It’s become a battle of the last mile delivery. That would be what retailers like Amazon and Walmart are doing to remain competitive in same day or next day delivery.
Expansion of e-commerce puts pressure on a merchant’s delivery infrastructure, especially when many premium subscription-type consumers are signed up for fast delivery. Since the costliest part of a delivery is when packages are hand delivered to homes by van drivers traversing neighborhood streets, retailers need to have warehouses as close as possible to their final destination.
Amazon uses a warehouse based system, which is why the company needs more distribution facilities. It was not surprising to hear that Amazon is reportedly looking to rent out space in Simon Mall locations that have vacant space from former anchor stores. Meanwhile, Walmart and Target aim to fulfill online orders directly from their stores. This fast delivery competition will continue and it also gives credence to the old-time business adage—stay close to your customer.
The following excerpt from a Bloomberg article reports more on the topic:
Amazon.com Inc. plans to open 1,000 small delivery hubs in cities and suburbs all over the U.S., according to people familiar with the plans. The facilities, which will eventually number about 1,500, will bring products closer to customers, making shopping online about as fast as a quick run to the store. It will also help the world’s largest e-commerce company take on a resurgent Walmart Inc.
Amazon couldn’t fulfill its two-day delivery pledge earlier this year when shoppers in Covid-19 lockdown flooded the company with more orders than it could handle. While delivery times have improved thanks to the hiring of 175,000 new workers, Amazon is now consumed with honoring a pre-pandemic pledge to get many products to Prime subscribers on the same day. So with the holidays approaching, Chief Executive Officer Jeff Bezos is doubling down by investing billions in proximity, putting warehouses and swarms of blue vans in neighborhoods long populated with car dealerships, fast-food joints, shopping malls and big-box stores.
A recently opened warehouse in Holyoke, Massachusetts, exemplifies Amazon’s answer to this existential challenge. Located not far from a once vibrant mall, it’s just a short drive from more than 600,000 people. The goal is to creep closer to almost everyone in the U.S.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group