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Fear of Amazon Pushes Retailers to Take On Risks of Same-Day Shipping

tommccabe 14y ago
Amazon can (possibly) pull this off due to their scale and their warehouse technology. I think the other retailers that can be successful are those brick and mortar retailers with thousands of physical locations across the country (Walmart, Target, Staples, Kohl's)- imagine a reverse brick and mortar model where the customer orders from the site but it is fulfilled directly out of their local store. The luxury apparel market is going to be the next wave of retailers who explore this offering and, could be, successful with it. Shoppers who are spending hundreds and thousands of dollars online expect an elevated level of customer service- same day delivery (like Net-a-Porter offers) is the next step in this personalized service.
- storborg 14y ago
  Some numbers of this in action: http://www.reuters.com/article/2012/12/24/us-usa-retail-ecommerce-idUSBRE8BN03J20121224 http://www.reuters.com/article/2012/12/24/us-usa-retail-ecom... "292 of Macy's 800 stores have been doing double-duty as mini-fulfillment centers that assemble, pack and ship online orders" "since 40 percent of bestbuy.com orders are now picked up."
  - FireBeyond 14y ago
    Best Buy, when I need something "now", though it has gotten better, has had a nasty, at times outright dishonest history of issues relating to its online experience - at one time they were caught having different pricing when the site was browsed in store ("But online it was $x-20" "Sorry, sir, I'm looking at it here on our website and it's $x" "But I can pull it up on my cellphone and see that it says $x-20")... So I don't support them, but if I need something, ordering for pickup a) ensures the price, b) minimizes upsell, and c) ensures stock (I'm sick, too, of times when there was a display model out but nothing in stock).
    - zwily 14y ago
      Heh, I wish it "ensured stock". Twice now I've ordered for pickup, gotten the email telling me it's ready to be picked up, and gone to the store only to be told that they don't actually have it. (?!?!) It made me swear off ever shopping at Best Buy again, but I broke that promise when they started price-matching Amazon prices...
      - timjahn 14y ago
        "but I broke that promise when they started price-matching Amazon prices..." I've yet to try them on this. I'm curious - do they actually match Amazon every time, no matter what? When they first announced this, the press releases seemed to indicate that each store could independently decide not to honor on a per-situation basis.
        zwily 14y ago
        They have the 3 times I've tried, and one of them was about 35% off of a $400 item. I think it ends in February.
prostoalex 14y ago
Looks like retailers who kept complaining about Amazon's sales tax advantage got what they were asking for - local nexus.
pazimzadeh 14y ago
Isn't this what competition is all about?
tptacek 14y ago
This is a bell Matt Yglesias at Slate has been ringing for the last year; specifically, Amazon is financed by the public markets to an extent no other retailer is or can be (look at their P/E), enabling them to compete at a loss against established businesses. People like Charlie Stross ding Amazon for its predatory marketing in the media industry, assuming that it's part of a plot to dominate the market and collect rents. Yglesias has an even more sinister theory: that there's no real rhyme or reason to Amazon's strategy, that it's acting on the assumption that having beaten the market into submission there will somehow, in some way, be a way for Amazon to capitalize on the resulting chaos --- but that it's equally likely that Amazon will itself crater, having destroyed everyone's profits in the process. I like Amazon (we're Prime subscribers), but I have to bear that in mind every time I prepare myself to complain about Wal Mart (which I do not like). In any case: it's close to impossible for a small-scale retailer to compete with Amazon once Amazon decides it's competing.
- tedunangst 14y ago
  Most of amazon's business is profitable last I checked. The losses come from write downs and investments, but they aren't strictly operating in the red. The business they've built right now is sustainable just as it is.
  - tptacek 14y ago
    Sure; the issue is that the outsize valuation they receive in the market gives them enormous leverage to compete at (or I suppose near) a loss; they simply have more opportunities to buy market share than other companies. As Yglesias would have it, it's as if the public markets are paying for Amazon to buy up that market share even without any coherent plan for how to profit from it. The issue Yglesias seems to have with that is that the market can profit from volatility even if, over the long term, Amazon's actions are a net negative for the larger economy, and would fail without their intervention. I don't know how much of that I buy. I'm just pointing out the hugely privileged position Amazon has.
    - recuter 14y ago
cm2012 14y ago
We sell on Amazon, eBay, Sears, buy.com and newegg, and have been almost dounling our sales year over year. Weve learned this year that the shipping cost advantage of fulfilled by Amazon is just insane - and we already get significant UPS discounts.
frozenport 14y ago
I wonder if we will see Amazon as a competitor to FedEx, UPS, USPS, DHL?
robryan 14y ago
I think at the moment you can probably charge enough to at least break even on same day. As the article says most people don't need it so those that really do will probably pay a premium or depending on the item will go to the store. Prime with amazon is pretty much next day/ 2 day shipping on everything? Which is likely already very fast for most people an most purchases.
pclark 14y ago
Tired. Cold. Sick. Not yet unpacked. Apartment barren of foods. I fire up Instacart – for the first time ever – and order groceries to make a stew. An hour later, with free delivery, the foods arrived. Living in the future.
- edwardy20 14y ago
  Not that impressive (to me at least). Food delivery has been around since forever- pizza gets to my house in 10 minutes. I don't see why groceries should be different.
  - wlesieutre 14y ago
    Pizza places have maybe 20 ingredients in stock that all get used at a pretty predictable rate. Keeping something like a much larger selection of fruits available and fresh when you can't freeze them is a somewhat harder problem.
    - sksksk 14y ago
      Does Walmart or Target not deliver? In the UK all the large supermarkets (Tesco, Sainsbury's, M&S, Asda) let you order online and deliver to your house. They actually just get someone to go round a supermarket and pick the stuff off the shelves.
      - ig1 14y ago
        Online grocery shopping is more developed in the UK than any other major market. A large part of it is the London effect where you have a large number of middle-class shoppers who don't have cars in close proximity to each other, that makes the economics vastly better for the supermarkets.
        dalke 14y ago
        Perhaps, though I know Oxford also has home delivery so it's not just London. I've not understood how Oxford could have it but San Francisco doesn't.
2pasc 14y ago
I have experienced myself different types of offerings from different startups/Companies (ebay now, Get it Now, Instacart, etc...) and I would say the following: - For groceries, it is really awesome. Instacart prices are 10-15% above Safeway prices, but their customers don't care on average, and that's how they make money. Delivery fees are a necessary evil. - For premium pizza, "get it now" is really great, but their business model is not sustainable: I never paid for delivery, and they only charge 5% out of which they pay 2.5% for CC processing. The fact that they want to scale now and expand to further categories without having nailed their primary suppliers (fancy restaurants that do take out but don't deliver) seems crazy to me. - For other types of goods, one hour delivery is a bit too much, and you feel bad the first time. But then, hell it is practical, and in many ways it seems much more relevant and ecological that having an item shipped from a random warehouse in the middle of the country, boxed specifically for me, etc...Same day/next day would do in 99% of the cases though.

