Amazon.com AMZN recently announced its decision to offer free same-day delivery to its Prime members only in some cities.
The service, introduced in 2009, has now been expanded to 14 metro areas including New York, Los Angeles, the San Francisco Bay Area, Philadelphia, Phoenix and Atlanta.
The service allows customers to order items any day, latest by noon, and receive the deliveries at their home on the same day by 9 p.m. This service is applicable for more than a million of items including books, electronics and vacation gears.
Prime members can avail free same-day delivery service for orders above $35, which cost $5.99 earlier. However, the service is expensive for non-subscribers who have to pay $9.98 for the first item and 99 cents for each additional one.
Online shopping has changed the shopping scenario. Customers visit retail shops to physically check the products but they finally purchase it online to avail attractive discounts. Therefore, prompt and accurate delivery of products is essential for any company to succeed in the e-Commerce arena.
This is the latest effort by the company to expand its operational activities (shopping) and gain a larger market share. We believe that the company’s ever-expanding content portfolio will attract more subscribers, thereby expanding the company’s revenue base.
However, the same-day delivery field is getting more crowded by the day. Increasing competition from eBay EBAY, Google GOOGL and other online retailers remains a concern. Recently, Wal-Mart Stores, Inc. WMT announced its plans to test a shipping service for online shoppers at an annual subscription of $50, much less than Amazon’s $99-a-year Prime service. Google also launched its Express shopping option to gain a competitive edge.
Also, uncertainty regarding its investment plans and the probability of incurring losses in the near term compel us to be cautious regarding Amazon.
Amazon currently carries a Zacks Rank #3 (Hold).
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