Amazon (NASDAQ: AMZN ) wants to take even more business from regular stores and part of its plan involves offering delivery so convenient that it eliminates the main advantages traditional retailers have -- stocked shelves and proximity to customers.
To accomplish this the company is pursuing everything from drones to building out its own fleet of trucks to offer same-day delivery. One approach has been its deal with the U.S. Postal Service to offer Sunday delivery in New York and Los Angeles. At the launch an Amazon spokesperson spelled out the logic behind it to USA Today.
"The three big pieces of growth for us are selection, lower prices, and speed," Dave Clark, VP of worldwide operations and customer service, told the newspaper. "Adding an additional day is all about delivery speed. An Amazon customer can order a backpack and a Kindle for their child and be packing it up on Sunday for school on Monday."
The program started last November and according to Amazon it has been successful -- the company said in a release that it has delivered millions of packages on Sunday. Because of that success Amazon and the USPS are expanding Sunday delivery to 15 additional cities -- Austin, Texas; Cincinnati; College Station, Texas; Columbus, Ohio; Dallas; Houston; Indianapolis; Lexington, Kent.; Louisville, Kent.; New Orleans; Oklahoma City; Philadelphia; San Antonio; Shreveport, La.; and Waco, Texas.
Amazon does not charge extra for Sunday delivery. Members of its Prime service, who get free two-day delivery on millions of items, can order on a Friday for Sunday delivery if they live in an area covered by the service. Non-Prime users in those cities will also receive Sunday deliveries either by paying Amazon's charge for two-day delivery and ordering on a Friday or by random chance if a customer spends more than $35 on eligible items, which come with free five- to eight-day shipping.
Why is Amazon doing this?
People shop on the weekends because they're not working and have to stock up for the week. Amazon is betting on the idea that people want to replenish needed supplies over the weekend but that physically going to a store is not necessarily on the top of their to-do list.
"So far, the most common items delivered on Sunday include baby supplies such as newborn apparel, books, and toys—Sunday delivery is clearly crossing errands off the weekend to-do list," said Mike Roth, Amazon's VP of North America operations. "We know our Amazon customers love the convenience of everyday delivery, and we're excited to be offering Sunday delivery in more cities across the U.S."
Sunday delivery isn't a gimmick, it's a step in the process toward Amazon becoming a seven day a week company that's as close as possible to the convenience of going to a store without having to leave your house. To make customers think Amazon first and physical stores second, the company needs to make it as easy as possible for as much of its audience -- specifically Prime customers -- to be able to buy what they want and have it delivered when they want it.
How big is the potential market?
Amazon does not literally sell every item considered a retail sale by the Commerce Department (the site has yet to figure out how to sell gasoline), but it offers tens of millions of items and competes with nearly every retailer from clothing stores and electronics chains to supermarkets and niche retailers.
In March the Commerce Department reported United States retail sales of $386.6 billion. If Amazon can make its users see it as a viable alternative for everyday shopping it can make a play for a large portion of that total market, which dwarfs the current online retail sales total.
Amazon's 2013 e-commerce sales totaled more than those of the nine other largest U.S. merchants combined, according to data from Internet Retailer, an e-commerce research firm. The company had $67.9 million sales -- $49.6 billion more than second place, Apple (NASDAQ: AAPL ) , which has $18.3 billion in sales. Wal-Mart and Staples came in third and fourth.
Sunday is just a piece of the puzzle
Sunday delivery is only a small part of Amazon's overall delivery plan. It's an arrow in an ever-expanding quiver but it's an important one if the company can make it available to a large percentage of its valuable Prime customers. If that happens the entire Prime buying experience becomes more fluid -- order on any day and have your stuff two days later. That should lead to Prime customers spending more and they already spend more than twice as much -- $1,340 per year -- than non-Prime members using Amazon, according to the research by Consumer Intelligence Research Partners.
Amazon is doing everything it can to make its customers want to buy more from the retailer. Whether it's the company's Dash shopping wand, which allows customers of its grocery service Amazon Fresh to easily fill their virtual baskets, allowing customers to order via Twitter (NYSE: TWTR) hashtags, or improved delivery, it's all about keeping loyal customer out of stores.
Sunday delivery is part of that strategy and it should work -- not because people were clamoring for it, but because it removes a reason to leave the house to buy something. In markets where Amazon can offer a menu that includes same-day delivery (for a price) and free two-day delivery seven days a week for Prime customers, it becomes an even more formidable threat to traditional brick and mortar stores.
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