Here's how it works, in a nutshell: The company crunches its streams of data to forecast generally where a certain item might be wanted, sends it on its way, and remotely directs it to the right address as soon as someone actually orders it. On the off chance that the item doesn't actually get ordered, Amazon might discount it to the person at the place it arrived, or even give it away for free. It's all based on probabilities: What people are likely to want at what time, based on user signals like wish lists and past purchases, and the cost/benefit calculus of time saved vs. packages erroneously delivered.
If it all works according to plan, Amazon will eat away at one of the last reasons people still go to brick and mortar stores: Immediacy. It might not be able to deliver something to you as fast as you think it, but it could get darn close. As Techcrunch points out, widespread speculative shipping could function like electrical utilities use predictive demand management to send power back and forth across the grid.
We shouldn't, though, expect other retailers to lie down and let Amazon become a utility-like monopoly. Wal-Mart is hot on its heels, and the rest of the industry is scrambling to keep up. In their struggle against the Seattle-based empire, retailers are discovering that their physical locations -- increasingly thought of as useless overhead -- are a key advantage.
Retail storefronts, after all, are the original hubs for data on what customers want. And big retailers are very familiar with adaptive stocking: Certain branches of different grocery stores offer different items based on the demographics around them (Goya Foods, for example, helps grocery stores understand what Latino nationalities live in the area and what they eat). They stock for the weather, big sporting events, holidays and weird food trends. Now, since more retailers are able to ship from their stores, many -- from Footlocker to Dick's Sporting Goods -- have a network of warehouses and delivery hubs that Amazon's now building from scratch.
"They're trying to do what stores can do intuitively," says one retail logistics professional who asked to stay anonymous because he's not authorized to speak publicly. Think about it like this: Brick-and-mortar retailers actually have two points of sale. They can sell something off the shelf or mail it to someone nearby. That creates more flexibility in the amount of inventory they can stock, alleviating the problem of empty racks.
"They'll throw something into a store to create more panache," the logistics expert says. "They're not going to sell it, but they can ship it."
No matter who comes out on top in the retail wars, the real winners are the people doing the shipping: Amazon's patent provides for working through a contracted "common carrier," like FedEx or UPS. Other services, such as the find-you-where-you-are eBay Now, employ people in cars to shuttle things around from retailers to people willing to pay $5 for almost-instant gratification. As the shipping pileup over Christmas demonstrated, when lots more people are ordering lots more things online, the existing distribution network just doesn't cut it. And sure, that last-mile delivery might be accomplished with drones, but people are still in the picture for now.
"It's going to be a huge courier network that's going to develop from a society that wants everything right away," the logistics expert said.
Disclosure: Amazon.com chief executive Jeffrey P. Bezos owns The Washington Post.