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August 10, 2017 4:45 PM, EDT
Amazon Eyes the Finish Line in Online Delivery With Home Hub Lockers
Amazon Hub Screenshot via Amazon.com

Amazon.com doesn’t just want to control the “last mile” of online delivery. The company wants to own the finish line, too.

Amazon has started a service in which residents of apartment buildings can receive and store packages in on-site lockers operated by the online retail giant in Seattle. While the company offers lockers in places like Safeway and 7-Eleven where shoppers can retrieve Amazon packages, the new Hub lockers will accept deliveries from any sender.

That means merchandise ordered online from Walmart, Target and Best Buy could end up in lockers operated by the very company swiping business from them.

Amazon seems to be copying Luxer One in Sacramento, a fast-growing startup that operates high-tech storage lockers in apartment buildings. But Amazon’s interest in the business seems to lie beyond lockers: The company could in theory reap an enormous amount of information from competing retailers, including the origin, size, weight and frequency of packages at a particular location.

“Amazon will know everything that’s going on in those lockers,” said Doug Stephens, founder of the Retail Prophet consulting firm. “The lockers are like a Venus flytrap” for data.

An Amazon spokesman did not respond to a request for comment.

Hub is only the latest effort by the company to control all aspects of the supply chain. When you buy from a third-party seller on Amazon, the odds are good that the merchandise is stored in an Amazon warehouse. In addition to its enormous distribution centers, Amazon is developing its own cargo air service, Prime Air, to lessen its dependence on outside carriers like UPS. It has even completed a Prime Air delivery by drone. And despite some reverses — Staples and RadioShack dumped their Amazon Lockers in 2013 — Amazon has been expanding the locker program to places like college campuses.

By controlling all aspects of the e-commerce experience, Amazon can significantly lower its costs, especially the last mile of delivery. This final leg tends to be the most expensive because people often miss deliveries and packages get lost or stolen. Hence Amazon Lockers.

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But Hub represents a dramatic escalation against retailers. Amazon CEO Jeff Bezos has often talked about how he wants to sell everything to everybody. Now he is finding ways to make non-Amazon shoppers customers too — whether they want to be or not.

The expansion into apartments is early. Only one building in San Francisco was identified with the Hub lockers. Perhaps for that reason — or simply because Amazon is such a hot potato — there was no comment from Williams-Sonoma, Gap, Target, Best Buy or Walmart on how they feel about Amazon handling their packages.

Hub neutralizes a key advantage those retailers have: physical proximity to customers. Over the past few years, major chains have introduced services that allow customer to pick up online orders in stores.

Take Best Buy, which operates about 1,000 stores in the United States. About 70% of Americans live within 15 minutes of a store. Because of that, Best Buy has been able to get orders to customers faster than Amazon, according to StellaService, a research firm that tracks the performance of online retailers. In fact, more than 40% of Best Buy’s online sales consist of customers who choose to pick up their orders in a store.

Moreover, those customers are also likely to purchase additional items once they are there.

But having a Hub locker at home might discourage people from visiting stores if they can get all of their packages delivered.

“The biggest threat to retailers has been Amazon changing the center of retail activity from the dressing room to the living room,” said Brian Kilcourse, senior partner at BEK Consulting in Grass Valley (Nevada County). “The one thing retailers have over Amazon is immediate gratification.”

“Amazon has been systematically attacking” that advantage, Kilcourse said. “They are subverting the value of the store.”

Hub is also a play for competitors’ data. The company can learn, for example, which of its customers are also purchasing items from Walmart if those packages are ending up in Hub lockers. Theoretically, Amazon could use that information to offer discounts to the customer.

“The most valuable assets a retailer has is not stores or people, but rather information,” Kilcourse said. “Giving away information to competitors is not a good idea.”

Walmart, in particular, has been wary of ceding too much information to Amazon. Walmart is reportedly warning its technology vendors not to use Amazon Web Services or risk losing contracts with the nation’s largest retail chain.

But retail consultant Brittain Ladd, a former Amazon strategy official, said competitors are adopting the wrong approach to Amazon. Instead of worrying about Amazon stealing data, the companies instead should collaborate with the company to more efficiently deliver packages to customers, which benefits everyone, he said.

“Everything about retail is changing and consumers would rather see retailers collaborate to improve their experience versus resisting” each other, Ladd wrote in an email.

“In the coming years, companies such as Amazon, Target, and Walmart will come to realize that neither retailer is going away,” he said. “Instead of driving up each other’s costs” by building duplicative delivery systems, companies should collaborate.

Retailers are not the only industry who might lose from Hub. Amazon’s willingness to provide its lockers for free or at low cost will no doubt threaten Luxer One’s core business.

But there’s more at stake than just one company’s survival, said Luxer One CEO Arik Levy.

“Amazon’s business is not to sell lockers,” Levy said. “Amazon is mining for data. They are going after every retailer they can in every way possible. If I was a retailer, the last thing I would want is for Amazon to know who my customers are.”

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