The news: Amazon rolled out a new program that lets consumers in 10 US metro areas including Atlanta, Chicago, and Seattle receive same-day delivery from select retail stores.
- The first retailers to participate in the service are PacSun, GNC, SuperDry, and Diesel. Amazon plans to expand the program to Sur La Table and 100% Pure in the coming months.
- Delivery is free for US Prime members who spend at least $25 on qualifying items (otherwise it is $2.99) and is $9.99 for non-Prime members. Some stores may also offer a click-and-collect option.
How it works: Shoppers can order from participating retailers via the same-day store section of Amazon’s website and app.
- After the shopper clicks the buy button, Amazon sends the order details to the store where an associate fulfills it using store inventory.
- An Amazon delivery driver then picks up the order from the store and delivers it to the customer.
- Shoppers initiate a return via its website and app.
Taking on quick delivery companies: The service puts Amazon in direct competition with quick delivery companies such as Instacart, Target-owned Shipt, and Walmart-owned GoLocal, which have forged relationships with merchants such as Dick’s Sporting Goods, Costco, and Home Depot.
- The timing of the announcement comes days after The Wall Street Journal reported that Instacart—which was reportedly profitable in Q2—plans to go public before year’s end.
The calculus: By tapping into its existing logistics infrastructure, Amazon is further expanding the value of its Prime membership at a time when its US user growth has begun to slow.
- More than half the US population—172 million people—are Prime members, according to Consumer Intelligence Research Partners. Over two-thirds of US households (67%) subscribe to Prime, per our estimates.
- Those customers are extremely valuable to Amazon because US Prime members vastly outspend US non-Prime members. Prime members spent $1,968 per year on Amazon on average, which is roughly four times as much as the non-Prime shoppers, per a 2021 Bank of America survey of US shoppers reported on by Quartz.
- Prime membership is also an important revenue channel for the retailer, with subscription services (which are largely made up of Prime fees) accounting for $15.497 billion in the first half of the year—a 10.5% increase year-over-year.
- As membership growth slows, Amazon needs to avoid churn and keep its existing subscriber base satisfied by offering exclusive benefits such as access to Prime Day and a second sales event this fall, as well as perks such as free food delivery via Grubhub (which it invested in), and delivery from other stores.