The Prime model is moving to a one-day delivery offering. While Amazon says this will be rolled out globally, is it viable in Australia?
Amazon is raising the bar yet again, announcing Prime will offer one-day delivery for eligible items this year. “We’re currently working on evolving Prime two-day to Prime one-day,” said Chief Financial Officer Brian Olsavsky during the company’s first quarter 2019 earnings call. In order to make this happen, the company is investing US$800 million.
Amazon said that it would still require the “continued support” of its partners, and won’t be shifting away from its regular fulfilment providers, including UPS, FedEx or the US Postal Service. According to Olsavsky, one-day shipping will be a standard Prime offering rolled out globally on many items the way that two-day shipping is currently offered. There is no word yet on if (or when) this would be offered in Australia. North America appears to be the first region to be offered the one-day delivery perk. “This is all about the core free two-day offer morphing into a free one-day offer,” Oslavsky explained.
There was a time when Prime perks and speedy delivery differentiated Amazon, yet the competition is heating up. Two-day delivery is no longer the domain of Amazon alone, and loyalty programs across the board are increasing their offerings. In Australia, Prime, launched in mid-2018 with Prime Day attracting a record number of shoppers to the Australian marketplace, making it the biggest two days Amazon Australia has had since its launch in December 2017. Not to be outdone, eBay launched Guaranteed Delivery and eBay Plus, ensuring its paid membership program and fast delivery speeds offered both retailers and consumers an alternative to Amazon’s offering. Worldwide, marketplace and retail rivals are matching two-day shopping or leveraging Buy-Now, Pick-Up-In-Store options. Where once two-day shipping was a differentiator, it’s now becoming the ‘norm’ (thanks to Amazon). In its inimitable way, Amazon has no choice but to continue to evolve.
In such a landscape, Last-Mile delivery is where the real competition is. But with the amount of investment and infrastructure required, what do Australian consumers actually want? “Our data shows that retailers who have invested heavily in superspeed delivery at the expense of profits may not reap the benefits they desire. Honouring the delivery promise is more important to consumers than all-out speed, so investing in reliable, sustainable and efficient last mile delivery is more effective than joining the space race to offer the fastest delivery option possible,” says Grant Arnott, managing director of Power Retail. In the latest Spotlight Series report, ‘Last Mile Delivery – A Race Against Time’, Power Retail’s data and insights team revealed a disconnect between what retailers think consumers want, and what shoppers actually want.
For more on Amazon, check out the Spotlight Series report Amazon Australia: Year One and keep an eye on our upcoming research into loyalty and membership programs here.
Whether Amazon is able to roll-out one-day delivery is without question. Whether it will subsequently change consumer expectations and raise the bar for retailers also leaves no doubt. But whether fulfilment capabilities here (as well as Amazon Australia’s scale compared to other markets) would make this viable in Australia is definitely something that experts are querying. Watch this space.
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