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[39 comments]

Amazon Preps For Retail Drone Wars

December 2, 2013

It was pretty big news when Amazon.com announced it would begin using the United States Postal Service to make deliveries to customers in select markets on Sundays. Now comes a CBS broadcast of "60 Minutes" during which Amazon's CEO Jeff Bezos announces the company's future plan to use drones — known as octocopters — to fly ordered goods to customers.

Mr. Bezos said the octocopters would be able to deliver packages up to five pounds to customers within a 10-mile radius from its growing number of fulfillment centers within a 30-minute timeframe.

Unlike military craft that are remotely piloted, Mr. Bezos said octocopters would be autonomous and deliver goods to locations based on GPS coordinates.

"The hard part here is putting in all the redundancy, all the reliability, all the systems you need to say, 'Look, this thing can't land on somebody's head while they're walking around their neighborhood," said Mr. Bezos.

As to when Amazon will begin making deliveries by octocopter, Mr. Bezos said that wouldn't happen any earlier than 2015. It will take at least that long for the Federal Aviation Administration to develop rules incorporating drones into the nation's air traffic.

According to Bloomberg News, drones are being tested as delivery systems in both Australia and China. Zookal, an Australian textbook company, has been testing drones to deliver materials to students.

FINANCIALS:     [NASDAQ:AMZN] [ ]

Discussion Questions:

Do you share Jeff Bezos' view that flying drones will become a practical way to make deliveries in the future? How long do you think it will be before drones are making large numbers of deliveries?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is it that flying drones will become a practical way to make deliveries in the not too distant future?

Comments:

If drones become a feasible, safe and cost-efficient way to deliver same-day goods to consumers, leave it to Amazon to figure it out. The demonstration on 60 Minutes involved a small package, so it's hard to know how the technology works for bulkier or heavier packages...but I'm sure Amazon is working on it.

It's exciting to see this company continuing to reinvent the e-commerce experience, which has been part of its heritage ever since it began as a book-ordering site.

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Dick Seesel, Principal, Retailing In Focus LLC

Bezos was pretty clear that there would be a 10-mile/5 lb. limit to this form of delivery and that it might be centered around urban areas. I'm not sure urban is capable of this. I'm thinking of a warehouse in Manhattan - how do you deliver to apartment buildings? That said, intriguing idea in the absence of financial implications.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

While I question the flying drones' success, the interview with Jeff Bezos was very illustrative. Of all of his insightful comments, wittily given, perhaps the one that resonated most with me was tenure of any organization. His point, that I happen to agree with, is that there will be a new disruption that will eventually displace Amazon. When the new paradigm arrives, everyone goes back to zero.

It reminds me of the quote of the late Malcolm Forbes, "The greatest obstacle to business is success." Lessons learned to date from Amazon: focus on customer intimacy and use technology to never stop innovating.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Whether it's using the postal service to make deliveries on Sunday or drones, Amazon and other e-commerce retailers are looking for ways to meet consumer demand for faster delivery. Drones may be practical in some geographic areas and impractical in others, just as they cannot handle deliveries of over 5 pounds. Whether you agree with Bezos's vision of the future, you have to admire his passion and tenacity.

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Max Goldberg, President, Max Goldberg & Associates

Cool tech certainly interests me, but I hope the FAA never lets this happen. My guess is Mr. Bezos is testing the waters with his plan, both with public and governmental reaction.

From a business perspective, drones could mean a sea change for local and same day delivery, but for humans and other creatures, they would be very intrusive in an already crowded environment. Imagine relaxing in the park with your family, already concerned with ants invading your space from below and now drones obstructing your view from above.

I ask "What price for commerce?"

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

Traffic-free, on-demand, point-to-point delivery is a perfect use-case for drones. So, it's unsurprising that Amazon was among the first to announce this type of a program.

