What is "The Amazon Effect"?
“The Amazon Effect” is the impact that the business has had on the world since its creation in 1994. This can range from its impact on traditional brick and mortar business, to the impact it has had on the shopping trends and expectations of customers worldwide.
In this article, Supply Chain Digital investigates how “The Amazon Effect" has impacted the landscape of supply chain and manufacturing in terms of customers, supply chains, and technology.
Due to the always-available and constantly cheap prices that Amazon is able to offer, customer’s expectations when it comes to delivery have changed. A few years ago, no one would think twice about waiting for a few days/weeks for something that they ordered online. Now, with Amazon even offering in some territories, customers expect the same level of efficiency when interacting with other suppliers.
This can be a hard pace for smaller companies to keep up with and is causing similar issues with larger suppliers. The effect has even gone as far as to reduce physical shop traffic, which has been reaffirmed by the global pandemic. It is easier for a consumer to stay at home and order a product to arrive the next day for convenience. The increasing demand at a smaller price means that customers are increasingly impatient, and sometimes will choose products of a lower quality, if it means they can get it faster.
On Supply Chain
As supply chains in their most basic level are responsible for the delivery of goods from A to B, Amazon has had an effect on them too. With the increased demand from customers, supply chains globally are having to develop and adapt to keep up with these high-volume requests. The use of 3 and 4PL’s are increasing as their networks and resources are able to rival those of Amazon and remain competitive.
As a result of this increased demand, supply chains are having to focus on efficiency and end-to-end traceability. (To learn more about end-to-end traceability, sign up to our exclusive webinar hosted for HERE Technologies and Sigfox) Only with a focus on the areas to increase efficiency and reduced costs, can companies hope to compete with giants such as Amazon.
Amazon is at the forefront of the technology revolution when it comes to supply chains. One example of this is the focus on pursuing patents relating to drone technology. This ranges from to airborne .
They have also invested heavily in AI e-commerce tools, such as those created to detect trends and potential recommendation fluctuations. Even investing in simple chatbot AI can play a huge part in staying in the game. The reach of amazon’s influence in terms of technology can be seen across the supply chain world, with global organisations increasing investment to stay competitive.
Overall, “The Amazon Effect” can be seen throughout the supply chain world and has impacts across the rest of the consumer life cycle. They are a key player leading the way in defining the direction that e-commerce and logistics are evolving.
Cainiao Network Launches Customer-Centric Logistics
As the logistics division of the Alibaba Group, Cainiao Smart Logistics Network has decided to provide its Southeast Asian customers with unsurpassed service during its annual shopping festival. Based on customer feedback surveys, the company will expand its real-time customer service support and speed up delivery times. ‘By expanding and deepening our services, we aim to provide a stronger logistics infrastructure that can bolster the booming eCommerce sector, support merchants’ expansion into new markets and diversify retail options for consumers’, said Chris Fan, Head of Cross-Border, Singapore, Cainiao Network.
Who Is Cainiao?
According to TIME Magazine, Cainiao ‘is far from a typical logistics firm’. The company controls an open platform that allows it to collaborate with 3,000 logistics partners and 3 million couriers. This means that merchants can choose the least expensive and most efficient shipping options, based on Cainiao’s real-time logistics analytics. The company’s goal is to ship packages anywhere in the world in under 72 hours—and for less than US$3.00.
For countless small business owners around the world, from coffee-growers to textile-weavers, this could change everything. Usually, it costs about US$100 to ship a DHL envelope from Shanghai to London in five days. Cainiao aims to change that. Said its CEO Wan Lin: ‘The biggest barrier to globalisation is logistics’.
What’s Part of the Upgrade?
Throughout the Tmall festival, Cainiao’s logistics upgrade will be divided into four critical segments:
- Real-time customer service support. Cainiao has launched a direct WhatsApp channel for customers to receive logistics updates and ask questions.
- Expansion of air freight parcel size and weight limits. Packages can now be up to 30 kilograms or 1-metre x 1.6 meters to help ship large items such as furniture.
- Daily air and sea freight connections. Shipping frequency will almost double to seven times weekly to maintain resilience and efficiency.
- Compensation for lost or damaged packages. Customers will be reimbursed up to RMB 2,000 (US$311).
Where is the Company Headed?
From June 1st to June 20th, the finale of Tmall, Cainiao will ensure that its customers feel confident in the company’s ability to deliver their packages. Despite global shipping delays due to COVID, the show will go on. Said Fan: ‘This series of customer-centric logistics upgrades reaffirms our goal of pursuing value-added services to enhance customers’ shopping experience while mitigating challenges posed by external factors’.
Furthermore, Cainiao has recently expanded its Southeast Asian operations, achieving revenue growth of 68% year-over-year. In Malaysia, the logistics operation has partnered with BEST Inc. and Yunda; in Singapore, the company has partnered with Roadbull, Park & Parcel, and the Singapore Post. And if its recent measures help retain and grow its customer base, the company will be well-poised to lead the industry in resilient and customer-centric global logistics. ‘COVID-19 made everyone realise how important the logistics infrastructure backbone is’, said Wan. ‘And it gave us a peek at what Cainiao should look like in three years’.