Target and Walmart have changed the retail game for Amazon. They have merged on-line and off-line sales, speeding up delivery time.
That’s according to Stanley Philipose 1st, author of the book Retail Apocalypse; The Death of Malls, Retailers, & Jobs.
“Amazon made 2-day delivery table stakes for e-commerce,” he says. “Retail giants such as Walmart and Target have caught up and countered by turning stores into fulfillment centers, offering customers next day or even same day pick-up and delivery options. Amazon knows that speed is as important as pricing to consumers, so it is investing heavily to shrink that window faster than the competition in order to stay ahead.”
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Retail giants Amazon, Walmart, and Target are caught in an ‘epic’ war for same day delivery that has just begun.
Same-day delivery is a new hot trend in retailing these days, according to a recent Elastic Path report, which finds that 75% of consumers expect, in the next 12 months, for all brands to offer same-day delivery.
But at the same time, 72% expect curbside pickup in the same time frame.
“Same Day Delivery options are fast becoming the norm with customers expecting a convenient and immediate experience,” says Mousumi Behari, Digital Strategy Practice Lead at Avionos. “We are seeing that customers don’t mind paying extra for this convenience and it’s allowing retailers to charge more for this premium delivery service.”
That’s especially the case for groceries, where freshness is a key attribute of the product.
“At the moment, grocery seems to be at the heart of customers’ needs for same day delivery,” says Behari. “With the highly perishable nature of food, retailers are having to come up with savvy options that meet the customers’ expectations, but are also financially feasible. This includes everything from the appropriate selection of foods to keep items in a refrigerated space to finally timeliness and customer satisfaction in the actual delivery.”
Who will win? It’s still too early to say. Each side has its own “ammunition” to fight the war.
On the one side, Amazon has fulfillment centers and robotics.
“Amazon has a massive lead on fulfillment with an extensive build out of their hyper-local distribution centers and an ecosystem of commercial and private contract drivers,” says Darin Archer, Chief Strategy Officer at Elastic Path. “They also have Amazon Robotics, whereas others attempting to use traditional warehouse methods will simply not be able to keep up.”
Nonetheless, this head start is extremely costly, adds Archer, cutting into company’s bottom line and costing Amazon “more than expected. Amazon itself has to keep up with the expectations they’ve created for customers, but it will be costly.”
The company’s recent financial report attests to the heavy cost of creating an infrastructure to keep up with same day delivery. This week, Amazon reported a plunge in its earnings due to heavy investments in shipping and fulfilling.
On the other side, Walmart and Target have extensive brick-and-mortar neighborhood stores.
“Target and Walmart will be able to tackle the problem from a different angle and have the advantage of leveraging their physical footprints to cut down on the challenges of last-mile fulfillment,” says Archer. “However, it will be costly for them to make the same investments in delivery speed that Amazon has made, and they don’t have the advantage of shareholders that are accustomed to low profitability. “
Which side has the upper hand? It’s a mix bag, according to Behari “Amazon leads the pack with same day delivery being offered for all Prime members for free on qualifying orders over $35,” she says. “Target takes a slightly different approach and has partnered with Shipt to offer same day delivery. To remain competitive, Walmart has newly announced that they will expand their grocery delivery orders and are investing in same day delivery in more cities. “
Walmart and Target shoppers are placing orders online and are picking-up merchandise at neighborhood stores, saving time and avoiding shipping fees.
This combination of on-line and off-line shopping has helped both Walmart and Target to report strong sales recently, as was discussed in a previous piece here.
While it’s still too early to say who will win the same-day delivery wars, one thing is clear: The war could be expensive. “With all three retail giants offering this capability we can expect to see more investments made in this arena,” adds Behari. “We should start to see an expansion in locales of where this is offered including a larger breadth of merchandise available for same day delivery.”