There's no question that Amazon.com has used shipping to gain a competitive advantage over other merchants. Now, a number of chains are looking to negate that strength with a new shipping service that directly competes with Amazon's Prime subscription program.
Chains including Babies 'R' Us, Dick's Sporting Goods, GNC, PetSmart and The Sports Authority are partnering with ShopRunner to offer a year of two-day deliveries for $79, the same price charged by Amazon. The new service also offers free returns, a perk not available to members of Prime.
Amazon is the largest e-tailer in the country with an eight percent market share, according to Hudson Square Research. That strength has led retailers that normally wouldn't work together to do just that.
"If you're going to spend $79, you want a really broad assortment, and by the end of the year, we'll have an assortment of five million items," Fiona Dias, executive vice president of strategy and marketing for GSI Commerce Inc., the owner of Shop Runner, told The Seattle Times.
Collin Gillis, an analyst at BGC Financial, said the new service will face an uphill battle. "It's late in the game. Amazon already has an established base of people," he told the Times. "And it's losing between $150 million and $350 million on shipping in a given quarter, so this is not going to be a lucrative business for GSI."
Brian Walker, an analyst with Forrester Research, told The Wall Street Journal that Amazon "can afford to lose money on a individual consumer if they can make it up in volume. This is more difficult when trying to do this across a network of retailers."
Retailers in the new program are responsible for handling fulfillment while ShopRunner tracks shipments and handles bookkeeping.
"There are lots of pieces that you have to figure out," Clay Cowan, vice president of e-commerce at The Sports Authority, told the Journal. "That's one reason we view this as a pilot and will see how it goes."
Discussion Question: Will the new ShopRunner two-day shipping subscription program give Amazon serious competition?