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Supply Chain News: Amazon Roils eCommerce Market with Free One Day Shipping, as Walmart and Target Quietly Pursuing Same Day


Union Argues Amazon Next Day will just Make FC Associates Work Harder

April 30, 2019
SCDigest Editorial Staff

Coming off by far its most profitable quarter in its history, $4.4 billion in net income in Q1, Amazon made quite the news by announcing it was going to use some of that cash to offer free one-day shipping to its Prime members instead of the current two-day program.

CFO Brian Olsavsky dropped the bombshell news during Amazon's first-quarter earnings call last week in an answer to a question about the company's expenses.

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Some pundits argue that traditional retailers with extensive neighborhood store presence like Walmart and Target have a major advantage over Amazon.

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"We're currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program," he said. "We're able to do this because we've spent 20-plus years expanding our fulfillment and logistics network, but this is still a big investment and a lot of work ahead of us."

Building the capacity to pull off one-day shipping consistently won't come cheap: Olsavsky noted that the company's guidance for the second quarter includes "approximately $800 million of incremental spend related to this investment."

Amazon has actually offered Prime members one-day shipping on select items for years. It also offer its Prime Now program, which provides one-to-two-hour delivery of some items in some mostly urban markets.

"This is all about the core free two-day offer morphing into - or evolving into - a free one-day offer," he said. "We've already started down this path. We've, in the past month, significantly expanded our one-day eligible selection and also expanded the number of ZIP codes eligible for one-day shipping."

One-day delivery will be released in phases across the US. When it's complete, it will cover roughly the same 100 million-plus products now available with two-day free shipping under Prime.

While the two and one-day programs officially refer to transit times from the point order is shipped, Amazon picks and ships a high percentage of orders same day if placed before cut off times about mid-day.

Union Objects

Some interesting opposition to the plan arose shortly after it was announced.

The New York Post reported that the Retail, Wholesale and Department Store Union, which is trying to unionize Amazon workers in various spots around the country, said warehouse workers already struggle to handle 200 to 300 orders per hour in 12-hour shifts with the promise of two-day shipping.

"If Amazon plans to effectively double the speed, it must also address existing workforce needs and ensure its workers are safe," Stuart Appelbaum, the union president, said in a statement. "Increasing fulfillment speeds means they need to hire more workers, under more sustainable speeds that don't put workers' lives in jeopardy."

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Amazon's Dave Clark, senior vice president of worldwide operations, dismissed Appelbaum's remarks and accused the union leader of continuing to "spout falsehoods.

"We appreciate his concern for our associates but his concern is misguided and self-serving," Clark said in a statement to CNN.

Walmart and Target Aiming to Up Ante with Same Day?

While Amazon grabbed all the headlines, retail equity analyst John Zolidis says that this past October, Walmart CEO Doug McMillon told him that same-day delivery, not one-day delivery, was going to be the real battleground.

And, paradoxically, this coming ecommerce imperative may be very good for brick and mortar retail.

Some pundits argue that traditional retailers with extensive neighborhood store presence like Walmart and Target have a major advantage over Amazon once you get to same day, which would be a real challenge despite Amazon's massive fulfillment center network.

"Both WMT and Target are already at a huge advantage over Amazon in this respect - because both retailers already have product stored within a short driving distance of the vast majority of the US population in their respective 1,000s of stores," Zolidis wrote. "Further, both retailers are offering not just delivery (Target already has same-day delivery via Shipt) but various options for BOPIS (buy online pickup in store).

The efulfillment wars continue on.

Any reaction to Amazon's  One-Day Shipping Plans? Will the real end game soon be same day?Let us know your thoughts at the Feedback section below.



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