Amazon has significantly heated up the battle for retail dominance by announcing its plans to provide Prime members with free one-day delivery. In response, retail giant Walmart quickly tweeted a teaser hinting at membership-free one day shipping. As this is being written, both Target and Walmart shares are down; Amazon shares are up. While the retail giants battle it out over delivery disruption and news sites cover the story as it unfolds, most retailers are left with one vital, unanswered question:
What does this mean for everyone else?
Retailers can take heart. Amazon’s announcement has several clear takeaways, and there is a fairly wide silver lining for the rest of the market. It can even be seen as an opportunity.
1. The market is catching up.
Amazon itself is reacting to a threat. When Amazon launched Amazon Prime fourteen years ago by offering two-day delivery, few believed they would succeed. Fast forward to today, where next-day delivery has become the golden standard. This means that more and more companies have optimized their supply chain and delivery operations to make next-day deliveries possible, and ensure promised delivery times are met.
These practices are working, and retailers are narrowing the gap with Amazon. The leading North American retailers reported an average 16.6% increase in ecommerce sales in 2018, while Amazon’s Prime growth rate has slowed down during the same period, with some analysts claiming it has reached the saturation point, beyond which growth is limited.
One reason for this is rival retailers learning from Amazon by placing the customer delivery experience at the heart of their fulfillment operations, and taking advantage of ship-from-store, click-and-collect, lockers and other non-traditional delivery methods to get goods to their customers faster and at less expense.
Now that two-day delivery is no longer a unique selling point, Amazon’s slowing growth rate is ‘forcing’ the company to upgrade its already demanding delivery windows, in an attempt to regain a differentiator.
“Amazon’s market leadership is under threat, and they know it.
In a nutshell, the market is in play again. This is an encouraging thought for other retailers.
2. For consumers, it’s all about the delivery experience
You can look at Amazon’s announcement as a gift to retailers. Thanks to its unmatched control and visibility over the entire supply chain, Amazon understands the challenges of delivery speed, cost and efficiency better than almost any other retailer, so the company’s insights are invaluable.
This announcement, then, amounts to Amazon rolling out a “State of Retail Today” report showing that delivery is one of the key differentiators for customers.
“Amazon gets it: In an online world with thousands of near-identical products and near-identical sites selling them, what stands out is the post-sale customer experience.
There is no clearer way to say this. Amazon will be spending nearly $1 billion this year to beat their own existing delivery offering that is already hard for other retailers to match. Why?
Because they realize that this delivery offering is what keeps customers coming back.
Delivery optimization is not about making money from delivery; it’s about providing the most efficient delivery with the best possible customer experience at the most reasonable price point for both the retailer and the customer. And it’s all targeted at one goal – differentiation through fulfillment that drives brand loyalty – the key to success in the age of amazon.
These days, retailers who have avoided putting the customer experience at the heart of their strategy need to align their operations, and fast.
3. Retailers have room to grow
It’s important to note that Amazon announced they are accelerating a plan that was already in place. Amazon has not perfected its one-day delivery plan. In fact, it has a lengthy and expensive way to go before it gets there. This leaves room for other retailers to differentiate themselves and gain brand loyalty by perfecting their own fulfillment experiences across the last mile.
It helps that most retailers have one thing that Amazon doesn’t to a large extent: a brick-and-mortar presence. Utilizing their last-mile presence and local inventory, in combination with well-orchestrated delivery operations, retailers can provide fast deliveries and branded experiences with which even Amazon may find it hard to compete.
Doing so will not only ensure return customers; it will help brands tap into the new growth potential that the ever-growing ecommerce market is providing.
It will take Amazon a long time to be able to provide one-day delivery across the board. Now is the time to take stock of your supply chain, from the first mile to the last; adapt your delivery to a customer-centric strategy; and find ways to better control your delivery operations and data.
Interested in reading more? Get your copy of the eBook, Delivery in the Age of Amazon.