If anyone still needed a reason to join Amazon Prime, perhaps free two-hour booze delivery will be enough to sell them on the membership. Amazon.com, Inc. (AMZN -1.25%) expanded their Prime Now one- and two-hour delivery service of household goods to its hometown Seattle metropolitan area on August 25. The announcement shows Amazon continues to increase the value-add of the Prime Membership, deepen their competitive moat, and even take on the array of local alcohol deliver apps and services.
Party Emergency? There’s an App for That.
Amazon Now is the company’s app-only service that allows Prime members to order among "tens of thousands" of household items and receive free delivery within two hours or pay $7.99 for delivery in an hour. The service is perfect for those who can’t run to the store because they are either too busy at home or work, hosting a party, taking care of kids, are sick, or perhaps just want the convenience!
Prime Now originally started in Manhattan last year, and has since been rolled out to Miami, Dallas, Atlanta, Austin, and Baltimore. But the alcohol delivery service is new. Not only will the beer be delivered cold (along with other items such as ice cream), but the service will deliver from 8am to midnight every day, including Sundays.
Amazon’s Competitive Moat Grows Again
The continued rollout of Prime Now, along with the addition of alcohol delivery, should be making the martini glasses of competitors clink with fear. There are many alcohol delivery apps already on the market such as Drizzly, Minibar, Ultra, Swill, Saucey, and Drinkfly. But all of these have only one, or at most a handful, of cities where they operate. Many of them also rely on partnering with local beverage stores to deliver the products.
Amazon has the infrastructure to eventually roll out Prime Now to hundreds of cities if there is enough consumer demand. Their scale will allow them to stock an incredible number of choices and not have to rely on individual partnerships with local stores. As Amazon’s CFO Brian Olsavsky noted in the Q1 2015 earnings conference call:
We'll point out that our operations network that we've been building for the last 20 years, helps make Prime Now a viable proposition for us. The scale makes this possible.
This is Amazon’s biggest competitive advantage, along with the brand it carries. Prime Now shows it continues to deepen this competitive moat, making it all the harder for others to challenge them. This also further gets them closer to the holy grail of online grocery shopping and delivery, which they have been experimenting with Amazon Fresh and Amazon Pantry. If successful, we could easily see all of these Prime services rolled together in the future.
So Where’s My Beer?
For those not in the Seattle area or one of the other highly coveted Prime Now zones, when can you expect Prime Now to come to a neighborhood near you? Unfortunately Amazon won’t say -- but this could be a good thing.
Amazon is taking a deliberate approach to rolling out the service. Rather than going crazy and making huge capital expenditures on more fulfillment centers, Amazon is making sure there is enough demand for the service and staying power. The instant delivery business is an area where many have failed in the past.
Hopefully Amazon continues to undertake the rollout carefully. On the recent conference call for Q2 2015, management was asked why there weren’t rolling out Prime Now and Fresh faster and what the bottleneck was. They responded that they were already moving quickly, but "we would always like to move quicker, obviously."
This isn’t Amazon’s first experimental concept in logistics, so it shouldn’t be a worry. If anything, investors should applaud the development and put another mark up for Amazon’s competitive positioning and unceasing commitment to the customer and convenience.
