Delivery Strategies – Amazon vs. White-Glove Delivery

Process strategy has been a focus of this class, and we’ve seen how decisions made in a process strategy can give a company a competitive edge. I was curious to see how brands that value convenience but are not known for that aspect of service are competing with companies such as Amazon and Walmart when it comes to home delivery. My hunch was that a company that places luxury or exclusivity higher on its list of priorities in terms of customer interaction would struggle to keep up with Amazon Prime and other similar services while keeping that reputation and brand identity intact.

 

Willis Weirich is the senior vice president of supply chain and operations for Neiman Marcus, a high-end clothing, home goods and furniture brand. Weirich noticed a lapse in the classic, reliable customer service Neiman Marcus usually provides in person when it comes to delivery. So, Weirich’s supply chain team and the customer care group researched and recorded the bulkiest delivery jobs in attempt to identify and remedy problems before the delivery date. They were able to do this with a new software called Convey Software Inc. I liked how this article pinpointed exactly how Neiman Marcus was able to tackle this problem and restore the trust and reputation the brand has worked so hard to exemplify to its consumers and competition, while still being able to offer a service in high demand.

 

Through my research, I found that deliveries from high-end brands are often referred to as “white glove deliveries.” Another example of a company seeking to maintain its reputation with specialized delivery is The Saatva Company. The Saatva Company is known for selling luxury mattresses online, and it announced in January that its delivery service now includes delivery, set-up and removal of the old mattress, all free of charge. Ron Rudzin, CEO of The Saatva Company, said the new service offered by his company, “speaks to our continued commitment to deliver luxury products and service at affordable prices.” The Saatva Company has 23,000 5-star reviews, combined with a 95% + customer satisfaction rate, Saatva is the best reviewed online mattress company for 8 years running. The company has worked hard to build a reliable, luxurious brand and continues the trend by upgrading the normal quick delivery service to match its high-end profile.

 

Although Amazon is a huge competitor, one writer for the Wall Street Journal believes that its strategy to keep growing will be its limitation. Christopher Mims points to Google, Microsoft, Salesforce.com and Oracle Corp. as providing specialized services and white-glove treatment for business essential assets. Since Amazon has expanded its platform to sell so many different items, it becomes difficult to offer specialized service for specific items. That’s where Neiman Marcus, The Saatva Company and Oracle Corp. move in with a centralized focus on just one or a few product lines done very well.

 

https://www.wsj.com/articles/neiman-marcus-turns-to-technology-to-solve-home-delivery-exceptions-1520020902?mod=searchresults&page=1&pos=3

http://markets.businessinsider.com/news/stocks/the-saatva-company-now-offers-free-white-glove-delivery-672804

https://www.wsj.com/articles/the-limits-of-amazon-1514808002?mod=searchresults&page=1&pos=2

7 thoughts on “Delivery Strategies – Amazon vs. White-Glove Delivery

  • March 7, 2018 at 2:24 pm
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    I think your comment about Amazon struggling to continue to grow was very interesting. It seems that Amazon continues to set the bar for other companies who compete in similar industries. With each move Amazon makes, it seems that they could not possibly continue to grow and take over more industries. Nonetheless, it seems that Amazon continues to prove this wrong with their commitment to their value chain and efficiency. After reading about your discussion of white-glove delivery I did a little research to find any recent current events about this topic. I found that the logistics giant, FedEx, has been struggling in this area. FedEx struggles to service larger packages because they do not work with their processes very well. Often times it causes a supply chain break down; FedEx has difficulty with bigger boxes because they do not fit through automated sorters, are not easily read by scanners, they require additional manual handling, and need additional cargo space in trucks for delivery. White glove service provider XPO, reported net income growth of 316.7 percent as of November 2017. FedEx has also experienced a 240 percent growth of oversized packages over the last ten years. In order to maintain their market share, FedEx is analyzing their processes in large package handling and looking for ways to improve the way their supply chain handles large packages. Use this link for additional information. http://www.supplychainbrain.com/single-article-page/article/delivery-of-online-bulky-items-creates-new-competition-for-fedex-and-ups/

  • March 7, 2018 at 10:01 pm
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    So far Amazon has been successful because they’ve been able to achieve almost all of the competitive priorities, without sacrificing anything. I think this article is a good example of how sometimes achieving a competitive priority means that something else goes away. In the case of Amazon, their ability to provide variability means that providing customers with a niche, specialized experience is very rare. However, I don’t think this will be a huge problem in the long run. Amazon is so competitive in every other aspect of business that losing out on one tiny market won’t affect them that much. That being said, if it does start to become a problem, Amazon has shown its ability to adapt quickly in the past, so Amazon could probably do it again and change the business model if they think they have to in order to stay competitive.