Ultimately, though, I think that drone-based delivery could be even more beneficial to businesses that *don't* have Amazon's scale. If you are only doing a handful of deliveries a day, running trucks or dedicated drivers to your store becomes cost-prohibitive quickly. But without the cost of a driver, a drone pickup and delivery can be fast and cheap, provided the drones can service other businesses too.

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Ben Sprecher, Business Development, Google

Jetsons here we come. It sure was an interesting interview and you have to give Jeff Bezos a ton of credit for creative thinking. The imagination of Bezos and Amazon seemingly knows no bounds. Amazon's biggest problem remains profitability and I'm not sure this will help in that regard.

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Al McClain, CEO, Founder, RetailWire.com

No matter what you think of Amazon, you have to admire their tenacious pursuit of innovation - it's a real passion.

Assuming the FAA hurdles are overcome and further technology refinements are made (both of these challenges should not be understated - can you imagine a sky full of drones from multiple retailers or delivery companies?!), then Amazon Prime Air can become a practical reality at a rate commensurate with the attractiveness of the delivery fee for that service. Purely from a consumer perspective, I find getting my order within 30 minutes to be a hugely disruptive capability that hits on convenience and immediate gratification of physical goods from the comfort of my home (wonder how it would work if I order from a hotel room while traveling on business or on vacation?).

Although Amazon intends to launch in 2015 (per their announcement), I expect Prime Air will have a wider impact with other retailers and the "overnight" delivery business model within 2-3 years. But I am certain that many are already looking at how they'll address this disruptive change - so in effect, by announcing and sharing a test flight video Amazon is forcing further strategic moves by their competitors. The supply chain will never be the same again.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

It's a very cool concept. I think a lot of consumers will want to try it out just because of the novelty. But long-term practicality remains a question for me. Of course, Bezos stated that it will be at least a few years until this can literally "take off."

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

Whether octo-copters take off or not (excuse the pun) the 60 Minutes piece showed the pervasive nature of innovation at Amazon. Many retailers are in the process of re-platforming their infrastructure and programs, but that alone won't win the war against a competitor like Amazon. Every retailer is going to have to step up their game.

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Cathy Hotka, Principal, Cathy Hotka & Associates

It's an exciting idea that should be pursued further but as of now, I don't see how it could work. But these things usually have a few pivots before the practical solution is discovered so we should keep an open mind.

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David Dorf, Sr. Director of Technology Strategy, Oracle Retail

Brilliant! Regardless whether or not this version of the idea works, at least Mr. Bezos and his team are pushing the envelope. We will see something like this by Christmas 2015 in small test markets.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

The overriding message of the interview to me was "Bezos gets that the business is DELIVERY - not just more convenient browsing, order entry and payment."

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Ben Ball, Senior Vice President, Dechert-Hampe

I wonder if hot take-out food is within the size and weight limit? Maybe he is on to something!

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Peter J. Charness, SVP America, Global CMO, TXT Group

It seems like no one wants to bet against any Jeff Bezos project and neither do I.

His plan isn't practical as of now, particularly in congested urban areas. Amazon loses money with abandon yet its stock continues to rise and Jeff has expand his "empire" into newspaper publishing in an influential area.

If these thoughts and those conveyed by others add up to one thing it is this: Develop a healthy disregard for the impossible.

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Gene Hoffman, President/CEO, Corporate Strategies International

I guess there would be an additional charge for drone delivery. It looks like effective PR to me. Gets the media talking about how Amazon continues to be the leader.

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Larry Negrich, Vice President, Marketing, nGage Labs

I have to say, I am not seeing it. I personally don't see drones as having a huge impact in fulfillment, but am not going to discount Jeff's vision either, as he's been right far more often than he's been wrong.

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Bill Davis, Director, MB&G Consulting

Jeff Bezos is the Donald Trump of his time. This drone idea is total hype, but I could be wrong. Imagine how many of these drones will be stolen, shot down, or destroyed by idiots who have nothing better to do. It would be a modern version of stealing pizzas from a Domino's truck.

