Amazon’s 2-Hour Delivery Service Could ‘Slaughter’ Traditional Stores

Analysts agree that Amazon’s Prime Now Service could spell doom for many traditional retail stores.

BEACON TRANSCRIPT – Retail analysts believe that Amazon Prime Now service, the super-fast, ultra-cheap delivery service the e-commerce behemoth rolled out last year, will “slaughter” brick-and-mortar stores.

The delivery service can bring the items you picked from Amazon’s site to your doorstep in an hour for a $7.99 fee or two hours for free. The annual subscription to the service amounts to $99.

Amazon uses local Prime Now hubs to link distribution centers throughout vast areas. Hubs are smaller than warehouses and can easily handle ten of thousands of products in a much faster way.

Amazon’s network of hubs and warehouses can cover areas where only traditional retail stores had had an advantage. Lee Peterson VP of consulting firm WD Partners noted that if someone can deliver a product within an hour it is game over for brick and mortar chains.

But retailers do not plan to give up easily. Wall-Mart has recently rolled out ShippingPass, a two-day free delivery service for members who pay $49 per year. In response, Amazon.com unveiled a monthly Prime offer that is cheaper.

Chris Boring of the Boulevard Strategies consulting firm said that consumers hadn’t expected a two-hour delivery service to actually fulfill its promises, but with Amazon everyone must match it.

And free delivery is just another trick to boost on-site traffic just like stores sell some products below cost to attract customers. Plus, Amazon has a strategy of sacrificing profits to gain a larger market share in a shorter time.

But Boring believes that not all retailers are equally threatened by Amazon’s new service. The retailers that are more likely to lose their business are fashion and electronics retailers, bookstores, music stores, and those selling sporting goods and pet-related products.

Analysts think that the Internet will mostly affect the leisure goods sector while venues selling convenience goods including drugstores, grocery chains will be able to survive… for a while.

Analysts expect the least affected to be retailers that sell furniture and other large objects and companies that provide dining and entertainment. Small businesses that focus on customers should also be alright, analysts estimate.

Two major advantages of brick-and-mortar stores are the ability to offer “touch and feel.” and “instant gratification,” a comprehensive study had shown. But Amazon Prime Now service might have just solved the gratification part.