- This is an excerpt from a story delivered exclusively to Business Insider Intelligence E-Commerce Briefing subscribers.
- To receive the full story plus other insights each morning, click here.
Amazon announced that it’ll be evolving its Prime Two-Day Shipping program into a free One-Day Shipping program, and that it’s already started down the path and set aside $800 million for this investment, in its most recent earnings call.
Business Insider Intelligence
If the e-tailer succeeds, it’ll put a great deal of pressure on Amazon’s competitors and could lead to a major shift in consumers’ shipping expectations.
Here’s what it means: A move of this magnitude will certainly get a response from Amazon’s major rivals as they strive to stay competitive.
- One-day shipping already seems to be on Walmart’s radar. A day after the earnings call in which Amazon announced its one-day ambitions, Walmart tweeted: "One-day free shipping…without a membership fee. Now THAT would be groundbreaking. Stay tuned." While this is short on implementation details, it shows that the retailer is already considering its response to Amazon’s forthcoming upgrade. And, with a huge network of stores in the US — there’s a Walmart location within 10 miles of 90% of the US population — it may be able to scale up the areas it could reach with a one-day shipping offering relatively quickly. However, it has a way to go, given that its standard delivery option is currently a two-day offering with a $35 minimum.
- Target may already be prepared to compete, as it currently has a successful next-day delivery service. The retailer’s "Target Restock" service offers guaranteed next-day delivery if a customer places their order before 7 p.m. on a weekday and carries a relatively low cost of $2.99 per order and a $35 minimum. Restock is currently limited to 35,000 consumer packaged goods (CPGs) and other essentials, and Target’s standard delivery option is two-day free shipping with a $35 minimum. However, the fulfillment strategy behind Restock — sourcing products from Target stores — is a solid foundation on which to build out a larger one-day service with greater product selection.
The bigger picture: After one-day shipping, only same-day remains, so Amazon needs a flexible upgrade to one-day shipping that can be pivoted to a same-day offering in the future.
A wide network of physical stores may be critical to same-day delivery, and it’s an advantage Amazon doesn’t have. Extremely rapid shipping depends on having a strong fulfillment network throughout the US, and while Amazon certainly has this, competitors have the advantage in physical stores. Target has 1,851 locations nationwide, for example, while Walmart has 5,355.
By fulfilling online orders from stores, legacy retailers can trim costs and roll out fast delivery rapidly, giving them an edge in the long-term fight for same-day delivery. As such, as Amazon pivots to one-day delivery, it’s critical that the e-tailer puts extremely strong logistics systems in place that can be upgraded even further to accommodate a widespread same-day offering when the time comes.
Interested in getting the full story? Here are two ways to get access:
1. Sign up for the E-Commerce Briefing to get it delivered to your inbox 6x a week. >> Get Started
2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the E-Commerce Briefing, plus more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
See Also:
- Amazon is upping the ante with a one-day shipping plan
- All Kohl’s stores will soon handle Amazon returns
- Kroger is having a slow start to e-commerce
SEE ALSO: The three types of Amazon buyers — and how other e-tailers can lure them away
Source: Business Insider – feedback@businessinsider.com (Gregory Magana)