Amazon announced this week that it is building a branded cargo plane, Amazon One, to offer faster delivery for customers. In the past, Amazon has faced delivery delays due to glitches partnering freight services and has been testing drones as an alternative to traditional shipping.
Without a doubt, Amazon has raised baseline standards for fulfillment. To compete with the giant, not only do online stores have to speed up delivery times, they must offer free shipping (at least above a certain order amount) and accept free returns. For some time, using stores as warehouses was thought to be the answer to the expense of competing with Amazon. Shoppers could return items they ordered online to stores, reserve inventory online for in-store pickup, or purchase online and opt to pick up at a store instead of asking for delivery. Reports that Amazon was considering buying RadioShack stores fueled the notion that stores would become an essential component of online shopping and fulfillment.
However, L2’s 2016 Specialty Retail study finds that relatively few brands have focused on omnichannel (with the exception of in-store returns of online purchases) relative to free shipping. For example, among brands tracked in L2’s 2015 and 2016 Indexes, the fraction of brands offering “reserve online, pick-up in-store” grew a mere 2%. Meanwhile, brands offering free return shipping jumped from 35% to 54%. And overall, more than half of brands tracked in both studies offer free return shipping and free shipping with a minimum order while less than half have implemented omnichannel initiatives (checking in-store availability online, buying online to pick up in store, reserve online to pick up in store).
The investment lag is likely because omnichannel developments are extremely expensive and time-consuming when implemented effectively. Amazon’s new direction could be a sign that retailer competition will intensify in delivery options rather than in-store programs.
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