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Amazon Prime sparks delivery app competition with local store add-ons

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May 22, 2015

Prime Now is adding Manhattan eateries to its inventory

Prime Now is adding Manhattan eateries to its inventory

Amazon Prime is expanding its mobile-enabled Prime Now service to include delivery capabilities from a slew of Manhattan eateries and grocery stores, including D’Agostino and Billy’s Bakery, as competition continues to heat up in the delivery application space.

Manhattan users of the app will now be able to order baked goods, prepared meals and groceries from select neighborhoods, and have them delivered to their doorstep within the hour. If the Prime Now service sees success with this tactic and expands it to other metropolitan cities in the nation, it could bode ill for apps such as Fresh Direct or GrubHub, who depend on clientele ordering groceries or takeout through their mobile and digital platforms.

“As expectations regarding what constitutes ‘immediate gratification’ for online ordering  shrinks from 5-6 days, to 2 days, to 1 hour, Amazon is broadening its reach into the local market,” said Wilson Kerr, vice president of business development at Unbound Commerce, Boston, MA. “This is smart, as the ‘buy local’ movement was largely in reaction to online mega-malls like Amazon stealing business and customers.

“As consumer confidence in mobile as a way to buy securely rises fast, Amazon is seeking to apply its friction-reducing mobile 1-click ordering (and their revenue share model) to daily neighborhood cash transactions.”

Increasing competition
While Amazon’s foray into food delivery may worry fellow competitors, it will likely benefit a large amount of consumers in New York City who may not have the time to grocery shop as much as they would prefer, and instead turn to mobile for their shopping needs.

The capability is now available in select Manhattan neighborhoods, with further expansion planned for the near future. Popular Italian marketplace Eataly and Westside Market are next on the launch list.

This Prime Now feature will enable consumers to get all of their shopping done in a time-efficient and convenient manner, as they will be able to order anything from electronics to household products from Amazon, and can fill their refrigerators with groceries from the participating stores, all within one hour.

However, overseas marketers may also incur a threat from Amazon.

“Amazon has been building it customer base for years, first on PCs and now on mobile devices,” said Thad Peterson, senior analyst at Aite Group, Atlanta, GA. “It’s a much easier thing to get existing customers to move from a PC to a mobile device than it is to build a new customer base on a mobile device.

“The potential threat is probably offshore with Tencent, Alibaba and Rakuten, who all have strong customer bases.”

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Prime Now is enabling consumers to receive instant gratification

To place orders, consumers can use the Prime Now mobile app, which is designed for both iOS and Android platforms. Two-hour delivery is free for users, while the one-hour option comes with a $7.99 fee.

Amazon is dipping its toes into a plethora of different sectors and industries as it continues its trajectory to become the retail conglomerate of choice for many customers.

The brand is also reportedly considering rolling out a service called Unlocked that would offer unlimited access to mobile games and applications, a move that suggests features mimicking a buffet-style archetype for mobile apps could be on the rise (see story).

Competing with others
Mobile delivery options for food and beverage marketers has become a hot topic as of late, with brands such as Starbucks experimenting with the feature in New York, and apps including Seamless and GrubHub growing in popularity and usage.

“The benefit is that it is the most frequent shopping category so once the customer is habituated, it’s likely that retention will be very high and perceived value will increase as well,” Mr. Peterson said.

“Long term, the evolution of the Internet of Things and the home delivery model will converge to create a really convenient way for customers to shop and buy groceries.”

McDonald’s is also joining the shift towards mobile delivery by partnering with mobile application Postmates for a test at 88 New York locations, news that coincides with a business turnaround plan to increase profits and focus on consumer-driven decisions (see story).

prime other 420
Seamless may face some competition from Prime Now in New York City

This points to the notion that more membership apps will be competing with each other in a tight space, a feat which may lower prices and increase convenience for customers while being detrimental for marketers who do not have a large enough customer base.

However, if apps stay local and maintain their customers with loyalty platforms and incentives, there may be enough room for Amazon as well as the other major food delivery apps.

“If they can mend fences and partner with local businesses and prove they can deliver incremental sales, everybody might win,” Unbound Commerce’s Mr. Kerr said.

Final Take
Alex Samuely is an editorial assistant on Mobile Commerce Daily, New York

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Alex Samuely is staff writer on Mobile Commerce Daily, New York. Reach her at alex@mobilemarketer.com.

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