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Amazon is trying to grow its clout in the same-day delivery market
Retailers are determined to get goods into the hands of consumers quickly and Amazon.com is always part of the conversation on that topic. So there’s little surprise in The Wall Street Journal’s reporting that Amazon intends to become a significant force in same-day deliveries. However, how close it is to achieving that goal may surprise a few.
Amazon has opened 45 same-day shipping centers since 2019 and it could have as many as 150 operating within the next few years, according to MWPVL International, which tracks the retail and technology giant’s operations.
The facilities, which carry around 100,000 of the most popular SKUs sold by Amazon, are being opened in major metropolitan areas around the U.S. The Journal said Amazon has opened new same-day sites in Los Angeles, Phoenix and San Francisco.
“We’re always exploring ways to bring our customers new levels of convenience and delivery options that work best for them. Same-Day Delivery is one of the latest innovations,” an Amazon spokeswoman told the paper.
Amazon has been trying to nail same-day delivery since at least 2009. Still, the Journal’s reporting suggests it may have worked out most of the bugs as it goes up against retailers using Instacart, Target and Shipt, and Walmart.
The Amazon spokesperson told the paper that 1.5 million people try same-day delivery through the site monthly.
Amazon offers free same-day delivery in markets where it is available on orders of $25 or more. Smaller orders come with a $2.99 charge.
Walmart+ members receive free same- or next-day orders from local stores. Subscribers to Instacart+ and Target’s Shipt service also receive free deliveries.
Amazon is far from alone in making investments to speed deliveries to customers in a more efficient and less costly manner.
Target last week said it would invest $100 million by the end of 2026 to open six new sortation centers as it seeks to increase the number of next-day orders it fulfills while simultaneously lowering its costs.
The retailer, which fulfills over 95 percent of its online orders from stores, has nine sortation centers in Colorado, Georgia, Illinois, Minnesota, Pennsylvania and Texas. It opened its first center in 2020 in its home market of Minneapolis.
- Amazon Expands Same-Day Delivery, With Fees, While Battling Slow Growth – The Wall Street Journal
- Trying for more smiles? Amazon rolls out quirky mix of new slogans on Prime delivery vans – GeekWire
- Amazon Launches Same Day Delivery in Seven Major Cities and Expands Saturday Delivery Options – Amazon.com
- Same-Day Delivery just got faster – Amazon.com
- Will Target become the king of next-day deliveries? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Will same-day deliveries in major U.S. markets help Amazon recruit and retain Prime members? How will Amazon’s expanded presence in same-day affect others in the same space?
Poll
Loading …BrainTrust
Melissa Minkow
Director, Retail Strategy, CI&T
Gary Sankary
Retail Industry Strategy, Esri
Many colleagues on this and other forums and I have already agreed that nobody “needs” same-day delivery. So I am still puzzled by why there is still an emphasis on this capability by retailers like Amazon.
At this point, I think Amazon shareholders are asking “will it help the company be more profitable?” The answer to that is no.
And the times at which Amazon delivers now border on the bizarre. I get deliveries at 4:30am and 10pm. This is not in an acceptable window.
Same-day deliveries deepen loyalty. The convenience of skipping the store and time savings from extra-fast delivery add value to Prime memberships.
Expanding same-day delivery helps Amazon compete with speedy rivals like Instacart and its partners (like Walmart and Sephora.).
I don’t think same-day is going to recruit anyone who isn’t already using Amazon because of the two-day. This switch is really only slightly incremental and, in most shopping journeys, unnecessary. I’ve thought some of my orders were arriving same day, and it ends up being two days later. I think they need to pursue a different angle of differentiation at this point.
E-commerce and brick-and-mortar are in an understandable fight for the last mile as the two distribution channels converge. Same-day delivery is the online equivalent of a quick run to the store, minus the actual run to the store. The question is, what percentage of sales can’t wait for a day or two? I find that most of what I order on Amazon can wait and the amount of stuff I actually buy as an impulse, same-day purchase is very low. I’m not sure that same-day delivery will move the needle for anyone but it will be great to watch how this fight for the last mile sorts itself out and helps shape the seamless customer journeys between digital and physical retail.
A recent RSR study showed that consumers care about same-day delivery, especially in specific categories like food and FMCG. I think the overlap between Prime users and people who want to get their products the same day is probably bigger than we think. Home delivery continues to be a key differentiator in retail. Doing it better and faster than the competition will help drive loyalty.
We’re still early in the development of this capability. There are lots of issues around cost and processes that are still being worked out. But if you think about where retail was back in 2020, at the start of the pandemic, most retailers have made enormous strides.
Just as stores aren’t going away, and in-store experiences are still important, consumers who want to use same-day delivery services also aren’t going away. And in a market where incremental growth can be challenging to find, for Amazon, this allows them to leverage a strength and gives Prime subscribers more reason to continue to pay for the service.
Here in snowy Portland “same-day” seems to be fulfilled by individual drivers in presumably their own cars, which for a $25 item can’t represent a good business/environmental model for anybody. Worse, for some products there is no choice to deliver later available for a lower cost. Somehow these costs will get to the consumer, whether explicitly or not. I don’t see a need for same-day much beyond grocery products.
The question is whether same-day delivery is necessary or simply a nice add on. If it is perceived more as the latter, the questions are how expensive is same-day delivery what is its profitability impact. Even if it is perceived as a differential advantage at the moment, competitors will soon offer something comparable and everyone will go back to zero.
For most customers same-day delivery is a want and not a need. This is something retailers are trying to make into a point of differentiation in their offer versus their competitors. As more retailers implement it, it moves from the “needed to win” category to the “needed to play” category, albeit an expensive feature needed to play. The result is either higher cost passed on to the consumer or reduced margin for the retailer or both.
Same day deliveries is a nice to have for customers and expensive to deploy for retailers. There is a small niche of customers who value same day deliveries in dense urban areas, but is it really a profitable path for amazon just to drive Prime subscriptions?
There are times when same-day delivery is more than nice-to-have, and this can be something that drives customer loyalty. For example, in our household over the past month, we have had a number of situations where we did need something same day, but didn’t have time to visit multiple stores to find it, so turning to Amazon and seeing same-day as an option was fantastic. However, Amazon still seems to have a ways to go on fulfilling that promise. I’d day they hit the mark at most 60% of the time, and I don’t consider same-day delivery at 11pm at night, or 4:30 am the next morning as hitting the mark if you place that order before noon!
Can this help retain Prime members? Possibly, but the real question is knowing which products do you need to offer same-day delivery that will matter to Prime members? The answer is not “all of them.” Will this help recruit new Prime members? I suspect that is more challenging and that other Prime features have more relevance to new Prime members, streaming video programing for example.
Amazon’s emphasis on same-day continues to be a priority because it builds a perception of simplicity and fewer hassles, ultimately creating long-term loyalty.
This phenomenon is not unlike grocers who stay open late, especially for 24 hours. Studies have shown these stores perform with notably higher sales, not because of people who shop between 1 a.m.-4 a.m., but because the majority of day shoppers don’t have to keep track of hours, perceiving them and easier to do business with.