Commentary

Amazon Leaping Into Free Same-Day Shipping, Eyeing Private-Label Groceries

Amazon will offer free same-day shipping to its Prime members in 14 metro areas across the country for more than a million of its items on orders over $35 — if placed before noon — it said yesterday. Meanwhile, the Wall Street Journalreports that trademark applications indicate that the online retailer will be adding private-label grocery items to its digital center aisles.

“We know same-day delivery volumes will grow dramatically now that we are making it free,” Greg Greeley, head of Amazon Prime, tells Reuters’ Nandita Bose, who points out that “the announcement comes within days of rival Wal-Mart Stores Inc. saying it plans to test a new unlimited online shipping service this summer for $50 per year.”  

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The new program is called Prime Free Same-Day Delivery. Amazon Prime now costs members $99 per year.

“Amazon introduced same-day shipping in seven markets, including Seattle, in 2009, and has expanded it since then. But Prime customers have had to pay an extra $5.99 per order for the expedited shipping,” Jay Greene writes in the Seattle Times.

Same-day-shipping orders under $35 will still cost Prime members $5.99, and start at $9.98 for non-members. The 14 metro areas in the rollout are Atlanta, Baltimore, Boston, Dallas-Fort Worth, Indianapolis, Los Angeles, New York, Philadelphia, Phoenix, San Diego, San Francisco Bay Area, Seattle, Tampa Bay, Fla., and Washington, D.C.

“I like to think of it as a way to get people back their time. They can check off their to-do list with a few clicks and spend their time doing what they want to do,” Amazon’s Greeley tells GeekWire’s Tricia Duryee in an extensive interview about the new service.

“If Amazon’s same-day scheme succeeds, it will combine the best of brick and mortar (getting it right now), with the best of e-commerce (huge selection and low price),” concludes Davey Alba for Wired. “After all, Amazon doesn’t want to dominate just online retail. It wants to own retail, period.”

Not that there aren’t other deep-pocketed and ambitious adversaries out there.

“In addition to competition from retailers, Amazon is also starting to see other major tech firms make a bid for the e-commerce world by augmenting their online payment systems,” Sarah Halzack and Hayley Tsukayama point out in the Washington Post (which is owned by Amazon CEO Jeff Bezos, who has not yet been rumored to be interested in “saving” the New York Daily News). “Google is adding a ‘Buy’ button to its search results, which could help the firm bolster its advertising revenue, particularly on mobile devices.”

One thing not likely to wind up in a Google shopping cart, however, are Elements branded milk, cereal, baby food or household cleaner products. Elements is, you may recall, Amazon’s private label brand and is, at present, confined to several varieties of baby wipes. Not for long, according to the Wall Street Journal’s Greg Bensinger.

“Earlier this month, Amazon sought trademark protection for more than two dozen categories under its Elements brand, including coffee, soup, pasta, water, vitamins, dog food and household items like razors and cleaning products,” Bensinger reports. “Amazon has approached some private-label food manufacturers seeking a partner, according to people familiar with the matter. Those discussions included TreeHouse Foods Inc. of Oak Brook, Ill., one of the larger private-label producers, with $3 billion in sales last year, said one of the people.”

Amazon refused to comment on Bensinger’s revelations, but others certainly have. 

“This would be Amazon’s first try at selling its own line of food, a far more complex business than some of its other private label products because of food safety issues,” Phil Wahba comments for Fortune. “And Amazon would be going up against experienced competitors that have plans to improve their own brands. Target’s Archer Farms, for one, will undergo an overhaul in the next year.”

“Private labels allow retailers to control product quality, pricing, size, distribution and packaging,” USA Today’s Roger Yu tells us. “They also help build customer loyalty — just ask some Costco fans about the Kirkland brand — and pad retailers' profit margins since they don't require as much marketing costs.”

Speaking of profits, as Bezo sort of did in December at Business Insider's IGNITION conference, have you heard the one about not telling people they are going to a rock concert and then putting on a ballet? But nothing seems to be stopping Amazon from putting on both a rock concert and a ballet … and a circus, and a Broadway play and a tennis match and ….

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