In the attempt to broaden its market share, Amazon brings a new service to its Prime members: same day delivery for orders placed until noon. The new service was launched last Thursday, on May 28, and currently includes 14 metropolitan areas, among which Los Angeles, New York, Phoenix, the San Francisco Bay area, Philadelphia and Atlanta.
The same-day delivery service stems from the previously launched Prime Now service (1-hour delivery at a cost of $7.99 for a selection of items) and attempts to emulate the instant gratification feeling of purchases made from brick and mortar stores.
Millions of Products, Same Day Delivery, A Logistic Nightmare?
There are industry skeptics who do not believe that the new service is sustainable over time and for this reason may be limited to the metropolitan areas included in the pilot stage. In turn, this could cause dissatisfaction to other Prime members, who will find themselves discriminated by the restriction.
On another note, the same-day delivery service poses a big challenge to physical stores. If people can order online and receive the products the same day, how will they be motivated to actually travel to a brick and mortar store for shopping? The only answer to this conundrum is that physical stores will up their customer assistance services and add significant value to the shopping experience – or they will be forced to close down.
Is It Financially Sustainable?
Another issue related to Amazon’s same-day delivery service is the rate of financial return. Prime members pay a $99 fee per year. The minimum amount of purchases for same day delivery eligibility is $35. Is it enough to cover the logistic costs?
Some analysts believe that it is not, even considering the fact that the service is available to non-Prime clients for an extra fee starting from $9.98. In the opinion of Robert Mittelstadt, the former dean of Arizona State University’s W.P. Carey School of Business,
“At some point they have to cover the costs of the service […] once they start doing that, people are going to say that they really need something within two hours.”
However, Amazon has no option than to introduce as many facilities as possible to Prime customers in order to increase brand loyalty and sales. Although it generates a huge amount of sales, the actual revenues generated by the company is still insignificant compared to other top retailers on the market.
Image Source: Amazon delivery