Amazon speeds up shipping, but rivals' stores buck its challenge3 min read . Updated: 29 Apr 2019, 09:24 PM IST
- The ability of brick-and-mortar rivals to catch up with Amazon using their stores indicates the e-commerce giant could be vulnerable as it invests billions of dollars to build out service
- As of Jan 31, Walmart offered same-day grocery pickup at more than 2,100 locations
Amazon’s promise of one-day shipping threatens to upend the retail sector, but its rivals’ physical stores give the likes of Walmart and Target powerful assets that Amazon itself is scrambling to match.
Amazon.com Inc, seeking to stem slowing sales growth, is plowing $800 million this quarter alone into its next-day package delivery project, something even Walmart Inc , the world's biggest retailer, will be hard-pressed to duplicate.
But there is another battle brewing behind the scenes, with Amazon racing to reproduce the assets of the businesses it aims to upend. The move to expedite shipping is a sign of growing pressure from such brick-and-mortar competitors, experts said.
The e-commerce giant, which has a mixed record with brick-and-mortar retail projects, is racing to open shops that sell top-selling items ranging from books to cell phones; rolling out same-day curbside grocery pickup – a service popular with time-crunched suburban Walmart and Target Corp shoppers; and gearing up to accept returns at all US Kohls Corp department stores.
"This is a sign Amazon needs to compete with its rivals, who now offer free two-day shipping, free pickup, free returns and are using their stores to pose a serious challenge," said Frank Poore, chief executive of CommerceHub, a technology company that works with retailers like Walmart, Best Buy and Macy's Inc, helping them manage e-commerce inventory and increase product assortment.
The ability of brick-and-mortar rivals to catch up with Amazon using their stores indicates the e-commerce giant could be vulnerable as it invests billions of dollars to build out the service.
A source with knowledge of Walmart's plans, who spoke on the condition of anonymity, said Walmart's current infrastructure will not allow it to match Amazon's one-day shipping in every market but that it is aggressively building up its own network.
"I will not make the assumption that we can't do it as quickly as they can," said the source, referring to Amazon, which already offers free one-day shipping to Prime members in more than 10,000 cities and towns.
That confidence pushed the Bentonville, Arkansas-based company to take a jab at Amazon's $119 annual prime service. "One-day free shipping... without a membership fee. Now THAT would be ground breaking. Stay tuned," Walmart tweeted on Friday.
Walmart already offers free, two-day shipping around the country for purchases of $35 and up. Its existing network of 156 distribution centers in densely populated urban areas will make it easier to build out a one-day service, Brandon Fletcher, an analyst at Sanford Bernstein, said in a note.
"One-day shipping is neither shocking nor difficult for retailers at scale," Fletcher said.
Walmart declined to comment on Amazon's next-day shipping plans. Target said its shoppers can shop same-day and receive their purchases within hours, including grocery delivery, curbside pickup and order pickup. The last two services are free and require no membership.
Walmart is also moving faster on what the source with knowledge of its plans called the “next wave" in delivery – fresh food – as well as same-day pickup for general merchandise orders and groceries. It has enlisted delivery services like DoorDash to drop shopping bags on customer doorsteps and tapped drive-thru-trained suburbanites to pick up their own online orders.
As of Jan. 31, Walmart offered same-day grocery pickup at more than 2,100 locations and same-day grocery delivery from nearly 800 stores. It runs nearly 4,700 U.S. stores.
Such efforts are a cost-effective way to fight Amazon, which is building a shipping network to contain costs. But they depend on investors continuing to funnel millions of dollars into unprofitable delivery startups, said Satish Jindel, founder of ShipMatrix and SJ Consulting Group.
There is also the risk that next-day shipping could woo fans of order pickup programs.
"Most people didn't need two-day delivery until Amazon made it 'necessary.' The same is likely to happen with one-day," said John Bonno, a managing director in the retail practice at consulting firm AlixPartners LLP.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.