However, Bezos continues to raise the bar with his ideas, and many online and B&M stores are trying to figure out how to compete with this huge company that is the darling of consumers and bloggers. Right now, Amazon has the ear of the public and will continue to stay relevant for a long time.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Not going to happen by 2015.

I agree with David Dorf and Bill Davis on this one. Large scale deliveries in urban areas by drones is simply not feasible. Even if the drone technology is available by 2015, there would be a massive amount of regulations involved regarding the massive drone traffic required for large scale delivery.

Great PR move by Bezos to push the envelope of delivery and logistics ... but this one is overreach in terms of practical execution.

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Chris Petersen, PhD, President, Integrated Marketing Solutions

Practical drone delivery? It may be a long way off...or it may never be. But image building today? You bet! Whether this is a practical solution or not, it seems to everybody that these guys at Amazon are serious about raising the bar.

Al McClain mentioned that Amazon's real challenge is profitability. I can't help wondering whether that iconoclastic Mr. Bezos has a plan that goes something like this: retail domination first, profitability next.

Michael Twitty, SVP, Strategic Planning & Insight, INtegrated Marketing Services

I absolutely see drone delivery as a fulfillment strategy for Prime customers in urban areas where the 10 mile, 5 lb. plan works, and I like the fact that drones are more environmentally friendly than delivery trucks idling in the street while packages are hand delivered.

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Karen S. Herman, Founder & Design Director, Gustie Creative LLC

The real message of the Bezos interview was how Amazon looks at its business. The Amazon mindset and strategy is in direct conflict with how most retailers (and most businesses) view their business. Richard George notes in his comments above, the real message.

I teach this to my students using the history of the companies that have come and gone in the DJI30 since 1896.

The fact is, it doesn't matter if drones become a real delivery vehicle. What matters is that Amazon is thinking about 30 minute delivery, one way or another. Business growth is like playing dominoes. One piece leads to another. It is rarely a straight line. Unfortunately, most companies, especially retailers are stuck in a straight line.

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Gene Detroyer, Professor, Independent

Timing.

Great new ideas often come ahead of their time. In the process, they get tagged as a poor idea.

A good number of infrastructure issues, as well as consumers being ready and available to receive the goods, have to be sorted out.

This really innovative idea isn't going to grow to a scalable level in the next 5 years. By 2015, it will be an ooh and aah item of "You should see what just landed in my front yard." Long way to go, but it has potential for certain hard-to-get-to destinations.

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Roger Saunders, Managing Director, Prosper Business Development

Drones are simply one crucial part of the coming of robots to retail. Amazon will almost certainly operate the service at a loss until it is so deeply embedded that profits can accrue. And thinking of robots, don't count out Google and other "non-traditional," aka online, retailers in this space. (See: "Google's Original X-Man. A Conversation With Sebastian Thrun")

In many ways, drones as delivery agents are the logical next step in shortening the distance from merchandise to the shopper. "Come and get it!" just isn't going to get it. ;-) However, as I have noted elsewhere, bricks retailing will survive. Just because Tesco couldn't shift gears adequately, doesn't mean there is not a bright future for Fresh & Easy, for example.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Adjunct Senior Fellow, Ehrenberg-Bass Institute

How many days in jail do you get for shooting down commercial drones? Gamers will have a field day with these! Brilliant concept but in my opinion, not very practical. The good news is that the innovation keeps coming.

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J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

When you have lots of money you can dream, and try to build your dream. Next it will be time machines.

The idea of drone delivery is just the start as people try to find new uses for this technology. I doubt it will be much cheaper than driving a truck within 10 miles of the DC and not sure it will be much faster. Five pounds is a very limiting factor. We will only learn from trying new things, but this will be a flight of fancy.

