Amazon.com (NASDAQ:AMZN) has staked its fortunes on disrupting all businesses near and far, be it traditional retail, book publishing, or cloud computing.
But as the tech giant races toward same-day delivery, it's beginning to look more and more vulnerable to being disrupted itself. As traveling with the helps of apps such as Uber and Lyft becomes more popular, the next frontier in the new transportation ecosystem seems to be package delivery.
Sidecar, a ride-hailing app in competition with Uber and Lyft announced on Monday that it plans to use its fleet of cars for package delivery of items such as food and groceries, in addition to transporting customers. The company said drivers would perform package delivery in addition to picking up and dropping off passengers, thereby dramatically reducing prices and delivery times. Its website claims prices are 80% cheaper than traditional delivery services and twice as fast. After being tested in San Francisco where the company said same-day delivery now makes up 10% of all orders, the service is now available in all cities in which Sidecar already operates, and the company envisions the service making up half of its revenue by the end of the year. Eat24, an online food ordering company that's partnered with Sidecar, said the app had reduced delivery time by almost half.
Uber, the leading transportation app with a $40 billion valuation also has its eye on the delivery market, having tested deliveries in Washington, DC with an option on its app called Corner Store last summer. Uber has also employed bike messengers as couriers in Manhattan under a service called Uber Rush, as well as testing deliveries of food and groceries under pilots called UberFRESH and UberESSENTIALS. Currently, none of Uber's pilot programs have been rolled out nationally, though that appears to be the next step.
How this affects Amazon
The e-commerce giant has spent billions over the last several years building fulfillment centers in close proximity to metropolitan areas in order to speed up delivery times. The company has also invested in technology such as delivery drones, and experimented with its own messenger service in Manhattan just as Uber has done.
But with ride-hailing apps like Uber and Sidecar moving into delivery, package delivery appears to be the latest business to be democratized by the Internet. Though these services are still in their infancy, it's easy to see how they present a better valuable proposition to consumers than Amazon's more traditional delivery, especially if Sidecar's claim of lowering costs by 80% is true. In order to keep growing, Amazon needs to win the same-day delivery battle.
The battle for the last mile
In package delivery, the "last mile" is often the most problematic as normally efficient systems such as cargo shipping and freight can't carry goods all the way to the consumers' homes.
A couple of years ago, it was almost assumed that Amazon's plan to add fulfillment centers and move to same-day delivery would destroy local retailers, but that's not what's happened. Brick-and-mortar stores have found an advantage in their real estate, using ship-from-store and in-store pick-up programs, and apps like Sidecar and Uber seem to give them yet another advantage.
Meanwhile, in its quest to speed up delivery and overcome the last mile challenge, Amazon has experimented with avoiding the middleman -- FedEx and UPS -- and handling the deliveries themselves, but unlike other areas it competes in, Amazon has no advantage in doing its own deliveries.
Meanwhile Sidecar and Uber, which have thousands of drivers at the ready and the technology to maximize efficiency, do have a competitive advantage. If the new delivery services catch on, Amazon's fulfillment centers may turn into excess bricks and mortar.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, FedEx, and United Parcel Service. The Motley Fool owns shares of Amazon.com. 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.