The Amazon Effect of Two-Day Delivery
By Julie Eby, Brand Manager
Amazon has come a long way since its humble beginnings as an online bookstore. It’s now one of the largest companies in the world, appears to be unstoppable in its continued growth, and has even been profitable for some time — a topic investors were quite concerned about for more than a decade.
Amazon’s meteoric rise can certainly be partially attributed to its vast and unmatched product selection and continued innovation in new industries and services, but truly Amazon’s attractiveness to the consumer comes from its relentless culture of customer- obsession.
According to estimates published by Consumer Intelligence Research Partners, the number of Prime members in the U.S. has grown from 54 million to 101 million over the past three years. More importantly though, the Prime program looks to be very effective at achieving its main goal: creating loyal customers and getting them to spend a lot of money.
Prime’s appeal is no secret: free two-day shipping. And its charm has driven a new norm. Forty percent of all online shoppers, and nearly half of millennials expect free two-day delivery.
Two-day delivery is not easy. Amazon has worked with the U.S. Postal Service, DHL Express and FedEx to deliver on its promise of fast delivery. Demand is so great that the once-flagging USPS, which had been considering cutting all weekend mail deliveries, now operates on Sundays to deliver Amazon packages.
Other mass merchants are following suit. In January 2017, Walmart launched its 2-Day Shipping Program on its own products, and only a few months ago expanded the service to other marketplace sellers. Target, meanwhile, has partnered with the Internet-based personal shopping service Shipt to offer same-day delivery.
To remain competitive, companies in all industries have to rethink their supply chain – even in the home furnishings space, a category with large, bulky, expensive-to-ship items. Once, waiting a few weeks for a product to arrive was completely acceptable. But now, consumers expect more and retailers are finding a way to make it work.
Several years ago, Wayfair brilliantly launched its CastleGate program, which brought its logistics in-house to boost faster, more efficient fulfillment. Wayfair moves its highest-volume products to its own warehouses and ships directly to consumers with next-day or two-day guarantees. Wayfair is continuing to expand this program by adding fulfillment centers both domestically and internationally.
Overstock has a similar program called Supplier Oasis Fulfilment Services, or SOFS, a wholly owned subsidiary providing multi-channel fulfilment.
In the not-too-distant future, retailers will turn to automated warehouses and driverless cars to meet this need for instant consumer gratification – in a few years, even 2-Day Delivery will feel long. A focus on future capabilities for any retailer is a must, given that Amazon is hoping to take to the sky with a hijack-free drone delivery service it has already named Prime Air.
It makes sense, then, for brands to at least partially incorporate Amazon’s bar setting movements into their distribution plans. But even beyond Amazon, trends and standards are changing rapidly, which means brands also need to constantly evaluate and adapt their channel strategies to ensure they are maximizing their presence on and offline.