Global, local, and hyperlocal – Amazon has slowly but surely been establishing itself in the delivery space. One of its most ambitious projects is same-day delivery called “Prime Now” which provides local delivery as quickly as one-hour. Until now, the service was only available on the Prime Now mobile applications, which was not popular among the Prime paying users. According to Bloomberg, this spring it will be available on their web site, so it can be accessed via desktop.
As part of the launch plan, Amazon is prospecting potential marketing partners to pay up to half a million dollars for ad space when they launch, on the assumption that it will bring huge traffic – they are betting that Prime Now same day delivery via the website to be a smashing success.
This move is right in line with a story we covered previously regarding leaked documents from Amazon about “Operation Dragon Boat” which stated that the company plans on becoming a full fledged shipping business.
Amazon realizes that in an on-demand world, they need to manage not only global shipping, but local as well. As the zeitgeist moves towards on-demand/same-day, being able to provide this kind of service will be what makes or breaks any online retailer.
The Prime Now service has only been available in select cities – New York, Chicago and around 20 other cities in the US and around the world – but it seems that it will now be expanded to further cities.
Amazon Prime Now delivers items from Amazon’s warehouses, as well as local restaurants and groceries, such as D’Agostino in New York.
The cost of shipping in 2015 for Amazon was $5 billion, which goes in line with the trend of fulfillment being their highest expenditure. In fact, $5 billion is the highest annual shipping cost the company has ever seen. It’s for this reason, probably, that Amazon invested in owning the entire supply chain, including the purchase of a shipping company and cargo planes in the last few months.
Same-day delivery is an expensive feat, and many retailers have not yet taken the plunge. Amazon, however, clearly sees where the market is going and is taking the risk. And why shouldn’t they? The company has already built one of the most efficient operations in history.
While the cost to Amazon may be high, it is offset by the fact that this service will only be available to Amazon Prime customers, who already pay a monthly fee for membership. As always, Amazon sees the writing on the wall. In fact, 75% of retailers plan on offering same-day delivery in the next 2 years.
So how will Amazon’s expansion of Prime Now impact retail as a whole, and what will be their next step in the evolution of their shipping strategy?
We are still early on in 2016, my guess is that by the time 2017 comes around we will have seen more announcements like this from Amazon.