Amazon announced on Thursday (April 25) that it was going to make one-day shipping standard for all Amazon Prime members. Shares in retail giants Walmart and Target tumbled on Friday (April 26), according to a report by CNBC.
Amazon said it was going to spend $800 million in Q2 of 2019 to beef up its infrastructure and warehouses to make the change happen. On Friday (April 26), Walmart shares were down 2.5 percent and Target’s were down 6 percent.
Amazon is estimated to reach more than half of all U.S. households and has upwards of 100 million paying Prime members. With the announcement as well as its widespread reach, Amazon could potentially shift customer expectations to receive ordered items in the faster timeframe.
A survey of 3,000 U.S. adults by the National Retail Federation found that almost 40 percent of people want their orders delivered for free and within two days, and 29 percent said they didn’t buy something after realizing it wasn’t eligible for free two-day shipping.
“Just as Amazon did with Prime two-day delivery 14 years ago, we see a broad-based, one-day shipping offering increasing consumer eCommerce expectations (essentially, more people will get used to one-day versus two-day shipping … and grow to expect one-day shipping),” Morgan Stanley Analyst Brian Nowak said in a note. “This, in our view, is likely to cause other brands, manufacturers, retailers and logistics companies to have to invest more aggressively to compete with Amazon and its differentiated delivery. The cost to compete within eCommerce continues to rise.”
Both Target and Walmart have begun offering two-day shipping, but have been spending considerably to do so. Investors have taken note and acted accordingly.
Target highlighted its current delivery and availability options in a comment to CNBC: “Today, Target guests have numerous ways to shop same-day and receive their purchases within hours. We have a range of options that make shopping easy and convenient, including our in-store shopping experience and delivery from Shipt in nearly 250 markets. Our Drive Up service is at more than 1,100 stores and Order Pickup services [are] at all 1,850 stores – both free, no-membership-required services,” Target said.