I recently read that 29% of Amazon Prime members ordered gifts online this holiday season from Walmart. Incredible, that’s close to ⅓ of all Prime shoppers. But what I found even more interesting is that according to the same study, “Prime members were actually more likely than people who aren’t Prime members to order from Walmart (25%) and Target (12%)”.
I have been preaching the importance of Amazon to retail for quite a while. I believe that Amazon has created a unique market opportunity that should be appreciated and learned from. Their 2 smartest moves: customer experience first and then the commoditization of same-day and next-day delivery – this is the great differentiator propelling their business forward.
Today’s consumer is accustomed to seeing their uber taxi within 5 minutes of ordering, their hamburger within 30 minutes, their groceries in 2 hours, and even a big paddle boat delivered in their yard in a day. All for free. Who wouldn’t love that buying experience? It’s convenient, it’s cost-effective and it’s fast. e-Commerce customer expectations have altered our consumer habits so that today, we ask ourselves why can’t everything be delivered like that; dry cleaning, SIM cards, phone repair, auto parts, tow truck, cable guys, etc. Everything! And hence, the commoditization of same day and next day delivery.
Interestingly, we see that when our customers, traditionally unassociated with marketplaces and speedy delivery models, decide to commoditize same day and next day shipping to fulfill orders they not only experience major growth but also new business models that weren’t possible before.
And, while we do see our customers thrive, many other organizations still struggle to commoditize same/next day delivery, believing they would need the same powerhouse logistical network that Amazon has spent millions to build.
This bares the questions, Why is it so hard? For one, not every company is a tech company, nor a logistics and delivery company. And, to achieve an elevated customer experience based on delivery as a commodity, is complex and requires a massive logistics network and technology investment to work in scale.
Every delivery option requires different partners, technology and processes. You would need to place your inventory close to your customers to travel fewer miles, you would need to enable your stores and warehouses with the right technologies to fulfill with speed, and you would need access to various driver fleets to enable different delivery options. And to serve all your customers with the same SLA, no matter where they are and what time of the day it is, every node of your fulfillment network must be digitized and connected to achieve the same cost-efficiency that enables Prime members free next day.
However, the commoditization of same day and next day delivery is not too far from any brand’s reach. Market trends will eventually propel brands to aggregate billions of deliveries to be fulfilled by a network of technology and logistics providers and partners to deliver at scale, in essence, commoditizing the delivery experience. And this is basic market equilibrium and I call it the Coalition Model – it’s all of us, brands, logistics companies, and technology vendors, coming together to create a real alternative to Amazon, creating a fair game again.
Fascinating times ahead of us. Enjoy the ride!