Has Amazon Pushed the Competitive Bar Higher?
Despite the difficult logistics and profitability concerns, Wal-Mart, Google, and eBay fear Amazon’s dominance more. Wal-Mart, which sells only a small portion of what Amazon does online, is the most recent entrant into the battle. During the holiday season, the retailer tested a same-day shipping service in five markets, which gave customers a 4-hour window for delivery and charged a flat $10 fee. So far, the test has been met with limited customer interest. While Amy Lester, a Walmart spokeswoman for global commerce, declined to give exact figures, she told The New York Times that shoppers picked next-day delivery more often than same-day.
CHEAT SHEET Analysis: Does this shipping trend support the retail industry?
One of the core components of our CHEAT SHEET Investing Framework explains that companies riding macro trends tend to outperform those that don’t. Think of the investing proverb, “A rising tide raises all boats.”
In retail, the growing dominance of Internet retailers has caused the profits of many brick-and-mortar retailers to plummet in recent quarters. The trend towards showrooming, where shoppers are increasingly using retailers’ stores to examine and test products before purchasing them from cheaper Internet companies, has left traditional retailers playing catch-up.
As a spokesman for personal assistant service TaskRabbit told the Times, the popularity of mobile devices, social networking, and location-based mapping services has transformed shoppers’ expectations. By indicating that it would offer same-day service in the near future, Amazon has placed the competitive bar high and set a new trend to which its rivals must adapt.
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