Amazon can (possibly) pull this off due to their scale and their warehouse technology. I think the other retailers that can be successful are those brick and mortar retailers with thousands of physical locations across the country (Walmart, Target, Staples, Kohl's)- imagine a reverse brick and mortar model where the customer orders from the site but it is fulfilled directly out of their local store. The luxury apparel market is going to be the next wave of retailers who explore this offering and, could be, successful with it. Shoppers who are spending hundreds and thousands of dollars online expect an elevated level of customer service- same day delivery (like Net-a-Porter offers) is the next step in this personalized service.

storborg 14y ago
Some numbers of this in action: http://www.reuters.com/article/2012/12/24/us-usa-retail-ecommerce-idUSBRE8BN03J20121224 http://www.reuters.com/article/2012/12/24/us-usa-retail-ecom... "292 of Macy's 800 stores have been doing double-duty as mini-fulfillment centers that assemble, pack and ship online orders" "since 40 percent of bestbuy.com orders are now picked up."
- FireBeyond 14y ago
  Best Buy, when I need something "now", though it has gotten better, has had a nasty, at times outright dishonest history of issues relating to its online experience - at one time they were caught having different pricing when the site was browsed in store ("But online it was $x-20" "Sorry, sir, I'm looking at it here on our website and it's $x" "But I can pull it up on my cellphone and see that it says $x-20")... So I don't support them, but if I need something, ordering for pickup a) ensures the price, b) minimizes upsell, and c) ensures stock (I'm sick, too, of times when there was a display model out but nothing in stock).
  - zwily 14y ago
    Heh, I wish it "ensured stock". Twice now I've ordered for pickup, gotten the email telling me it's ready to be picked up, and gone to the store only to be told that they don't actually have it. (?!?!) It made me swear off ever shopping at Best Buy again, but I broke that promise when they started price-matching Amazon prices...
    - timjahn 14y ago
      "but I broke that promise when they started price-matching Amazon prices..." I've yet to try them on this. I'm curious - do they actually match Amazon every time, no matter what? When they first announced this, the press releases seemed to indicate that each store could independently decide not to honor on a per-situation basis.
      - zwily 14y ago
        They have the 3 times I've tried, and one of them was about 35% off of a $400 item. I think it ends in February.

