Amazon Prime has decided that the ability to deliver a product within two days just wasn’t enough anymore. They’ve announced plans to restructure their 2-day Prime delivery systems to reach a new level of competence; the ability to deliver Prime products within a single day. How they will do this and how much it will cost are issues for Amazon to worry about, but the news is not good for competing retailers, such as Walmart and Target. After all, the two were barely able to keep up with 2-Day Amazon Prime as it was, and now it will only be worse.
Stocks for Walmart and Target stumbled after Amazon’s announcement, and for obvious reasons. With Amazon stepping up their online delivery game, there will be even greater pressure for Walmart and Target to follow suit and match Amazon’s delivery capabilities. Only, they probably won’t be able to. Amazon is pouring upwards of eight hundred million dollars into the upgrading of their infrastructure for one-day shipping. And while Walmart and Target could probably afford that kind of investment if they really wanted to, chances are it would actually be more costly. Amazon already has a significant presence on the global shipping market, whereas Walmart and Target have far less of a foothold.
They could even try to offer products at a lower price, but the two retailers, and others like them, simply don’t offer the same massive array of products that Amazon does. Ultimately, Amazon’s increased potency might mean that stores like Walmart and Target have to devote more of their resources to brick and mortar stores, which is the one thing Amazon has no presence in. It might be the only way to recover the six percent drop in Target shares, and the two percent drop in Walmart shares.
Of course, the other major problem is that Amazon Prime’s increased ability to deliver any product within twenty four hours is going to raise expectations for all other online retailers. Thanks to Amazon, most consumers already expect products to be delivered within two days, and often free of charge. Many consumers refuse to even complete online purchases when they realize that two day shipping isn’t free. Now that Amazon is upping their ability to provide for consumers, chances are people will begin to expect even more from their retailers. Some retailers might not be able to keep up, which could harm their profits and futures as companies.
But of course, this all depends on whether or not Walmart and Target will make the effort to catch up with Amazon. It will be a massive investment of funding, but it could be worth it in the long run, if it keeps them at a level where they will be able to continue competing with Amazon even with the new one-day delivery that is planned.
According to Business Insider, Walmart has already announced that it will be adding a 1-day shipping option. If they can pull this off, this would allow them to continue to gain the necessary foothold they’ve been vying for these last few years.
Sources: Business Insider, Yahoo News, Mashable