On Wednesday, I walked in the rain to CVS and bought a package of razors. Then I headed to the post office and asked the clerk what it would cost to send them overnight to my house a mile away. (Answer: $25.50.)
I actually needed the razors, so I wasn't really going to send them anywhere.
In short, the online giant has quietly removed most of the barriers that previously would have made it hard for Prime members to order very small, low priced-items from Amazon and still get them delivered the next day for free.
(OK, free-ish, since they've already paid for the Prime membership.)
Jason Del Rey at Recode explained:
The result is a flood of low-priced items -- a $2 roll of dental floss or a 75-cent makeup brush -- made available to Prime customers with free one-day shipping. ... These are items that are common purchases in supermarkets, Walmarts, Targets, or pharmacy chains like CVS, Rite Aid, or Walgreens. But they have been difficult for Amazon to sell profitably unless customers were willing to order other items with them.
Obviously, Amazon has a giant distribution network. It's likely paying a lot less than the $25.50 it would have cost me. Still, the company's surely upside down on these purchases, right?
It all feels a little familiar.
The Internet 1.0 graveyard was filled with startups that tried to build giant, free-delivery businesses that ignored the negative margins they faced on each unit shipped.
Webvan. Kozmo. Pets.com.
If you were there, you remember.
The theory behind them, besides separating investors from their money, was that startups had to get big fast to build a moat and stave off competition from other startups.
The difference now is that Amazon is already enormous, and its competitors aren't exactly tiny either. So you'd be forgiven for wondering if this change will last.
As Del Rey points out, we're talking about the likes of CVS, Target, Walmart, and other big retailers, which are pretty well-equipped to fight a long war.
Heck, Walmart has been running Jetblack for more than 16 months now, and it reportedly loses $15,000 per customer per year.
I asked Amazon for an explanation. A spokesperson sent the following reply:
We know customers love our vast selection, low prices, and free one-day delivery with Prime -- and we are always innovating to improve their experience.
Our customer experience improvements go hand-in-hand with supporting our sellers, who provide more than half the items sold in our store, and creating more opportunities for them to grow their business.
Often, corporate statements aren't very illuminating, but in this case it does offer an insight: the degree to which free overnight delivery of small items affects non-Amazon vendors on Amazon's site.
If you sell anything on Amazon, that includes you.
And, as Del Rey points out on Recode, there's no guarantee -- or maybe no way of the rest of us knowing -- that Amazon isn't just going to go back to those third-party vendors and insist on being made whole.
Of course, that's an advantage that those early Web 1.0 free-delivery companies didn't have.
If so, it'll turn out to be a good deal for customers and a really good deal for Amazon, but not so hot for vendors.
Come to think of it, that feels a little familiar too.