Should (can) rivals meet the free one-day delivery bar being set by Amazon?
Amazon.com has long maintained that its Prime membership program is “the best deal in retail.” Yesterday, the e-tail giant announced plans to make the program even better by lowering the amount of time it takes to deliver products from two days to one.
Brian Olsavsky, Amazon’s senior vice president and chief financial officer, told analysts on yesterday’s first quarter earnings call that the e-tail giant was well into the process of “evolving” the company’s free two-day standard option on Prime eligible purchases to one while continuing “to offer same day and Prime Now selection in an accelerated basis.”
Amazon, according to Mr. Olsavsky, “has expanded our one-day eligible selection and also expanded the number of zip codes eligible for one-day shipping.” The company plans to invest $800 million in incremental spending during the second quarter to further ramp up one-day shipping for Prime members. Consumer Intelligence Research Partners (CIRP) estimates that Amazon currently have 103 million Prime members in the U.S.
While Amazon is in the process of moving to a one-day standard, it is also accelerating its same-day and Prime Now delivery times as well. To reach its goals for one-day delivery, Amazon plans to continue using third-party services – FedEx, UPS and the U.S. Postal Service – in addition to its own delivery fleet.
Amazon rivals will be under pressure to keep pace with the e-tail giant as it raises consumer expectations around delivery times.
On a RetailWire webinar last November, Rakuten Intelligence principal analyst Ken Cassar shared research that showed Best Buy had cut the time it takes to get product from the warehouse to customer from 6.3 days to 2.7 over the past two years. Best Buy’s improvement, he said, was consistent with a trend seen across retailing.
Amazon saw the pace of its retail growth slow to 17 percent in the quarter as third-party sales moderated and Whole Foods posted a one percent increase during the period. The company did report record profits of $3.56 billion driven by its AWS cloud business and ad sales.
- Amazon.com, Inc. Q1 2019 Results (Earnings Call Transcript) – Seeking Alpha
- What will it take for retailers to win the last-mile race for customers? – RetailWire
- Amazon’s Profit More Than Doubles on 17% Rise in Sales – The Wall Street Journal
- There Are 103 Million U.S. Amazon Prime Members: CIRP – TWICE
DISCUSSION QUESTIONS: How will Amazon’s guarantee of one-day shipping for Prime memberships affect the expectations that consumers have about deliveries of online orders? What will this mean for Amazon and its competitors?