Like a Ton of Bricks

Somewhere in this canon (or the other one; way too lazy to go looking), I mused that the future of eTailing was retailing. The reasoning is straightforward: the cost of fuel, air and ground, will only rise. We either run out of crude or we substantially reduce how much we use so that we have enough air to breath. In the near term, it's unambiguous that rail transport is an order of magnitude cheaper than air, and nearly so for highway ground.

The advantage of brick & mortar retail is inventory; it can be moved in bulk, thus by rail and at substantial savings. At the time I mused, I didn't consider the shift back to brick & mortar to be all that swift. I didn't count on the folks at Amazon to have figured it out already. Here's a recent piece on Amazon's brick & mortar effort. Rather than you taking a short drive to Target, Amazon takes an almost short drive to you. Who said size doesn't matter? The losers? UPS and FedEx and the Post Office. They still do the last mile, so to speak, but not the bulk of the delivery.

Amazon's delivery of everyday objects needs to be fast enough and cheap enough to wean customers from their local stores. Yet it also must be economically feasible for the retailer, which is investing so heavily in the warehouses that it is barely profitable.

Some residents want more. "They want to be able to order something and then drive down the street to the warehouse and pick it up," said Rod Butler, the city manager. Here, just like everywhere else, shoppers dream of same-day delivery.

And what makes this better? The stated impetus was having to collect sales tax, but I just don't buy it. The cost of transport is significant. Just for yucks, one could use Amazon's build out as a test of the infamous Traveling Salesman Problem. For this instance, one need analyze the goods sold by region (cluster analysis sounds about right; one need define both the region and its goods' list concurrently), the size of the warehouse needed to supply those goods by rail (again, a region need have sufficient shipments, by value, to justify its boundaries), which would have to account for volume of goods (rail is effective for large movements). The most significant parameter is meeting demand lead time on the list of goods to be kept in the regional warehouses. The goal would be to meet some percentage, say 99.5%, of value shipped out of a warehouse to the region. Since these buildings, and if you read the links you'll find tax breaks abounding, still don't move much, definition of "region" is critical. Low volume/value would be shipped out of "central" stores, likely three; each coast and the midwest. The regional warehouses would be stocked by rail. I'd bet, but haven't got data, that the warehouses are quite near, if not on sight to, railheads.

Surprise, surprise. A quick search turns up this story.

Given the prime location in the Midwest with 4,700 miles of mainline rail track, three international airports and more than 11,000 total highway miles, it's no surprise that Amazon has already invested heavily in placing fulfillment centers there.

If you follow the Delaware link in that story, and then search for railheads in Middletown, Delaware, there's Norfolk Southern. Brick & mortar wins after all.