The last hurdle remaining for Amazon.com (NASDAQ:AMZN) as it takes on traditional brick and mortar retailers is immediacy -- the idea that you can look at an item, buy it right away, and take it home with you.
That has been strictly a feature available to traditional stores, but the online company has made continued inroads when it comes to getting products into customers' hands faster. First it began offering two-day delivery to both members of its Prime subscription service and orders over a certain dollar value. After that the company began enhancing its delivery offerings adding one-day shipment for a fee, rolling out Sunday delivery, and even testing same-day delivery in very limited markets.
Now, While Amazon still can't put an item in your hands with the same immediacy as a store it has taken a big step to cut delivery time in a growing swatch of the country. No, it hasn't quite yet rolled out drones and it has not figured out how to teleport items.
What the retailer has done is greatly improve and expand its same-day delivery service. Same-day is not the same as immediate, but it's a lot closer and perhaps it's enough to get people to forgo buying at a physical store.
What Amazon has done
The company had previously offered same-day delivery on a very limited geographic basis to Prime members who paid $5.99 for the privilege. Amazon's new same-day offer extends the delivery area to 14 major metropolitan areas covering hundreds of cities and towns. (To check if you live in one enter your zip code here. The company gave an overview of the service on its website.
We've made it simple to find the stuff that you want, and get it on your doorstep before bedtime. Just look for the Prime FREE Same-Day logo on eligible items while shopping, or choose it in the filter menu to see all the items you can get tonight. Order by noon, and you'll get it by 9pm, seven days a week. Or order later in the day with Prime FREE One-Day to get free delivery tomorrow.
If the order is over $35 it's now free. Orders under $35 are $5.99 for Prime members, and start at $9.98 for non-members. About a million items are eligible in the program. The service uses the company's own delivery personnel where applicable, but is mostly relying on third-party carriers.It operates seven days a week.
Why is Amazon doing this?
It's all about convenience. Amazon often has lower prices than brick and mortar retailers, which sometimes left shoppers with the choice of paying the lowest price or having it right away. Adding same-day delivery tilts that battle in favor of the online retailer.
"My focus is on how we can lower prices, and what can we do to make the lives of Prime customers better," said Greg Greeley, VP of Amazon Prime, told GeekWire in an interview.
How is Amazon doing this?
In a broad sense Amazon is leveraging its growing network of distribution warehouses and delivery infrastructure to facilitate the same day offering. The company also extensively uses data to predict what customers will order. In some cases, it even processes orders before the customer places it. Same-day, however, is a massive challenge and doing so for free pushes the company's capacities, but Greeley told GeekWire that the ability to make this happen comes from Amazon's constant innovation efforts.
"It leverages all the investments we've been making over the past 10 years," he said. "We continue to invest in more fulfilment centers, closer to metro areas, and invest in new supply chain software, and we've invested in more selection locally, and we've worked with lots of partners to ensure a fast accurate delivery service before 9 p.m."
Amazon has been building toward this and now it's able to leverage its shipping network and warehouses to make this offer.
Will it work?
It's hard to see why customers would not use free, same-day shipping. It should be an added draw toward attracting and retaining Prime members. It could also increase sales to those customers (who already spends more per year than non-Prime members).
The only potential negative here is cost. Amazon already operates on thin margins and same-day delivery even when perfectly executed almost certainly has to increase costs. The company has proven quite skilled at managing delivery costs effectively, but for this offer to work, it has to add volume and increase customer loyalty.
There's every reason to be believe it will do that as Amazon is removing one of the last reasons for its customers to visit an actual store.
Daniel Kline owns shares of Apple. He would use this were it available in his area. 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.