Target and Toys R Us posted overall sales declines during the holidays.
In what some analysts see as an attempt to compete head on with bricks-and-mortar retailers, Amazon.com today announced same-day delivery on items ranging from gourmet foods to electronics to hardware in seven major cities.
In what some analysts see as an attempt to compete head on with bricks-and-mortar retailers, Amazon.com Inc. today announced a new shipping option that offers same-day delivery on items ranging from gourmet foods to electronics to hardware in seven major cities.
The service is now available in New York, Philadelphia, Seattle, Boston, Washington, DC, Baltimore and Las Vegas, and Amazon plans to extend it to Chicago, Indianapolis and Phoenix in the coming months. In order to qualify for same-day delivery in New York and Philadelphia, orders must be placed by 10 a.m.; in Boston, Washington and Baltimore the cutoff is 10:30 a.m.; and in Seattle, Amazon’s headquarters, shoppers can request same-day delivery until 1 p.m.
Consumers enrolled in Amazon Prime, Amazon’s shipping membership program, pay $5.99 for same day delivery. For other customers, shipping rates vary by product and range in price from $14.49 to $18.99. In the same announcement, Amazon also said it will expand its Saturday Delivery options to allow items ordered before the cut-off time on Thursday using two-day shipping to be delivered on Saturday instead of Monday.
The move puts Amazon in more direct competition with bricks-and-mortar stores, says Sucharita Mulpuru, an e-commerce analyst at research and consulting firm Forrester Research Inc. “When you look at why people choose not to purchase something online, even if they research it online, the number one reason is because they want something immediately,” says Mulpuru says. “This solves that problem.”
The faster shipping option will have more impact on Amazon’s ability to compete with stores than with other online retailers, Mulpuru contends, as web shoppers that like Amazon already do much of their online shopping at Amazon.com. “For some customers it may make it more compelling to buy at Amazon, but for most people, if you’re already inclined to buy at Amazon, you’re already doing so,” she says. “It’s already cheaper and offers more shipping options. In the few cases where Amazon loses, it’s generally because they aren’t stocking something.”
Paula Rosenblum, Retail Systems Research LLC managing partner, suspects the move is an attempt to garner a greater share of the grocery business. “My hunch is that they’re trying to make the grocery business more profitable,” she says. “It’s kind of a profound step because that business requires instant gratification and, with this, you’re getting that instant gratification, which is very powerful.”
Amazon’s grocery service, Amazon Fresh, launched in 2007 and is currently only available in parts of the Seattle area. But the world’s largest online retailer has hinted that it’s looking to invest more in the program. Late last month Amazon said it would expand the business to the entire Seattle metropolitan area, according to published reports.
Rosenblum doubts many other retailers would try to match Amazon’s offer, although they may be forced to woo consumers in other ways. “Nobody has the size and scale to do it, so they would have to find another way to differentiate themselves,” she says. “Maybe with free shipping or with price.” Even Amazon could lose money unless it gets large volumes of same-day orders in each of the cities where the service is offered. “The thing other retailers have to hope is that they won’t make money on it, which isn’t an unrealistic hope,” Rosenblum says
An Amazon spokeswoman declined to discuss either the start-up costs or logistics for the delivery program, but notes that the retailer is working with delivery and distribution service providers Dynamex Inc. and the A-1 Delivery Service Inc. network.
Projecting the potential for setbacks in an ambitious delivery service like this, Rosenblum points to a free shipping and free return program Pottery Barn introduced about 10 years ago. “What people would do is order two sofas,” she says. “They’d decide which they liked and send the other back with the delivery truck. And that expense kills you.”