Sortation centers would help Amazon have more control over package deliveries
Amazon (AMZN) has become a serious player in the same-day delivery market. During its 3Q14 earnings call, Amazon’s management mentioned that it will have 15 sortation centers in the US by the end of the year. Sortation are much closer to customers, which helps Amazon control the delivery of packages to customers up to the last mile.
In the past, Amazon would hand over its packages to delivery companies such as United Parcel Service (UPS) and FedEx Corporation (FDX). However, Amazon faced criticism last Christmas when several customers complained of late deliveries. Amazon will now send sealed packages in a truck from the fulfillment center to the sortation center. Workers will then sort the packages according to the ZIP code of the customer and hand it over to the local post office.
This effort should help Amazon not only in quicker deliveries to customers but also in terms of shipping costs. Amazon mentioned that it has a same-day delivery facility in 12 cities and it will also have Sunday delivery that will serve 50% of the population.
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 BI Intelligence research service, and as the chart above shows, the US same-day delivery market could grow from $0.10 billion in 2014 to $4.03 billion in 2018 at a compound annual growth rate of 150%.
Looking at the growth potential, competitors have also stepped in to provide same-day delivery service to their customers. Google (GOOG)(GOOGL) provides same-day shopping service with its Google Shopping Express. eBay (EBAY) also offers a same-day delivery service, which it calls eBay Now.