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W. Frank Dell II, CMC, President, Dellmart & Company

Mr. Bezos is a very smart man. His ideas disrupt and change the way business has "always been done." If you had a chance to see the CBS 60 Minutes program that featured this delivery concept, you would immediately see the possibilities. There are obviously some issues to be worked out - safety, reliability, package drop-off points, etc. However, that's what the design gurus Amazon.com are going to figure out. Bottom line is that this is going to be reality. My guess is that Amazon.com will start rolling it out in test markets within three to four years.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

So, when Domino's talked about (and demonstrated) drone delivery of pizza in June the media made it a joke and called it a publicity stunt. When Amazon talks about it months later, it is heralded as innovative brilliance, just like Amazon selling goods at no profit is hailed as a brilliant growth strategy.

Jan Kniffen, CEO, J rogers Kniffen Worldwide Enterprises, LLc

Wow. What a lot of job opportunities are likely to open up at the Federal Aviation Authority once they have to start monitoring drones from Amazon and every other company deciding they're the way to go.

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Bernice Hurst, Contributing Editor, RetailWire

While I want to be in the camp of progress, the reality is that consumers will not very likely accept that there will be a layer of drones traveling above their city streets much less over their property. The FAA may develop the process and protocol, but they will encounter resistance of major proportions implementing it. Oh wait - now I think of what we go through to get on an airplane!

Sid Raisch, President, Advantage Development System

The Amazon effect at work: no matter how inconsequential or absurd an idea may be - and though of course I could end up wrong, that's my opinion of "drone delivery" - it will attract a flood of publicity.

'notcom'

I think there is an answer to quick delivery in there somewhere, but we ain't there yet! I could see the drone thing when Dominoes talked about it, but I don't think we are talking quite the volume when it comes to your local pizza shop.

There will be a lot to figure out. How about the smart aleck who just decides to pick the drone up off the lawn and run with it. How high can it fly in order not to be an obstruction? And the list goes on.

Amazon will do their due diligence and try this out, no doubt. People will love the novelty, but the answer will eventually lie some where else. IMHO

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

It's a tremendous PR story. Useful approach? I'm not convinced. We'd have to presume drones would have pre-determined drop sites as I don't really want an octo-copter showing up on my covered front porch with young kids around. And I don't want it to drop my package in rainy Oregon any place other than the covered front porch.

Feeling another Segway moment here - big promise of revolutionary technology implying that it solves everything - but which might be productive in very narrowly defined, but important, delivery scenarios like business to business.

Doug Garnett, Founder & CEO, Atomic Direct

Masterly misdirection by the carnival master, Jeff Bezos! He has journalists watching the flying elephant with mouths agape, while his agents slyly pickpocket the crowd.

If this ever comes to pass, I'm buying a helmet.

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James Tenser, Principal, VSN Strategies

So let me see if I understand.

Amazon. Drones. Lots of drones. Perhaps thousands of drones. More drones than mosquitos.

Manhattan.

Really???

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Ted Hurlbut, Principal, Hurlbut & Associates

Self-driving cars are already getting legal clearance in some states. Business and consumer use of aerial transport are surely inevitable, albeit with much legislative hand wringing and FAA red tape.

I think this will definitely happen, but the term "near-distant future" is subjective and the big X factor.

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Matt Schmitt, President & Chief Experience Officer, Reflect

Anybody else thinking some reindeer could be out of a job in a few years?

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Todd Sherman, CMO, Point Inside

You have to especially appreciate Bezos and Amazon getting on 60 Minutes the night before Cyber Monday. That in itself was brilliant.

If I learned one thing reading Brad Stone's "The Everything Store: Jeff Bezos and the Age of Amazon," Bezos is a man with conviction. If he believes something he'll make it happen, and isn't afraid to fail.

I just wonder how one can do so much without turning a profit.

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Doug Fleener, President and Managing Partner, Dynamic Experiences Group

I think this is a great example of a company that comes up with innovative ideas based on their focus on customer value. I can definitely see drones being a plausible delivery method in the future, though presumably with some intelligent electronics to prevent in-air collisions with other drones, or people and objects closer to the ground. I imagine it will be at least a few years before we see them being tested, and several more before they become widespread.

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Alexander Rink, CEO, 360pi

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