Amazon’s two-day shipping transformed the way consumers shop online – and elevated their expectations when it came to customer service and shipping with other retailers. Behemoths like Wal-Mart and Target have struggled to challenge Amazon over the years, even with deep promotions and free delivery offers. Currently, Amazon is taking another major swipe at its competitors with its Prime Now instant delivery service.
Chasing Amazon’s Market Share
Despite their best efforts to capture Amazon’s holiday market share, major retailers began to lose the 2015 Holiday Shopping Wars before anyone even thought about cracking open a can of cranberry sauce for Thanksgiving. According to early numbers, Amazon raked in nearly 40% of all retail e-commerce spending from November 1 though December 6 of 2015. During the same period in 2014, Amazon took in 37.9%. To make matters worse, it would be necessary to combine sales at Wal-Mart, Best Buy, Target, Macy’s, Home Depot and Costco to equal Amazon’s early holiday share.
How Amazon “Trained” A Legion of Loyal Customers
Amazon has had years to train customers to expect exceptional delivery. Long before Amazon Prime was rolled out, a customer merely needed make a purchase of at least $25 to receive free shipping, and while it was not two-day guaranteed service, Amazon packages had a way of arriving just a little bit faster than orders from other stores. At the time, Amazon was mocked by other retailers, saying that the losses from fast shipping would be far too much for the online store to recover.
Time showed that Amazon would have the last laugh. Shoppers became so hooked on free and expedited shipping that they became willing to pay $79 a year with Amazon to receive “free” and guaranteed two-day delivery, a price that was later increased to $99 without much blowback, despite some initial complaints. Amazon customers have come to rely on expedited shipping as a “middle ground” between waiting 5-7 days for standard shipping at other retailers or traveling to a brick-and-mortar store for instant gratification.
Amazon Prime Now: Upping The Ante
Just when you thought shipping couldn’t get much faster, Amazon began to roll out its Prime Now service to select cities around the world. Promising delivery in an hour, Prime Now is a lazy person’s dream come true, and could stand to save Christmas for last-minute shoppers around the world.
Amazon uses technology to help order pickers take the fastest path to an item when the order comes in. The order is fulfilled and sent out the door in mere minutes. Most of the hour from order to delivery is earmarked for travel time, which can be tricky in the large cities where Prime Now service is available.
To answer the travel challenge, Amazon still has its sights set on its proposed Prime Air service, where packages would be delivered straight to customers’ doors via drones. There are significant regulatory issues currently blocking Prime Air, but even if drones aren’t the answer, it is likely Amazon will find another way to eliminate shipping time and costs.
So far, Amazon Prime Now has been a success. Early predictions had the company’s profits soaring to nearly $95.5 billion before January 1st, 2016. The final numbers have not yet been released.
Other retailers have long been vexed by the “Amazon Problem,” and Prime Now is putting the online giant far ahead of the competition. However, Prime Now is limited in where it can deliver in an hour and what it can deliver in an hour. There are still plenty of gaps for innovative small and medium-sized retailers to fill. Amazon is big, but it is not the answer to every shopper’s needs. To truly compete, savvy retailers must spot those holes and come up with ways to step in where Amazon cannot.