Amazon has now expanded its Prime Now service to nine cities
Amazon’s (AMZN) Prime Now service is the one-hour delivery service available to its Prime members. During its 2Q15 earnings conference call, Amazon’s management mentioned that it is looking to quickly expand its Prime Now service to more cities. The company has now expanded this service to nine cities— three in the last quarter alone. This expansion also includes an international site in London.
Amazon continues to take initiatives to provide delivery as fast as possible to its customers. In this regard, a few months back, Amazon developed an app that would pay ordinary people to deliver packages to their destinations. In May this year, Amazon launched a limited pilot program in Germany (EFA) with car manufacturer Audi and courier company DHL. Prime members could receive their orders directly from Amazon by allowing one-time courier access to their Internet-connected Audi’s trunk.
Amazon looking to improve its delivery service
In the past, Amazon had faced criticism over its late delivery, as it relied on package delivery companies such as United Parcel Service (UPS) and FedEx (FDX). This is the reason it keeps innovating with different ways of delivering goods to its customers.
By conducting faster deliveries, Amazon is seeking to compete with the immediacy provided by brick-and-mortar stores. Physical retailers such as Walmart (WMT) and Target (TGT) still dominate the US retail market despite rapid growth in the e-commerce market.
According to a report from eMarketer and as the chart above shows, e-commerce retail sales as a percentage of total retail sales are at ~6% right now. The mobile commerce, or m-commerce, market constitutes only about 1% of the overall retail market. This means there is huge growth potential for Amazon in its quest to compete with physical retailers, and faster deliveries are one way to accomplish that.