Amazon Expands Same Day-Shipping to 6 More Cities ... Why?
Amazon.com announced yesterday that it will be expanding its same-day delivery service in six metro areas: New York City, Washington, D.C., Philadelphia, Baltimore, Dallas and Indianapolis. Customers in those cities will be able to have their orders delivered on the same day if they purchase before noon — for a fee, of course. Amazon Prime members will pay $5.99 per order. Those without a Prime membership will pay $8.99 plus another 99 cents per item. Amazon now offers some variation of same-day shipping in 12 markets, with more than 1 million products eligible for the service.
The question remains, however, is same-day shipping worth it? Maybe it is for an online behemoth like Amazon, which has developed the infrastructure — namely buying or building distribution centers across the country — to make the service cost effective, but most retailers (read: nearly everyone) don't have that luxury. Offering same-day delivery is simply too expensive and not practical for the vast majority of online retailers.
Consider Amazon's announcement in its second quarter earnings report that its fulfillment expenses increased 29.3 percent year-over-year. Furthermore, last week Amazon rolled out a "no rush" shipping program for its Prime members. Amazon will reward Prime members who are willing to wait five to seven business days for their order rather than the standard two-day delivery for Prime orders with a $1 credit that can be applied to titles offered via Amazon Instant Video.
Lastly, and perhaps most importantly, are consumers really clamoring for same-day delivery, particularly when they have to pay extra for it? According to a survey by Boston Consulting Group, only 9 percent of the 1,500 U.S. consumers surveyed cited same-day delivery as a top factor that would improve their online shopping experience. Compare that to the 74 percent that cited free delivery and 50 percent who cited lower prices for the same question.
"It's the stupidest idea ever," says Forrester analyst Sucharita Mulpuru, in a Fox Business article on the topic last year. "Not only is it incredibly expensive — and consumers won't pay extra — the strategy is to get consumers addicted to the behavior to help subsidize the cost, but that just isn't going to happen."
What are your thoughts on same-day delivery? Have you experimented with offering it to your customers? If so, what have your experiences been? Let us know by posting a comment below.