Amazon Focuses on Delivering What Customers Need
Customer centricity is what Amazon is all about and the retailer knows a significant aspect of what its shoppers want is getting their products when they want them, in some cases on the same day.
According to the Seattle Post-Intelligencer, Amazon’s transportation director Mike Bhaskaran said the company was looking to expand its same-day delivery service beyond areas within New York City where it is currently offered.
Mr. Bhaskaran said the online merchant was looking to expand the service beyond New York “very soon” and ideally it would like to offer the delivery option “all over the country.” Right now, orders in New York that are received by 11:00 a.m. can be delivered to some parts of the city the same day. Costs vary based on what is being shipped.
An analyst with ThinkEquity Partners, Edward Weller, told the Post-Intelligencer that same-day delivery is a very small part of Amazon’s business. The company has continued to emphasize its Amazon Prime service where customers can receive second-day delivery of all orders throughout the year for a $79 fee.
Discussion Questions: Is speed of delivery a critical part of success in e-tailing? What do you see as the potential for same-day deliveries and what other markets do you think could support such a service should Amazon offer it?
Speed of delivery is key, as consumers want the broad selection and variety available with online retailers, but also want instant gratification of having it now.
Ease of return is also a key component to online retailing…especially in the areas of apparel where a consumer is unable to try the item on before buying. Currently many online retailers charge a fee (normally a flat fee) to return items.
This will have to change if online retailers want to truly be seen as an alternative to brick and mortar stores.
Certainly in today’s immediacy culture, speed is a benefit that consumers are willing to switch and pay for. Though what is more important is clear expectations on delivery time and meeting or exceeding them. Why do shoppers get more annoyed over a 20 minute wait at the drug store pharmacy counter than three day shipping policies from a mail order pharmacy? Because they expect retail pharmacies to hand them the product “now” and know that the trade off to mailed scripts is time.
Same day is a big win for Amazon if they can pull it off reliably. As a shopper, I certainly hope so!
Online replenishment is what’s next. Webvan failed because of a faulty business model, not because of lack of demand. The demand is there if the price and the service is right.
As U.S. consumers urbanize and population densities increase, the economic and logistical feasibility of delivery comes within reach. The stars are aligning for this model–especially for center store items.
My only change to this question–it’s not “online,” it’s “mobile” ordering.
I like what Joel says – Barnes & Noble’s competition is the movie theatre or night club. Instead of drinks, they serve books and the lifetime value of those types of customers needs to be compared to the convenience shoppers. Some customers want convenience, some want experience, some want a social experience – if you want to design for the customer, be aware of introducing personal bias.
Anyone who has sold on eBay understands the benefit of very fast delivery. Even when it’s not used, having the possibility makes customers more likely to depend on the seller. Fast delivery also helps with inventory and shortens the time needed to deal with possible returns.
Shopping is either functional or entertaining. Online shopping is more functional and brick and mortar book stores are more fun/entertaining. You should see the independent book seller near me on a Saturday night–packed with people over 30! There is no way that Amazon, as an online retailer, could ever match the fun of going to a Barnes & Noble, browsing and having a cup of Starbucks coffee while figuring out which of 10 books to actually buy.
So, which options for growth does that leave for Amazon as a bookseller? Well, faster, quicker shipping certainly makes sense as an incremental improvement in service. Of course, the big win would come if/when Amazon opens brick and mortar stores in Times Square, Michigan Ave., etc. and gets into the entertainment/experience business. The operational efficiencies of delivery would be minor compared to the impact of mega-stores at prime locations, IMHO.
Online purchases are driven primarily by convenience and price. If delivery timing can be improved without adding a lot to the price, this can have a large potential. But if the total cost is going to go up significantly, that might act as a dampening factor with a lot of potential online sales being pushed back to B&M stores. I think its only a minority of online shoppers that may be willing to pay a large shipping fee for same day delivery. I personally shop a lot on Amazon for books and always end up using the Free Super-saver Shipping option (5-7 day delivery).
The ability to ship same day service will be the death of retail buildings eventually. As the pre-boomers age–the first of them are hitting their 70s–there is less mobility. So online purchase of medications, groceries, house goods, etc. will increase. As the boomers–who are more internet savvy–age, the convenience of ordering online versus getting in the crowds and using their beloved gas money is more attractive. Then watch out as the Cuspers (1960-1968) age there will be a dramatic increase of online purchases.
Amazon can reduce the price because they don’t pay for the store infrastructure, thereby, making the price more attractive. If the service is good, why not order everything online? Amazon built (albeit before its time) the automated distribution infrastructure to support same day service.
Expanding their product lines to custom printing, stationary, business cards, homeopathic medicines, healthy foods at an affordable price, etc. are just a few areas of opportunity.
As we look into the crystal ball, again, Amazon will be making the pioneering moves of the future.
Speed of delivery is a critical part of success in retailing, period. Consumers want instant gratification, and will go to the provider that has what they are looking for, in whatever channel. That usually means physical stores (even if the product has been shopped, even ordered, online). Ten years ago I used to joke that Amazon would become profitable when they opened stores, but now, as usual, reality is catching up. (Wasn’t it Lily Tomlin who said, “I try to stay cynical, but I just can’t keep up”?)
Books are their own particular category in retailing, of course, but I would point out that even after years of 25% annual growth, e-commerce sales comprise only about 3% of total retail sales (perhaps 4.3% by 2010, according to Global Insight); that the majority of online sales (80%, I think) are conducted by multi-channel retailers (those with physical stores); and that pure-play online merchants convert an average of only 2-3% of their site visitors into buyers.
Yet 87% of consumers shop online before buying offline, and credit the Internet with improving their in-store shopping experience. According to Accenture, 67% of consumers state a preference to make purchases in physical stores.
In other words, e-tailing complements in-store retailing. The Internet is an extension of consumers’ experience.
On the other hand, online merchants are becoming increasingly sophisticated and savvy. If there’s a market to be exploited by same-day deliveries, they will provide it.
Certainly, some customers want this in many businesses, and many do not. The only real way to answer this is to have/get data on what percentage want this. It is probably small, but the data is the answer, not my own opinion.
The real story here is giving customers what they want, not how many want same-day delivery. It’s interesting to me how this might seem an uninteresting story to many in the retail world, and that many of those with little interest in this might have a much lower customer focus.
At this point, I think most consumers are used to waiting a bit for their online purchases. For them, that is the trade off of perceived lower prices and the convenience of shopping at home. To achieve same-day delivery would be icing on the cake, and a HUGE selling differentiation point. If Amazon can pull off a same-day delivery model in key markets, it may redefine the value of on-line shopping and accelerate this medium even further into the shopping mainstream.
Years ago, Barnes & Noble’s web site started same day service in Manhattan. Certain fast food restaurants offer immediate delivery for web orders. Instant gratification is always a great lever. Too bad it’s very hard for Amazon to make it profitable. The article mentioned how Amazon reduced its price on a best seller. What good is being customer-centric if you lose more and more money on every order? If sales of loss leaders triple, what has the retailer gained? The customer loyalty of cherry pickers isn’t worth anything.