26 Oct 2014

Doorstep eTailing

Coming from a small town north India, I discovered the doorstep retail early as a child. Right from day break, the narrow streets of neighborhood used to get filled with hawkers, pushing their cartwheels, stacked with fresh produce (organic:-). Shrill screams of hawkers were like the cosmic noise; always around but didn’t invoke any sensory disturbance :-)

Now when I look back as a supply chain practitioner, the complexity of this apparently simple operation amazes me. Just like Bombay’s Dubbawalas, hawkers never missed a date (or street). They somehow had a seasonally adjusted demand plan that just worked. They knew what would sell and exactly how much. Even more intriguing is how the city was mapped? Who ultimately assigned the routes and kept a tab on conflicts? How the risk was managed? Were hawkers allowed to return their unsold inventory to wholesalers at the end of the day? And many more questions that we struggle on daily basis in our complicated DP and SNP algorithms.

We have come to grips now that there is a fine balance. If we wait for the confirmed order, delivery can only be started after order is processed (traditional ERP model). If we ship before order confirmation, there is a chance that goods may return unsold. Hawkers, somehow, already knew the quantity of merchandise that would always sell in a particular neighborhood on given day of month (or year). Knowledge of market reduced delivery time and risk.

Fast forward 2014 and here we are with sophisticated demand planning, route planning and payment systems supported with big data and predictive analysis. And the good news is we are very close to solving what hawkers already did:-)

The fundamental idea of “Amazon Fresh” and “Google shopping express” is to know upfront as to what would sell in a given territory on a given day of week so that goods could be dispatched even before receiving firm orders. Once you know your market, you don’t have to wait for the orders.

Lack of better word; I thought of calling this new distribution channel as “Doorstep eTail”. Google Shopping express is unique in the sense they (at least for now) don’t intend to have any central storage of their own. They want to leverage the storage facilities of the local providers. In a way, this gives ‘Walgreens’, ‘Smart & Final’ and many more local stores, a level playing field v/s Amazon. Shopping express is supported free for six months by Google in an attempt to build a true predictive database of what we can call a “Hawkers’ brain”. In addition Google might also club this with ‘Google Play’ to emulate the success of ‘Amazon Prime”

Amazon on the other hand, already knows ‘what sells’. They are trying to expand their local database with “Amazon Fresh” though its pricey at $299 per year that includes one year subscription of Amazon Prime which in turn includes free shipping from Amazon as well. Amazon Fresh is really nailing it down to the last leg as they ship perishable goods such as milk and vegetables as well while Google Shopping is still somewhat limited to non-perishables.

As we see evolution of these local shipping services, I wonder how far we have come in managing the last leg of supply chain. Though buying vegetables from the cart wheel is still lot more fun :-)

Update Jan 2017

Amazon has expanded the Fresh catalog. They are now offering cooked meals as well. The service has one month free trial and $15 per month there after if you are already a prime customer. That still brings it close to their launch pricing of 299 per year. Google Express continues to be delivery service for the local stores though they have added many more stores. Number of products eligible for shipping from each store has also increased. The service has a three months free trial followed by $10 per month or $95 an year. There are multiple home delivery options for food now in play. Door Dash is a popular food pick and delivery service. Blue Apron has an interesting model of shipping the fresh ingredients to your doorstep for you to enjoy the hot meal cooked in your own kitchen.