The Impact of Amazon’s One-Day Delivery
In 2013, Amazon greatly underestimated the magnitude of the holiday shopping season and faced widespread angry customers who didn’t receive their packages by Christmas Day. Consequently, Amazon went from 65 to 400 delivery facilities to not only prevent a repeat disaster but also outplay the competition with one-day delivery capabilities.
Other ecommerce giants like Target and Walmart have been coming up with ways to appeal to the same customer base without needing to open hundreds more fulfillment, sorting, and delivery facilities across the country. Target saw profits increase 17% from Q1 to Q2 2019 through implementing BOPUS (buy online, pick up in store) capabilities as well as same-day shipping. Improvements in business strategies have also helped Walmart see increased profits QOQ, although not to the same extent as Target.
Amazon’s same-day delivery strategy is impacting not only its ecommerce competitors but also delivery services like FedEx and UPS. FedEx cut ties with Amazon and is now partnering with Target and Walmart. UPS is staying with Amazon, which is not very surprising when you consider that FedEx relied on Amazon for 1.3% of its annual revenue, but that number is 10% for UPS.
Still, several transportation and logistics companies serving Amazon have been hurt in the process. Amazon partners and suppliers like New England Motor Freight and Scoobeez went bankrupt this year. Logistics expert and Cambridge Capital Managing Partner Benjamin Gordon says, “If Amazon continues to lose partners, they will face shipping failures far worse than what they experienced in 2013.”
Amazon Advertising Becoming More Accessible to Smaller Brands, Resellers
From hiring new teams around advertising to rolling out new video ad formats to building programmatic tools to place ads on outside websites, Amazon is ramping up its burgeoning advertising business to compete with Facebook and Google. And as Amazon continues to increase its Amazon advertising initiatives, it’s becoming more and more appealing to small advertisers.
One reason is lower costs, which are particularly attractive to third-party sellers. The threshold price of buying advertising on Amazon was recently lowered to below $10,000/month, which is several multiples lower than what advertisers were previously required to spend.
Amazon consultants have also revealed that Amazon account representatives have been offering more communication and proactive assistance to small advertisers than they have in the past.
Still, third-party sellers often have higher initial Amazon advertising spend, which contributes to the difficulty consumer-packaged goods (CPG) brands experience on Amazon in the face of the ecommerce giant’s private-label brands such as its AmazonBasics line. According to the Amazon consultants, Amazon is interested in creating its own products only in cases where it can control 30% of the market.
It’s also much less risky for Amazon to launch private labels since its online platform allows it to easily collect lots of data, as well as more quickly and easily launch a new product detail page, compared to a brick-and-mortar store that must dedicate physical store place and train employees in order to launch a private label.
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