Why Amazon and Google are trying to tap same-day delivery market

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Nov. 26 2019, Updated 3:08 p.m. ET

E-commerce market striving for shortest product delivery time 

The e-commerce market is evolving. Companies are competing on the price of goods and products as well as delivery time. E-commerce companies are devising ways to deliver products to customers in the least possible time.

Amazon.com, Inc. (AMZN) revolutionized the market with a two-day shipping guarantee for its prime members. Read Why the Prime program’s success is driving Amazon’s growth. Google Inc (GOOG)(GOOGL) then started its same-day shopping service with its Google Shopping Express service.

e-commerce same day delivery market

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The same-day shipping market has huge growth potential. Consumers demand instant gratification while shopping online regardless of high shipping costs. According to a report from Business Insider’s Intelligence research service, and as the chart below shows, the U.S. same-day delivery market could grow from $0.10 billion in 2014 to $4.03 billion in 2018 at a compounded average growth rate of 150%.

Companies move fast to offer same-day delivery service

There is a huge opportunity for e-commerce companies to tap into the same-day delivery market, especially for grocery items. Grocery is by far the largest segment in the retail market. According to a report from Harris Interactive, 78% of U.S. consumers prefer to purchase groceries in-person rather than online.

This is the highest in-person-preferred segment. Personal electronics is the lowest in-person-preferred segment. The reason why people prefer not to shop online for groceries is the perception that the goods delivered wouldn’t be fresh.

Amazon has become more aggressive in the same-day delivery market recently, expanding its service to a number of cities including New York City, Baltimore, Philadelphia, Dallas, etcetera. The company has also experimented with its Amazon Fresh service for grocery items. eBay Inc (EBAY) also offers a same-day delivery service it calls eBay Now.

Physical retail companies have started to see same-day delivery service by e-commerce companies as a big threat. The service undermines the only advantage that physical retailers have—which is to buy goods faster. To counter this threat, Wal-Mart Stores, Inc. (WMT) and Target Corporation (TGT) have also started to test same-day delivery of merchandise, especially grocery items.

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