Retail Delivery Wars: Smart Strategy Or An Inevitable Race To The Bottom?

It wasn’t so long ago that Amazon’s “Prime” two-day delivery benefit was a real game changer. Once a consumer paid the annual fee, the incremental cost of getting what (at the time) seemed like pretty fast delivery became zero. This is a “wow” for the customer, but it also creates adverse selection that’s not necessarily so good for Amazon’s marginal economics as evidenced by Amazon’s growing fulfillment costs as a percentage of sales. But there is no denying that Prime is a major contributor to Amazon’s ever growing dominance of online shopping. Now, as the stores strike back, ever more convenient delivery is part of an escalating arms race. While retailers have used free delivery as a promotional weapon for years, things really ratcheted up last fall when Target offered free two-day delivery over the holidays. Since then the Big 3—Amazon, Walmart and Target—keep upping the ante. Read more at Forbes.