Amazon's same-day delivery and next-day delivery services widen the gap between it and other e-commerce companies.
Doug Herrington, CEO of Worldwide Amazon Stores, wrote, "In March, nearly 60% of Prime member orders arrived on the same or next day in the top 60 U.S. cities." That's up from "more than half" in the second quarter of 2023, when the company last discussed the topic.
Amazon is betting that faster delivery will change people's behavior. It made that bet in 2005, about 20 years ago, when it introduced free two-day delivery for Prime members. At the same time, it focused on replacing Google's shopping search by offering products for every conceivable search phrase. It achieved this goal a few years ago, thanks in large part to the market. The next step is to make transportation fast enough to change when and how often shoppers use it.
Andy Jassy, CEO of Amazon said in discussing the first quarter results, "With us getting items to our customers so quickly, customers are choosing Amazon more frequently for their shopping needs, and we can see the results in all areas." "This includes the rate of growth in our Everyday Essentials business, as well as continued growth in the frequency of purchases and total spending by Prime members."
On the surface, every retailer is the same - every retailer sells a wide variety of physical goods. However, online retailers are not all the same in terms of size of selection and speed of delivery. Amazon - already notorious for its nearly limitless selection - also delivers most items quickly. Fast delivery is not a linear improvement; the difference between two-day and same-day is structural for retailers and behavioral for shoppers.
There are two types of experiences when shopping online at Walmart: fast but limited selection for physical store pickup, and slow but broad selection for general e-commerce (the Walmart 50%'s online order came from one of its physical stores). eBay has hundreds of millions of listings, but only some of them are fast, and none of them are consistent. Tmall and other services directly from China, such as Express and Shein, have a growing selection, but ship within 5 days or sometimes weeks. Finally, shopping from a brand's website has many benefits. However, they only sell a small number of items and therefore cannot be compared to a wide range of e-commerce platforms.
Amazon does not sell merchandise. It sells items that ship within one to two days, and for some shoppers, ship the same day. Logistics are as much a part of the product as the product itself. Amazon is trying to differentiate itself from other companies by shipping more items faster. Last year, the company delivered more than 7 billion items on the same or next day worldwide. This year, it has already shipped more than 2 billion items in the first quarter, so it's likely to surpass 2023.
For companies like Temu, there's no clear way to catch up with Amazon's delivery speeds, or for Walmart's pickup service to dramatically expand its selection. Shoppers may still choose them, or many others, but Amazon's moat is that most of the time, most people make most of their purchases by default. When any retailer's sales increase, online spending grows and market share changes. When delivery goes from two days to the next day to the same day, they change how and when e-commerce is used.
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