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Amazon has announced its intention to turn its Prime free two-day shipping into free one-day shipping in the US, and it’s earmarked $US800 million to invest in this initiative in Q2.
This sounds like a serious undertaking given the speed and efficiency it requires, but it may not be so difficult since Amazon is already able to offer next- and same-day delivery to 72% of the US population, according to a report from RBC Capital Markets cited by CNBC.
Here’s what it means: Amazon’s existing logistics capabilities may allow it to introduce free one-day shipping for Prime subscribers quickly and without much more than its planned $US800 million investment.
- Because it can already reach 72% of the US population, Amazon has a strong logistics foundation to grow one-day delivery from. Amazon can reportedly provide same- and next-day delivery to much of the East Coast, Texas, and more, so it’s already shown the ability to make one-day delivery a reality across large areas. And by extending its delivery networks or replicating its efforts in other markets, Amazon may be able to cover the rest of the US without much trouble.
- Expanding one-day delivery may be easy for Amazon since it probably won’t have to make changes to its fulfillment centres. Rather than altering fulfillment centres to make one-day shipping possible, Amazon will make changes to middle- and last-mile delivery processes, according to Retail Dive. These changes – which include building its own delivery fleet – should make the expansion simpler and more affordable than it would be if fulfillment centres needed to be built or restructured.
The bigger picture: The retail industry has no time to waste when it comes to matching Amazon’s delivery speed.
Retailers may need to rely on stores to quickly match Amazon’s capabilities.Most retailers’ fulfillment networks can’t hold a candle to Amazon’s. But retailers with hundreds or thousands of stores may be able to provide fast delivery speeds without too much effort, and it’s clear they need to begin investing in such initiatives immediately.
What Pros Are Saying: We conducted a small, informal survey of e-commerce pros on how the retail industry will react to Amazon’s one-day shipping plans. Here’s a sample of their thoughts:
- “Amazon created the original urgency problem with Prime Two-Day, and now they’re doing it again with One-Day. But if anyone thinks the story is still about urgency, they’re missing the real headline. It’s more than urgency, it’s about optionality. You can have different delivery expectations every time you hit checkout, but if retailers can’t give you that choice, you can bet Amazon will.” –Marc Gorlin, Roadie CEO, founder
- “Customer expectations are rising every day, so one-day delivery is not that groundbreaking in terms of expectations. Some retailers already provide one-day shipping, or even faster, but unlike Amazon, many of them charge for it. Retailers need to remove friction out of the purchasing experience by eliminating the burden of shipping fees for faster delivery. This will be the new expectation soon, if not already, so companies need to get ahead of this trend. Amazon, in its traditional way, is staying ahead of customers’ expectations, and in the process, setting up the new normal for other retailers to play catchup.” –Arpit Jain, Nerdery vice president of cross-functional delivery and capabilities
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