As product managers, it is our responsibility to use our product development definition to create products that our customers will want. With a little luck, they’ll discover our products, decide to buy them, and then place an order. You might think that a product manager’s job would be over at this point in time. However, the good folks at Amazon have succeeded in making our lives just a little bit more difficult. The Amazon Prime program provides Amazon customers with free two-day shipping for anything that they order from Amazon. What this means is the product managers are starting to discover that their customers have been programmed to expect to be able to receive anything that they order within two days. Are you ready to deliver on this expectation?
What Has Amazon Done?
Customers have come to expect to receive just about anything that they buy online in two days. The reason that they think that they can get this is because of Amazon’s Prime program. The Prime program costs customer $119 each year to belong to it. It is very popular – over 100M people have signed up for it. That’s something that would look good on anyone’s product manager resume! The popularity of this program has created a virtual arms race between online sellers.
As a result of the popularity of the Prime program, in the past year product managers at both Walmart and Target have started to offer “free” two-day delivery. There are a variety of different requirements for getting this service including the size of the order or belonging to a vendor’s club. Even as Amazon has resulted in the demise of the traditional bricks and mortar stores, they have been heavily investing in real estate – gigantic warehouses. The reason that these warehouses are so important is because in order for products to make it to customer within two day while still keeping costs low, they have to be delivered via ground transportation – not via air transportation.
It is hard for other companies to play catch-up with Amazon’s two-day delivery promise because Amazon has already made a huge investment in a network of warehouses that are spread all over the country. Currently Amazon operates 75 fulfillment centers and 25 sortation centers which group goods by destination. The size of some of these facilities is massive and they can cover over a million square feet.
How Product Managers Are Going To Compete With Amazon
In order to compete with what Amazon has built, Walmart has started to open its own online fulfillment centers. These are distinct from the existing store distribution centers that Walmart already operates. Walmart currently has six campuses that operate with the assistance of smaller centers and includes shipping from their own stores. Walmart claims that they can now reach 98% of the U.S. with ground shipping in under two days.
Over at Target they are taking a different approach to solving the same problem. At Target, over 90% of the orders that they receive online are shipped from 1,400 of their 1,800 stores and arrive at their customers within two days. For firms that are smaller than Walmart and Target, shipping within two days is still possible. If they are part of Amazon’s Marketplace program they can take advantage of Amazon’s resources to ship their products within two days also.
The need to be able to deliver goods within two days has caused both FedEx and UPS to create their own fulfillment programs. UPS matches companies that need warehouse space with companies that have spare warehouse room. FedEx is offering to store company’s products at FedEx facilities around the country. In order to be successful in the future, companies are going to have to grow large enough to or become innovative enough to find ways to cut shipping costs. While they do this they will still need to be able to get goods to customers in in the U.S. within two days or less. Competitors need to keep their eyes on Amazon which has started to offer same-day and even two-hour shipping options.
What All Of This Means For You
Product managers need to understand that their product manager job description tells them that their job is not over until their products are in the hands of their customers. The popularity of Amazon’s Prime program has programmed customers to start to expect that any goods that they order online can be delivered to them within two days. This means that product managers are going to have to scramble in order to find ways to match the service that Amazon is already providing.
The popularity of the Amazon Prime program has resulted in an arms race among other online retailers. Walmart and Target have been forced to start of offer their own brands of “free” two-day delivery. In order to be able to stock products close to their customers, Amazon has been making investments in real estate so they can build new warehouses. Amazon’s investment in warehouses has made it hard for the competitors to catch up with them. Walmart has decided to attempt to emulate Amazon and is in the process of opening their own fulfillment campuses. Target is taking a different approach and is shipping orders directly from 1,400 of their stores. Realizing that there is a market in helping companies to ship within two days, both UPS and FedEx have started to offer services to help stock products close to customers. Amazon keeps increasing the competition by staring to offer faster and faster delivery times.
Product managers need to understand that the popular Amazon Prime program has defined what customers have come to expect from product delivery programs. No longer are customers willing to wait for weeks for their products to show up – they want it now! Creating their own network of warehouses that can be used to stock products close to customers seems to be the key to keeping up with Amazon. However, this may only be a temporary solution – product managers need to be ready to speed deliveries up in the future!
Question For You: Do you think that product managers can use Amazon’s delivery service to get their products to customers within two days?
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What We’ll Be Talking About Next Time
So I really enjoy driving my car. I get in, fire it up, hear the rumble of that motor (ok, so it’s a 4-cylinder motor – it’s not that much of a rumble), I pull out into the street, press the gas petal to the floor, and I’m off! Well, it turns out that over in China, they love their cars too. However, electric cars are currently all the rage and it turns out that the best-selling electric cars are not what you might think that they would be. In my country, the U.S., the best-selling electric cars are the wonders of modern technology created by Tesla – big cars that have every convenience that you could possibly think of. In China, it’s almost the opposite. The best-selling electric cars have a unique product development definition and are tiny and come with almost nothing. What are these Chinese product managers up to?