prostoalex 14y ago

Looks like retailers who kept complaining about Amazon's sales tax advantage got what they were asking for - local nexus.

pazimzadeh 14y ago

Isn't this what competition is all about?

tptacek 14y ago

This is a bell Matt Yglesias at Slate has been ringing for the last year; specifically, Amazon is financed by the public markets to an extent no other retailer is or can be (look at their P/E), enabling them to compete at a loss against established businesses. People like Charlie Stross ding Amazon for its predatory marketing in the media industry, assuming that it's part of a plot to dominate the market and collect rents. Yglesias has an even more sinister theory: that there's no real rhyme or reason to Amazon's strategy, that it's acting on the assumption that having beaten the market into submission there will somehow, in some way, be a way for Amazon to capitalize on the resulting chaos --- but that it's equally likely that Amazon will itself crater, having destroyed everyone's profits in the process. I like Amazon (we're Prime subscribers), but I have to bear that in mind every time I prepare myself to complain about Wal Mart (which I do not like). In any case: it's close to impossible for a small-scale retailer to compete with Amazon once Amazon decides it's competing.

tedunangst 14y ago
Most of amazon's business is profitable last I checked. The losses come from write downs and investments, but they aren't strictly operating in the red. The business they've built right now is sustainable just as it is.
- tptacek 14y ago
  Sure; the issue is that the outsize valuation they receive in the market gives them enormous leverage to compete at (or I suppose near) a loss; they simply have more opportunities to buy market share than other companies. As Yglesias would have it, it's as if the public markets are paying for Amazon to buy up that market share even without any coherent plan for how to profit from it. The issue Yglesias seems to have with that is that the market can profit from volatility even if, over the long term, Amazon's actions are a net negative for the larger economy, and would fail without their intervention. I don't know how much of that I buy. I'm just pointing out the hugely privileged position Amazon has.
  - recuter 14y ago

cm2012 14y ago

We sell on Amazon, eBay, Sears, buy.com and newegg, and have been almost dounling our sales year over year. Weve learned this year that the shipping cost advantage of fulfilled by Amazon is just insane - and we already get significant UPS discounts.

frozenport 14y ago

I wonder if we will see Amazon as a competitor to FedEx, UPS, USPS, DHL?

robryan 14y ago

I think at the moment you can probably charge enough to at least break even on same day. As the article says most people don't need it so those that really do will probably pay a premium or depending on the item will go to the store. Prime with amazon is pretty much next day/ 2 day shipping on everything? Which is likely already very fast for most people an most purchases.

pclark 14y ago

Tired. Cold. Sick. Not yet unpacked. Apartment barren of foods. I fire up Instacart – for the first time ever – and order groceries to make a stew. An hour later, with free delivery, the foods arrived. Living in the future.

edwardy20 14y ago
Not that impressive (to me at least). Food delivery has been around since forever- pizza gets to my house in 10 minutes. I don't see why groceries should be different.
- wlesieutre 14y ago
  Pizza places have maybe 20 ingredients in stock that all get used at a pretty predictable rate. Keeping something like a much larger selection of fruits available and fresh when you can't freeze them is a somewhat harder problem.
  - sksksk 14y ago
    Does Walmart or Target not deliver? In the UK all the large supermarkets (Tesco, Sainsbury's, M&S, Asda) let you order online and deliver to your house. They actually just get someone to go round a supermarket and pick the stuff off the shelves.
    - ig1 14y ago
      Online grocery shopping is more developed in the UK than any other major market. A large part of it is the London effect where you have a large number of middle-class shoppers who don't have cars in close proximity to each other, that makes the economics vastly better for the supermarkets.
      - dalke 14y ago
        Perhaps, though I know Oxford also has home delivery so it's not just London. I've not understood how Oxford could have it but San Francisco doesn't.

2pasc 14y ago

I have experienced myself different types of offerings from different startups/Companies (ebay now, Get it Now, Instacart, etc...) and I would say the following: - For groceries, it is really awesome. Instacart prices are 10-15% above Safeway prices, but their customers don't care on average, and that's how they make money. Delivery fees are a necessary evil. - For premium pizza, "get it now" is really great, but their business model is not sustainable: I never paid for delivery, and they only charge 5% out of which they pay 2.5% for CC processing. The fact that they want to scale now and expand to further categories without having nailed their primary suppliers (fancy restaurants that do take out but don't deliver) seems crazy to me. - For other types of goods, one hour delivery is a bit too much, and you feel bad the first time. But then, hell it is practical, and in many ways it seems much more relevant and ecological that having an item shipped from a random warehouse in the middle of the country, boxed specifically for me, etc...Same day/next day would do in 99% of the cases though.