Amazon (NASDAQ:AMZN) has been steadily working to eliminate the one advantage that physical retail stores have over an online retailer -- the ability to put goods into a consumer's hands immediately.
The company has improved its delivery times over the years. First, it made two-day shipping a standard for orders over a certain dollar amount and for its Prime members who pay $99 a year for the service. Amazon also offers overnight delivery for a fee and more recently, in certain markets, the retailer has been making same-day deliveries to customers of its grocery service.
Now Amazon has launched Prime Now, a same-day shipping service with a one-hour guarantee. At first it will only be offered in select parts of Manhattan, but in 2015 the company hopes to expand the program to other cities.
"There are times when you can't make it to the store and other times when you simply don't want to go. There are so many reasons to skip the trip and now Prime members in Manhattan can get the items they need delivered in an hour or less," said Dave Clark, Amazon's senior vice president of worldwide operations via press release.
How the service works
Manhattan, like many cities where people both work and live, has a delivery culture. Since most people don't have cars, chores that are easy in the suburbs -- such as shopping for a week's worth of groceries at at time -- are more challenging. Add in smaller living spaces and less room for storage and you get a lifestyle conducive to more shopping trips or deliveries whenever possible.
Prime Now, which requires a Prime membership, does not offer the full Amazon product offering. Instead, it focuses on a select list of "essentials." Items offered include paper towels, shampoo, books, toys, and batteries -- mostly things you want right away, but may not want to leave your apartment for.
Add in the fact that Amazon, in many cases, offers much lower prices on these basic items than a neighborhood convenience store, and it appears the company is offering a real value to its customers.
There is a catch, but it's not likely to be a deal-breaker. Prime Now offers two-hour delivery for free, but the one-hour service costs $7.99. That's a bit steep, but customers are likely to recoup a portion of the delivery cost by paying less for the delivered items.
Prime Now is available from 6 a.m. to midnight, seven days a week. The service is offered via an app on Apple iOS devices, as well as on Android phones and tablets. Prime members can now download the Prime Now app and will be notified when the service is available in their area.
Why is this important?
While offering one-hour or even same-day delivery won't be feasible in all markets, it's a valuable arrow in Amazon's quiver in major cities. It's not particularly easy in Manhattan to run out to grab a few essential items -- certainly not the way it is in the suburbs where a Target or Wal-Mart is around every corner.
By making it as simple as possible for customers to get items directly to their door -- whether through two-day shipping, one-day, same-day, or even one-hour delivery -- Amazon removes incentive for its customers to visit rival retailers. Throw in the company's expanding Sunday delivery service and the accessibility advantage physical retailers hold lessens dramatically.
Prime Now won't be a game changer on its own, but as part of an enhanced delivery strategy it's an important piece of Amazon's puzzle.
Daniel Kline owns shares of Apple. He used to live in Brooklyn in an apartment so small he had to buy items pretty much as he needed them. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.