Amazon Thinks You May Not Care When Your Package Arrives

Last Updated Jul 2, 2010 2:11 PM EDT

Amazon (AMZN) is testing a gutsy new delivery option in Seattle called AmazonTote, which allows you to choose free shipping that arrives once a week. Your neighborhood's "Tote Day" also happens to be whatever day Amazon delivery people are nearby delivering food for AmazonFresh. In other words, AmazonTote delivers when it's convenient for Amazon.

It's a brilliant little adjacency: since Amazon's grocery delivery guys are already nearby, why not stick some Amazon.com products on the truck? But it also makes use of one of the most counter-intuitive principles in management: the customer may not always want what you think. In fact, he may not always want what he thinks. (In this case, fast shipping.)

AmazonTote is virtually opposite to Amazon Prime, the service that gives you unlimited two-day shipping for $80 a year. Amazon Prime operates is underwritten by the idea that users hate paying shipping fees, and that they always want their items as fast as possible. But that's an example of where inductive reasoning can fail management. In other words: just because shoppers like "free" and they like "fast" does not mean that they will necessarily salivate doubly over a service that provides both at once.

AmazonTote is an excellent pilot program for figuring out what drives customers to prioritize "free" over "fast", and whether the product being delivered has any bearing on that prioritization. And since Amazon could never hope to make AmazonTote a full-scale, nationwide offering -- it simply doesn't have the hand-delivery infrastructure in place anywhere but Seattle, and building it would be deadly expensive (see WebVan) -- it's clear the company's doing it to study customer behavior and not simply as a normal pilot program.

What they may hope to learn is whether customers repeatedly place priority on certain items, while letting others arrive more slowly. That has implications for the way Amazon organizes its supply chain: maybe the best taxonomy for their shipping infrastructure is to know which items end up more often in the slow-delivery funnel, and which tend to be frequently overnighted.

In classic Amazon fashion, it may be the small insight -- the long-tail observation -- that induces a massive shift in the way business is done.

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