Amazon Takes On Delivery: How Retailers Should React

April 30, 2014

Amazon boxesDrones. Last mile. Robots. AI. These sound more like words from an abstract for the latest sci-fi film than strategies from the largest e-commerce retailer on the planet. However, these words actually describe Amazon’s latest fulfilment strategies that are shepherding the world into an era of same-day gratification for online shoppers. The latest in this lineup: a test in San Francisco to own the “last mile” delivery of select Amazon products, with similar availability to be tested in other US cities, such as Los Angeles, in the coming year.  Amazon will operate its own trucks and use its own delivery staff to take products from Amazon fulfilment centres directly to your front door, with no middle man (e.g., UPS, FedEx, USPS) involved.

Amazon is arguably taking a large portion from the e-commerce buffet, but is the company now looking to eat delivery as well?

With services like Amazon Fresh, a grocery-delivery service in San Francisco, southern California and Seattle, Amazon is already dabbling in the same-day delivery spectrum under its own brand. Combine that with tens of millions of Prime users accustomed to free two-day delivery and instant streaming of books and media, and it’s an easy stretch to envision this appetite extending to same-day physical goods and having a huge market. We’re watching these offerings closely to determine the impact they’ll have on traditional shipping giants UPS and FedEx, which struggled to keep up with Amazon’s shipping demands during the 2013 holiday season.

Other e-commerce leaders have picked up similar strategies, so Amazon won’t be the only one playing in this space. EBay offers local delivery in one to two hours with its eBay Now service in five major urban regions: Chicago; Dallas; Manhattan and Brooklyn; Queens and San Francisco. For just $5, customers can shop for products sold in local stores and have eBay Now deliver them to their door within a couple of hours.

We tested eBay Now recently at our User Conference in San Francisco and had great results (our order was delivered just as I was writing this section on the program). Google is also piloting a similar service called Google Shopping Express, available in San Francisco, San Jose and the Peninsula, that delivers within the same day for $4.99 per order — a fee that’s now being waived for six months with a recent promotion running through June 30, 2014.

How This Affects Retailers

Amazon has over 100 global distribution centres.* It’s clear that having goods close to consumers is part of the company’s strategy to deliver expedited service options and reinforce buyers’ habit of looking to Amazon, rather than local stores, for products they want quickly.  

Prime plus same-day delivery could be a huge game changer if online customers become accustomed to accelerated delivery options. If you’re a traditional pure-play retailer, then chances are, you’re warehousing in one location or region. If that location happens to be on the East Coast, then you’re automatically at a disadvantage when West Coast shoppers are considering purchasing from you. Shipping carriers offer expedited options for your West Coast clientele, but you’ll incur more costs in exchange for shaving days off your delivery time. Take a look at your distribution network and see what delivery times you’re offering your domestic customers. Where do you have coverage gaps? How are you going to compete in this new era of e-commerce where customers want products quickly without a lot of extra expense?

How You Can Compete

ChannelAdvisor believes that warehouse proximity is the next big thing on the savvy retailer’s horizon. One strategy that many of our customers are taking is to partner with Amazon and use the fulfilment by Amazon (FBA) service to sit on the backbone of Amazon’s wide distribution-centre footprint. (Learn more about ChannelAdvisor and FBA in this eBook.) Other retailers aren’t as eager to trust an Amazon partnership more than necessary and are looking to do what they can to make their own distribution network work better and smarter for them. In our recent 2014 Spring Release, we’ve delivered services and functionalities that do just that.

The Multiple Distribution centres feature, for example, part of ChannelAdvisor Marketplaces, takes your distribution centre network and makes it smarter. Upload quantity for each of your fulfilment options (warehouses, drop shippers and even FBA) and we’ll manage the quantity for you as you offer your goods for sale on your webstore and multiple marketplaces, routing your orders to your distribution centres based on your customised fulfilment strategy. Our Proximity Order Management feature allows you to reduce your shipping speed and cost to US customers by fulfilling your orders from the distribution centres closest to the buyer’s address.

We’ll be talking about Multiple Distribution centres and other recent product developments in our Spring Release webinar on May 1, 2014 at 2 p.m. EDT. Register now to join us and learn more about how ChannelAdvisor can help you create a smarter fulfilment network. To speak with a ChannelAdvisor expert sooner, please contact us at info@channeladvisor.com or call 866-264-8594.

Blog post by Rachel Miller, product marketing manager, ChannelAdvisor

*Note: This post originally stated that Amazon has hundreds of distribution centres in the US, which is incorrect.