Amazon will soon lose the biggest reason to pay for Prime
- Amazon's Prime membership program offers a lot of benefits, but the most important one is free two-day shipping on more than 100 million items.
- The companies that represent the other half of online sales are catching up, however.
- Companies like Deliverr are helping retailers like Walmart and Ebay to also offer Amazon-like, free two-day shipping for more items than ever.
- As two-day shipping becomes less unique, Amazon has enticed Prime customers through other benefits like same-day and one-day delivery, as well as unrelated perks like Prime Video streaming and discounts at Whole Foods.
Prime could lose a bit of its uniqueness this year.Customers love Amazon's Prime membership program, which offers a myriad of benefits. But the most important by far is its chief perk: unlimited, free two-day shipping.Advertisement
Members still overwhelmingly cite the perk as the most important of the subscription, according to a recent survey of 1,160 Prime members by The Diffusion Group. According to the report, 79% of members say free shipping is the most important part of Prime. The second-most popular response - by far - was Prime Video, with 11% saying it's the biggest perk.
Amazon's Prime shipping offering is currently unique due to how consistent it is and how many millions of items that it sells, either directly or through third-party sellers using the Fulfillment by Amazon or Seller Fulfilled Prime programs.Amazon has been sitting pretty in this position for a while. But now the rest of retail is catching up.
More two-day shipping to come
Business Insider/Dennis Green
Walmart, by most metrics Amazon's biggest competitor online, debuted free two-day shipping without a membership in 2017. The catch: orders must total more than $35 to qualify.
But Walmart still needs to add more selection to its free two-day shipping offering to keep up with Amazon. It does offer millions of items, but not quite the 100 million items that Amazon boasts.Walmart only carries a little over half - about 55% - of Amazon's one million best-selling products, Cowen said in a report to investors in October. Amazon's top one million products account for about 80% of sales on its website, Cowen said, representing a weakness for Walmart.Advertisement
Walmart management agreed that the gap of assortment between Walmart.com and Amazon.com is still too large, Cowen said, noting that Walmart called expanding assortment a "top priority."One of the ways Walmart is doing that is allowing third-party merchants to sell on Walmart.com with a green two-day shipping badge. The initiative started in October, and the retailer said it hopes to expand it over the coming months. Previously, only items sold directly by Walmart were given the green tag.Advertisement
Not all merchants are equipped to handle the grueling demands of two-day shipping, however, especially without massive warehouses spread throughout the country. But companies like Deliverr, which partners with large merchants like Walmart, are sprouting up. Advertisement
He says that in 2019, "more parity [will] come to the space, where a retailer now can offer free two-day shipping anywhere they sell" through outside companies like Deliverr, Krakaris said.He said his business with Walmart is "really rapidly scaling," and he estimates that 30% of Walmart's third-party sellers use Deliverr. The end result: millions more items listed on Walmart with a free two-day shipping option, which can help it compete with Amazon and its services that allow third parties to sell with a Prime tag. Customers purchase items that ship quickly much more often than items that ship with a standard or unknown shipping speed.Advertisement
Sellers can use Deliverr to list products for two-day shipping on Walmart, Shopify, and Ebay. If the model is ultimately successful, it could lead to a proliferation of two-day shipping offerings among the merchants that account for the roughly half of online sales that aren't captured by Amazon.Advertisement
Time will tell whether Amazon will be able to convince its over 100 million US Prime customers to stay, however.
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