Leading up to the holidays, Amazon is only getting more aggressive. It is expanding the items that it will ship free in a single day to Prime customers. According to a Morgan Stanley analysis, the typical order for one-day shipping is $8.32, and Amazon spends $10.59 to fulfill and ship it, meaning the company loses money on many sales. But Amazon may satisfy a more valuable goal: pressuring other retailers to deliver the same level of convenience to keep their customers.
Retail is a huge industry, and not every chain is being squeezed. Walmart and Target have evolved from big box stores into retailers that have succeeded at offering the same conveniences as Amazon like one-day delivery.
They have managed to thrive because they are helped by a wide range of products like food and household staples that customers have to buy on a regular basis. Their sheer size also allows them to pressure their suppliers to lower the cost of their goods, which frees up money to invest in e-commerce.
Still, Amazon seems to have most of the advantages. The company is building out its own fleet of airplanes, delivery trucks and couriers, while other retailers must contend with rising rates to ship through FedEx and UPS.
While retailers are coming through with a “very, very competitive digital shopping experience,” said Kimberly Greenberger, a retail analyst at Morgan Stanley, they are pouring money into their e-commerce operations at the same time their stores are bringing in fewer sales. Just when they seem caught up, Amazon raises the bar again.
“It just continues this vicious cycle that retailers find themselves in,” Ms. Greenberger said.
Macy’s is one retailer caught in this cycle for years. Founded in the 1850s, Macy’s spent generations expanding its reach, acquiring regional department store chains and building new stores in shopping malls.
Facing pressure from e-commerce and seeing less traffic in malls, Macy’s has spent the past few years dismantling that brick-and-mortar empire. It has sold off some of its most iconic stores to raise money to reinvest in its online business and modernize its remaining stores.