Amazon.com (AMZN) has forever transformed consumers' shopping habits and helped to hasten the growth in online retail. But there was always one area that thwarted Amazon's reach: immediate gratification. Same-day shipping has been the bane of Amazon's existence and the single leverage brick-and-mortar retailers held over its online challenger. But Amazon may start offering same-day delivery as soon as next year, according to various reports, which could further alter the retail landscape.
Amazon has not confirmed the rumors but retail insiders believe it's an inevitable move for the online retail giant. The Seattle-based company has been planning to add new distribution centers across the U.S. in states such as New Jersey, Texas, California, Virginia and Indiana and these new warehouses will be able to ship online purchases to consumers living in that state within hours. Same-day shipping by Amazon would be another blow to brick-and-mortar retail stores already battling the phenomenon of "showrooming," an industry term for when customers examine products in person but buy the same goods online, often at a lower cost.
Wendy Liebmann, CEO and Chief Shopper at WSL/Strategic Retail, says Amazon's same-day shipping is "Amazon's way of becoming more and more ubiquitous" and gives consumers another reason not to go to physical stores. But mom-and-pop "stores aren't going away anytime soon," she says. "Eighty to 85 percent of shopping and spending will still be done in physical stores."
This development could have significant consequences for Walmart (WMT), Liebmann says in the attached clip. Walmart, the largest retailer in the world and the nation's biggest food retailer, has seen its customer base decline in recent years as more of its consumers shop at Amazon. More Amazon distribution centers suggest that Amazon is trying to compete in the food industry space, posing a direct challenge to Walmart, she adds.
Amazon created "AmazonFresh" — a home grocery delivery service — for its Seattle customers, which allows shoppers to purchase food, organic produce, meat, fish and bakery goods on its site for same-day delivery. That model could quickly become a norm for the states opening new Amazon facilities.
Amazon may be encroaching on big box retailers turf by introducing same-day delivery but the playing field is also moving in favor of big box retailers. A new study conducted by retail research firm Kantar Retail determined that Walmart offers lower prices on a wide range of products over Amazon. Prices at Amazon were on average 20 percent higher than at Walmart stores and Walmart's online retail site. Walmart's food prices were nearly 60 percent cheaper compared to Amazon. The study analyzed prices in April.
Moreover, Amazon will start collecting state sales tax in the states where it's building facilities in addition to the six states where it currently collects. Amazon has resisted collecting tax for years but is coming under increased pressure at both the state and federal level to do so.
Collecting tax means price increases for Amazon consumers, but Amazon still maintains its convenience advantage Liebmann notes.