    • March 8, 2018 at 7:07 pm
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      I completely agree with Jordan. I would be very interested to see what Amazon’s opportunity cost of their giant expansion has been. That is to say, if, because of their massive expansion leading to less specialization, they have lost any business to firms such as Neiman Marcus and Saatva. And if their gains from their expansion would offset this opportunity cost. That being said, I don’t think it’s fair to compare Neiman Marcus and Amazon. Amazon’s fashion department has been steadily improving, however I don’t think it can match the quality and notoriety of Neiman Marcus. Furthermore, Amazon fashion customers don’t have the option to go into the store and buy clothes. Neiman Marcus customers have this opportunity, therefore decreasing the overall demand of their online shopping. Because of these vast differences, I don’t think that we can conclude that Amazon is being negatively impacted by the increased processes of Neiman Marcus

  • March 7, 2018 at 11:33 pm
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    It is very interesting to see how these more specialized companies have adapted when faced with the looming threat that Amazon poses. By differentiating themselves they have found a way to create customer value that Amazon cannot. As ordering online continues on its path to being the most common way to shop I wonder if these previous order winners of quality and added touches may fall by the wayside in comparison to the speed and efficiency that is offered by Amazon.

  • March 8, 2018 at 12:26 am
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    Saatva identified a segment of the market that might value the extra care and security of purchased mattresses. Although Amazon has a competitive edge on delivery speed and on-time deliveries, it also does very well on product care and consistent quality. Amazon also has a high level of flexibility in its supply chain although they do not specialize in any particular facet of the delivery process. This is where Saatva can differentiate itself with a proprietary method for ensuring safe transportation for luxury goods. They will not compete with Amazon on cost, time, or flexibility but will have the top quality in the delivery space. Saatva will find the investment in its mattress delivery operation to be profitable if the costs of providing the service are lower than the increased sales from customers that want delivered mattresses. Saatva is foregoing the opportunity to outsource its delivery service to Amazon so the profits from its delivery operation also must be higher than the opportunity cost of using Amazon as its delivery outlet.

  • March 8, 2018 at 8:16 am
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    Your comment on Amazon having trouble expanding white-glove delivery is a great point. They own many different brands, and each of which has their own style to it. So, Amazon’s quality strategy has to be on point, especially for the delivery of high-end brands. However, the real concern is offering that quality delivery to all brands without sacrificing costs or time, something that’s extremely important in Amazon’s strategy.

    Economies of scale here, in my opinion, is what will hopefully separate Amazon from the rest of these specialized, white-glove deliveries. If they are able to share core competencies with the businesses they acquire, such as Whole Foods or Zappos, then they can limit their fixed costs across all brands by operating in similar factories, having labor do similar tasks, or sharing inventory space. Those saved costs could allow Amazon to create higher quality delivery for goods consumers find luxurious. So growth is not necessarily a bad thing, as long as they operate efficiently to the point where they do not engage in diseconomies of scale.

  • March 8, 2018 at 3:50 pm
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    Often times when companies start growing to fast this can be a major problem. They can grow so fast that they are spread so thin, leading to them not paying enough attention to each business unit they have. Because of this, some of their products are not fully developed and paid attention too. Some could wonder if this will happen as Amazon continues to spread. However, Amazon is such a large company with very large purchasing power and many smart minds, leading everyone to think they are impenetrable. This article brings up good points about specialization. It could be hard for Amazon to overtake certain extremely specialized companies. There are often times when consumers would rather purchase from a company that is great at one craft, as opposed to average at many crafts. Amazon also provides certain items that require installation that they do not offer. With phones, it is possible to purchase certain phones on Amazon, but then the consumer needs to install the phone service in the phone himself or herself, or take it to a store (which requires the extra step of going to a store). This can lead to consumers rather paying the extra money to purchase the phone from Verizon or At&T because all of the services can be done at one location. In the future I am interested to see how Amazon competes with companies that have more specialization than they do, or come with a service that needs to be installed

    http://bgr.com/2018/03/07/galaxy-s9-promotion-price-verizon-att-t-mobile-amazon/

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