October 16th, 2009
Amazon same day delivery squarely aimed at brick-and-mortar rivals
Amazon is using its distribution, information technology and shipping prowess to try and gain sales from brick-and-mortar retailers all the way up to Christmas.
As Amazon continues to grow its rivals won’t be Google and eBay as much as your local Wal-Mart, Target and Kohl’s. Enter Amazon’s expediting shipping efforts.
The company on Thursday said it will provide same-day delivery in seven cities—New York, Philadelphia, Boston, Baltimore, Las Vegas, Seattle and Washington D.C.—with plans to add Chicago, Indianapolis and Phoenix in the months ahead.
Amazon Prime customers will pay $5.99 per item for same-day delivery while others will pay a wide range of higher fees (rate card). This move could really help for those last minute items—Amazon says it will offer same-day shipping Christmas Eve for orders as late at 1 p.m. PST.
The rub is that Amazon’s shipping charges are steep, but it’s likely the company will lower fees over time. Goldman Sachs analyst James Mitchell noted:
We expect same-day deliveries to only moderately boost sales volumes given onerous shipping charges, but the ability to make same-day deliveries (even on December 24) should further differentiate Amazon in the eyes of consumers. Amazon may reduce same-day charges over time as its fulfillment network becomes accustomed to faster deliveries.
Indeed, if Amazon can lower fees it will be able to use shipping as a weapon to cut e-commerce “friction.” J.P. Morgan analyst Imran Khan notes:
We see the service as another step Amazon is taking to shorten customers’ waiting time between order and delivery, and to lower the frictions involved in eCommerce. When Amazon introduced Prime, it raised the order frequency for Prime shoppers—and we think the new delivery option could be one more lever for increasing order frequency.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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