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Amazon Same-Day Delivery? Stores Not The Target

Written by Evan Schuman
July 18th, 2012

This week saw a wide range of media reports stating that Amazon, thanks to its recent state tax deals, may offer shoppers same-day delivery and that this, as one Slate headline said, “will destroy local retail.” Just a few problems with all of this.

First, the tax deals are years in the making and have little to do with this. Second, no, Amazon offering same-day delivery won’t mean the end for almost any retailers. How do we know? That’s the third point: Amazon has already been delivering products same day—for more than three years.

There are a lot of interesting twists involved in this same-day delivery strategy—including some unusual ways one Amazon insider said the master site could deploy it—but there’s a bizarre trend here. Amazon seems to be the retail bogeyman, blamed for a wide range of self-inflicted brick-and-mortar issues, whether it’s the LSD-level of twisted reality in showrooming paranoia, the “Amazon is going to start opening physical stores everywhere” strangeness from Amazon Lockers or the general craziness about various Amazon Patents, including one for gift acceptance and a deservedly eye-brow-raising one on religion-guessing. And let’s not forget the Kiva deal, where some physical chains worried about warehouse robots phoning home to the Amazon mothership.

Interestingly enough, Amazon is quite likely the retailer that focuses less on its competition, which is annoyingly leader-like of it. In short, the likes of Walmart, Target, Walgreens and Macy’s strategically react a lot more to Amazon than Amazon does to them.

I only mention that to put into context the strange Armageddon-like reaction to the possibility of Amazon doing same-day shipments, which is so terrifying and destructive a move that it’s been happening for three years and few noticed.

Back in 2009, Amazon quietly—never announcing it—started offering same-day shipments to urban shoppers who used the $79/year Amazon Prime service. Amazon has been periodically adding new cities and, today, same-day delivery is offered to shoppers in 10 metro areas: Baltimore, Boston, Chicago, Indianapolis, Las Vegas, New York, Philadelphia, Phoenix, Seattle and Washington, D.C. Those Amazon Prime customers—who get two-day delivery for free and overnight delivery for $3.99—are charged $8.99 for same-day delivery (if it’s a giftcard being delivered, it’s only $3.99).

The service comes with some key limitations. First, not all products are eligible for same-day delivery. And the cut-off times are pretty severe.

The article that started this editorial flurry was a Financial Times piece that ran July 10. That story set the tone, arguing that same-day delivery from Amazon “will erode one of the last advantages of the physical store: instant gratification. If someone needs a pack of nappies, a mobile phone charger or bottle of cough medicine this evening, the only way to get them immediately is to go to a local store such as Walmart, Best Buy or Target, which all helped fund the anti-Amazon lobbying. But if Amazon can deliver to work or home in three or four hours—and at little or no shipping cost to the consumer—then why bother with the store?”

Contrast that with the Amazon same-day delivery reality. In Chicago and Indianapolis, to get same-day delivery orders must be placed by 7:00 AM and they are not promised to arrive before 8:00 PM. So much for instant gratification and having no incentive to go to a brick-and-mortar when you run out of nappies (a.k.a., diapers).


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2 Comments | Read Amazon Same-Day Delivery? Stores Not The Target

  1. Scott Says:

    I am pretty sure that is a new focus for Amazon, and I would think the implications for local stores may be real. You would not get the touch/feel or the absolute instant gratification, but for the right price reduction – it would surely be pretty attractive to many people. A real stretch thought might be Amazon opening tiny catalog stores where people can browse merchandise on nice Amazon computers and displays, pay for their merchandise via PayPal Here and then expect their product in a few hours. Real estate costs would be fairly low, but they could drive foot traffic in major malls or urban shopping districts into their stores.

  2. EL Says:

    If AMZN allocates inventory across its distribution network using the 80/20 rule – that is 80 of the stuff that sells is 20 of your owned SKUs, this will absolutely hurt physical retail, especially if they focus allocation on dry goods and diapers (you know, stuff that costs a lot to ship cross country?)

    The beauty of this shift to same day fulfillment is that AMZN doesn’t have to go all-in for its core businesses (books and media) because those have shifted to digital.

    Yes, this will squeeze other etailers, but the true target is big box retail. All of them.

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