Amazon’s recent announcement of one-day shipping for its Prime members will put new pressure on retailers and direct sellers to meet shoppers’ delivery expectations.
The e-commerce company announced last Thursday that it will be making one-day shipping the standard for all Amazon Prime members, expecting to spend $800 million during the second quarter of this year to improve its warehouses and delivery infrastructures to make this possible. With the announcement, retailer Target shares closed Friday down almost 6 percent and Walmart shares tumbled 2 percent. Amazon’s stock closed the day up 2.5 percent.
With more than 100 million paying Prime members across the country, it’s estimated Amazon reaches more than 50 percent of U.S. households today and is growing. The impact of its move toward an even speedier shipping option is going to be substantial. This means more and more consumers are going to get used to having whatever they order on the internet show up at their doorsteps in 24 hours or less.
Already, nearly 40% of consumers want online orders to arrive in two days, free of charge, according to a survey by the National Retail Federation of about 3,000 U.S. adults from Oct. 23 through Nov. 30 of last year. Twenty-nine percent of people said they didn’t complete a purchase online after finding out two-day shipping wasn’t free.
“Just as Amazon did with Prime 2-day delivery 14 years ago, we see a broad-based 1-day shipping offering increasing consumer e-commerce expectations (essentially more people will get used to 1 day vs. 2 day shipping … and grow to expect 1-day shipping),” Morgan Stanley analyst Brian Nowak said in a research note. “This, in our view, is likely to cause other brands, manufacturers, retailers and logistics companies to have to invest more aggressively to compete with Amazon and its differentiated delivery,” he added. “The cost to compete within e-commerce continues to rise.”
Walmart, Target and many of Amazon’s other rivals like Best Buy, Kohl’s and Home Depot are increasingly touting their buy online, pick up in store options. And that’s something Amazon hasn’t been able to match at scale, without a far-reaching network of bricks-and-mortar locations like these other companies.
There’s evidence more and more shoppers are turning to this option, too.
Target this past holiday season said the amount of online orders it fulfilled through either in-store pickup or its curbside pickup service was up 60 percent from a year ago and accounted for roughly 25 percent of online sales during November and December.
A recent April survey from Coresight Research found 46 percent of online shoppers in the U.S. had collected at least one of their online orders from a bricks-and-mortar store within the past 12 months. Coresight said Walmart and Target are the two most popular U.S. retailers for buying online and picking up in store, followed by Best Buy and Home Depot.