As the great Rob Base and DJ E-Z Rock rapped in their late ‘80s platinum hip-hop hit, “it takes two to make a thing go right” — except if you’re modern-day consumer counting down the days until your Amazon orders arrive.
Amazon’s pledge to ship Prime orders in two days nearly a decade ago heralded much-needed change throughout the retail industry. Now it’s slashing that promise in half and committing to free one-day delivery for customers who pay the $119-a-year membership fee — a group whose numbers top 100 million globally. The new shipping program is expected to roll out domestically before being offered in other countries.
In a research note published this week, RBC Capital Markets analyst Mark Mahaney highlighted the factors that could see one-day Prime shipping become a bottom-line bonanza for the Seattle-based retail innovator. Amazon announced its one-day initiative in April — along with the $800 million budget needed to make 24-hour delivery a reality.
One-day delivery could create a profit windfall thanks to the flywheel effect, according to Mahaney, where consumer adoption of speedy one-day shipping makes Fulfilled by Amazon more attractive to vendors, whose increased FBA presence and offerings thus attract more consumers — and so forth.
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“Although there is an enormous execution risk and additional costs, the delivery features are increasing the value of Amazon’s network and helping the Retail Flywheel spin faster,” Mahaney wrote.
So just how much could the one-day flywheel contribute to Amazon’s already bountiful coffers? Mahaney sees the delivery initiative adding as much as $24 billion in incremental revenue, assuming Prime households end up spending 5% to 11% more with the company, thanks to the 24-hour value proposition.
But if one-day shipping is a bright spot for Amazon’s future profits and share value, it comes with a dark side of more frequent delivery driver accidents as they race to meet tighter timelines.
A New York Times report Thursday cited a ProPublica investigation that identified 60-plus accidents, including 10 fatalities, dating back to June 2015 that involve delivery contractors ferrying Amazon packages to their final destination — and that number could be far higher, the paper said.
Though Amazon enforces rigorous stipulations for its driver contractors, it also requires these workers to release the tech firm from any liability, the Times reported.
“It’s sure nice to get something in two days for free,” the Times quoted Tim Hauck as saying. An Amazon driver killed his sister while delivering packages in 2018. “You’re always impressed with that side of it. But this idea that they’ve walled themselves off from responsibility is disturbing.”
The technology and convenience might seem attractive until you realize the “human cost of it,” he told the Times.
It’s too soon to tell if Amazon will emerge unscathed from yet another round of less-than-favorable headlines. The company has managed to shake off numerous worker protests decrying warehouse conditions, fallout from an anticlimactic search for a city to house its second headquarters, bribery scandals, unscrupulous reviews, unsafe marketplace products and other mayhem.
And reports indicate that Amazon continues to explore innovations that stand to improve the shopping experience. If you hate waiting to check out at Whole Foods’ long lines, there just might be good news in your future. Though Amazon told GeekWire it doesn’t comment on rumors or speculation, the New York Post outlined a new biometric system that scans a shopper’s hand in as little as 300 milliseconds versus the 3 seconds or 4 seconds it takes for a debit transaction to process.
To set up their account, Amazon customers would need to scan their palm and link a payment card. Palm-scanning devices have been a staple in some doctor’s offices and other locations for some time, despite concerns over the security and privacy of such biometric systems.
The Post reported that Amazon is testing this approach with a handful of vending machines inside its New York City offices. Hand scanning differs from the fingerprint scanners on many newer smartphones in that it doesn’t require the user to actually touch anything.
Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.
