchased, Amazon will send the item to a warehouse or truck closer to the destination of the predicted purchaser. The item will get as close to predicted purchaser as possible and then wait until the purchase is made. When this happens, only then will a genuine shipping label be added to the package.
The goal of anticipatory shipping is to get a purchased item to the purchaser with as minimal delay from time of purchase to actual delivery, which is the value they are creating for their customers. Amazon believes that people hesitate to purchase more items online due to the delay between purchasing and the item arriving. They believe this delay is what is preventing more purchases from being made online. According to eMarketer, in 2014, less than 7% of retail sales in the US were done online. This means there is still a huge opportunity for e-commerce retailers to capture more retail purchases, and Amazon believes that they can do so by decreasing the delay between when a customer completes a purchase and when the item arrives.
Additionally, anticipatory shipping also creates huge value for customers in that it saves them time from having to make trips to brick and mortar retailers. If you as a customer could order anything online and it could arrive to you almost instantaneously, how many hours would this save you of traveling to and walking around stores? Anticipatory shipping creates a lot of value in time-savings for its customers.
Lastly, anticipatory shipping gives Amazon yet another edge over its e-commerce competitors. Without the terabytes of customer data and the predictive models that Amazon has, competitor retailers will not be able to compete with Amazon in delivery speed. If delivery speed is as important to customers as Amazon believes, this gives Amazon a huge advantage over any competitors and could eventually allow them to capture more online shoppers as well as potentially higher margins in the long-term.