Prime membership is getting bigger and better in the U.S. as the
latest city to get the one-hour delivery service is Dallas.
Dallas is the largest city to get Amazon Prime Now. Also, it is the
fourth city added to the company's Prime Now list after Miami and
Baltimore, which it added last week and New York City where it was
launched in Dec 2014. Dallas is an important addition to the list
as it is not only the fourth-largest city in the U.S. but also has
a population of over 6 million.
As of now, Prime Now is being introduced in select Dallas-area zip
codes but will soon be expanded to include other nearby
areas. Prime Now is available from 8 a.m. to 10 p.m., seven
days a week. Two-hour delivery is free while one-hour deliveries
are charged $7.99 in most zip codes.
Amazon Prime Now
In Dec 2014, Amazon rolled out this one-hour delivery to a very
small zone in Manhattan. In February, it made the service available
Amazon Prime Now gives customers the option to have books,
batteries, shampoo and other household items delivered within 60
minutes. Prime Now offers this convenient service for free for
two-hour deliveries from 6 am to 12 am, with one-hour deliveries
available for an extra $7.99. All Prime Now items can be
browsed and purchased through a dedicated app.
What exactly does Amazon do if it fails to deliver items within the
promised timeframe is still vague.
Paying $7.99 for getting household items delivered to your doorstep
can be a little expensive, especially if you just order a few
household items. However, we must remember that Amazon gives
substantial discounts on such items and customers are likely to
recoup a portion of the delivery cost by paying less for the
delivered items. Also, there is a convenience cost that comes into
The Prime Now app can be downloaded by all Prime members on both
iOS and Google's
Android devices. Through the app they will get the notification
when the service is available in their local area.
Prime members clearly benefit from such services. In the last
reported quarter, Amazon reported a profit of 45 cents per share,
surpassing the Zacks Consensus Estimate of 24 cents. Shares soared
more than 12% in extended trading following the report. Amazon gave
credit to Amazon's delivery service, Prime.
It's important to understand the nature of Amazon's core business.
Amazon is mainly an online retailer. This kind of business has a
very low barrier to entry. It is cheaper to set up and thus
attracts a lot of competition.
There is no limit to the number of competing businesses that are
waiting to snatch share away from the existing players. eBay
and Alibaba are all part of this industry. Online retailers also
face competition from brick and mortar stores like Walmart, Google
and even Uber, all of which are working on similar services.
Therefore, carving a niche in this business requires a lot of
marketing, an excellent customer service model and a rational
pricing strategy. Dealing with all three and getting it right in
order to maximize profits is definitely a lot of hard work.
To be a formidable player in this space, Amazon must constantly
provide excellent services.
Prime Now will be part of an enhanced delivery strategy -- an
important part of Amazon's growth.
So, as the perks of Prime members increase, subscription will
increase too. This in turn will increase the operating margins of
Amazon has a Zacks Rank #4 (Sell).
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