While Amazon Prime’s guaranteed two-day delivery promise has helped swell its ranks to an estimated 40 million members in the U.S. and growing rapidly, the shipping speed for non-Prime members has actually slowed as traditional retailers have caught up through omnichannel initiatives, according to data from StellaService.
As a result, Amazon has for the first time fallen outside of the StellaService index’s top 10 in terms of delivery speed.
StellaService, a consumer data and analytics firm, tracks a monthly index of 40 retail firm including Amazon, Best Buy, Apple, Walmart and Target. It found that the percentage of non-Prime packages shipped by Amazon arriving within three days was 44% in 2015, down from 62% in 2014. At the same time, the three-day shipping performance for the overall index increased from 36% in 2014 to 49% in 2015.
“That’s still almost half the packages (delivered by Amazon in three days for non-Prime members), but the big thing is, the rest of the market has improved,” said Kevon Hills, StellaService’s vice president of research. “It has a lot to do with companies focusing on faster fulfillment like Best Buy and Apple. They’ve caught up and even moved past Amazon in some respects.”
To illustrate the Amazon effect, Hills said a retailer delivering packages in four days in 2013 would be in consideration for a top 10 slot in the StellaService index; now, that performance would rate the middle of the pack or even below.
Hills noted how Amazon, in order to speed up its fulfillment, has to expand its already far-reaching network of 50 domestic fulfillment and distribution centers, while omnichannel retailers can leverage their store network, often hundreds of outlets, allowing them to get more inventory closer to shoppers. “A package used to travel a thousand miles or more from a DC, but now it can come from the store down the street, a city over or a state over,” he said. “So a lot of retailers are seeing some benefit from these omnichannel initiatives.”
However the ability to gain those advantages is coming at a steep cost. A new study from JDA Software found that 68% of retailers are experiencing rising fulfillment costs, the highest being in ecommerce shipping and returns and omnichannel services like buy online, pickup in store. Half of those surveyed said they were experiencing pressure on price and the ability of shoppers to choose same-day and two-day delivery options from Amazon.
Last month, sports apparel retailer Finish Line reported a brutal fourth quarter and plans to close a quarter of its 660 U.S. stores, partly the result of an omnichannel supply chain software implementation that went horribly wrong. The news forced out CEO Glenn Lyon.
Hills said retailers are finding it difficult and expensive to re-architect traditionally siloed store and ecommerce systems to enable omnichannel operations. Realigning people and processes is also difficult.
“Historically store associates have been engaging with folks, trying to sell them products,” he said. “Now many of them are being asked to pick, pack and ship from the store. It involves a different skillset, either hiring for that or training the staff you have, changing the mindset of what it means to interact with shoppers. And if an associate sees an online order being returned in store, they may not want to handle it because it will hit their commission or their store’s numbers. Forcing people to change their mindset is a big part of the process, in order to execute omnichannel successfully.”