Amazon looks to reinvent same day delivery for retailers
By Dan Boaz
To suggest that Amazon are using 2015 to make bold changes to the same day delivery markets for retailers both online and offline would be akin to saying that the Sahara has a lot of sand. In the latest step, Amazon is seeking to reinvent the concept of same day delivery by offering it for free to hundreds of thousands of customers so long as they make a purchase of significant size.
By doing so Amazon are taking delivery costs away from the realm of a profit/loss element to their business model but instead offering it as a value added service to encourage customers to spend more and in greater frequency. It is, by all accounts, a calculated risk but one that firmly raises the stakes for other retailers if they wish to go toe-to-toe with the online giant.
Amazon.com Inc said will offer limited free same-day delivery under its Prime shipping service and also plan to expand the service to San Diego and Tampa Bay bringing their roster of cities ever closer to twenty. For Prime members, it takes their existing free shipping offer which was normally next day or at worst two days into a same day option if they order in the morning. Amazon seems to be both responding to ambitious new same day delivery plans by Walmart in addition to responding to numerous surveys that indicate free shipping is the leading 'want' for online shoppers. Amazon are building the hype by saying that over a million items are now available for free shipping, but naturally there are some other factors built in.
To qualify for the free shipping offer, an order for Prime Free Same-Day Delivery has to be over $35. Even then, delivery charges for orders under $35 will cost just $5.99 for Prime members, and rates begin at $9.98 for non-members. The delivery window for all promotions shows that an order must be made by noon with the promise of a same day delivery by 9 p.m. The strategy also seems to suggest that any customer who experiences same day services who isn't currently a Prime member will want to sign up soon afterwards.
Delivery volumes are sure to spike in the sixteen markets where Amazon will offer the service but the logic suggests that such a high ratio of customers will fill their basket beyond the $35 minimum purchase threshold that they see gains can be had. Prime membership continues to skyrocket at Amazon with a 50 percent increase in membership reported last year.
The gamble appears to be a calculated one and what is certain that it changes the playing field for retail same day delivery services to a huge extent and perhaps permanently. It almost goes without saying that the responses from Walmart, Target, Google and eBay are all likely to be just around the corner.
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