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October 13, 2014

Retail's Revolution: A Special Delivery

Posted by Dinesh Bajaj (View Profile | View All Posts) at 10:38 AM

In some countries, the government-run post office can often be a poster child for inefficiency and all that is wrong with federalizing an organization. Add to the mix the decline in mailing traditional letters because of email, and post offices have faced some challenging years.

In the United States, for example, a debate has raged over the future of the country's post office. Some people say it should go private. They point to companies like Federal Express and United Parcel Service as examples of how efficient a mail delivery system can be when it is run for shareholders instead of by the government.

I wanted to cast a spotlight on one country's postal service in order to demonstrate how and why technology enterprises are born, as well as how they progress from start-ups to global corporations. What caught my eye was a new company in America that touts itself as a 'robotic' retail post office.

Think about the long lines at the post office. Much of what you wait in line for can and should be automated. And sometimes you're there because a package that came to your house had to be signed for by you - and you weren't home at the time. So you have to wait in line at your local postal branch to pick up the parcel on a day you're not at work.

That's why I'm encouraged by the appearance of this new company called Swapbox. When your parcel arrives at one of its locations, you receive an email. And these are not once-a-day deliveries. What Swapbox's founders have done is to strike deals with 24-hour pharmacies and other corner retailers that are close to where you live. So the moment the box arrives, you are alerted and can pick it up. For the 24-hour retailer, it's a boon in that you might buy a few things while you're picking up the package.

What's most important about this postal start-up is that it feeds into a rapidly growing e-commerce trend. I know what you're thinking: How does this bricks-and-mortar model affect e-commerce? Well, the latest wave of retailing from the online giants is to get you what you ordered online as fast as possible. They have figured out that by using local retailers that are nearest to population centers, people who shop online can get their packages within hours if they agree to pick them up at these predetermined locations.

Swapbox is just one of many services that are leveraging the "online-to-offline" e-commerce trend. What many retail experts predict is that when Alibaba, the China-based online retailer, brings its online-to-offline method of e-commerce to North America later this year, it will force a reorganization of the entire industry. That's why start-up companies like Swapbox are suddenly appearing on the scene. Some heavyweights in the retail world have said that Alibaba wants to establish a good rapport within the sector by making various investments in Silicon Valley-based e-commerce companies. I think the more likely story is that Alibaba is less concerned about establishing a good rapport and more focused on becoming the global market leader. And an enterprise does that by investing in and doing business with other companies that can help it reach its goal.

I would not be surprised in the least if Alibaba were to do business with Swapbox. What a Swapbox customer does is to get a kiosk assigned to her that is in her vicinity. When her package arrives in the kiosk, she receives a code via text or email that she can use to open the kiosk and get her package. The idea is that Swapbox will work with many online retailers who want to get their goods to their customers as quickly as possible. For decades, Americans have been shouting from the rooftops that their postal service needs to be modernized. Today there are some who advocate the entire agency going digital. I suspect another course is that it might just slowly fade off into irrelevance, year by year, if such innovations in the e-commerce sector continue to take shape.

Which brings me to a report I read not too long ago. The author emphatically stated that there is a hierarchy of receptivity to 'productivity-improvement innovation.' At the top is the private start-up, followed by the non-unionized business, and then the heavily unionized business. At the bottom of the heap, he said, is the government bureaucracy. Judging by what we're seeing in the online-to-offline retail trend, I think author of the report has it right. Indeed, we're on the verge of an entirely new way to deliver and receive the goods we purchase.

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