Why Amazon needs to try one-hour delivery
Amazon wants to get you stuff. And fast.
The e-commerce giant has launched Prime Now, a delivery service available in New York City that will get orders to customers in as little as an hour. The one-hour delivery fee is $7.99. The two-hour delivery service is free for Amazon Prime members.
Strategic move or sign of desperation? "Amazon doesn’t feel as invincible as its public image was," says Yahoo Finance Senior Columnist Michael Santoli. "The parts of e-commerce that it could dominate, it already does dominate.”
Getting goods to consumers in less than a day has become a tight race in cities like New York and San Francisco. “It’s the one area that Amazon really doesn’t have an advantage over brick-and-mortar retailers or a lot of these newer services that are based on an app that can kind of just route some goods to you,” says Santoli. “Arguably, they are at a disadvantage to a lot of those,” he says, “and I feel like that’s why we’re hearing about all these experiments that Amazon is doing.”
Start ups like Postmates and Instacart are already up and running in a number of cities, working with retailers to deliver goods to customers’ doorstep the day they order. And Uber is working its way into the space as well. These services essentially route items from local stores to customers. It's much more streamlined and cost effective strategy than Amazon's model of large central warehouses and distribution centers.
Bike messengers have been testing Amazon's Prime Now service for a few weeks out of a building Amazon rented in midtown Manhattan. Amazon has signed a 17-year lease for the building to house office space and merchandise. The company plans to roll out the service in other cities down the road.
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Prime Now is just the latest move Amazon (AMZN) is making to try to silence the chorus of investors who have grown increasingly critical of the company. Many are concerned over the company's spending and its fizzled roll out of the Fire phone.
But Amazon Prime has been a huge success for the company and Amazon hopes to jump off that success with Prime Now. Dave Clark, Amazon’s senior vice president of worldwide operations thinks this latest offering is a big win for customers: “We’ve long felt that Amazon Prime is the best deal in the history of shopping and now it has gotten even better.”
More than 25,000 items are eligible for delivery under the Prime Now program, the company said. The annual Prime membership costs subscribers $99. Delivery hours are 6 am to midnight, seven days a week in select areas of Manhattan.
“I think it’s all about essentially keeping people inside the 'Prime world',” says Santoli “If it’s one less reason to go elsewhere, or one more reason for you to do business within Prime, that really does work for Amazon.”
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