Amazon Prime: How This Service Transformed E-commerce Shipping

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Mainly due to the global pandemic, the e-commerce market in the United States grew immensely in 2020. According to the Digital Commerce 360 report, it rose by a whopping 44 percent year over year, with consumers spending at least $860 billion on online products and services.

But not everyone gets to eat the biggest pie. That privilege belongs to Amazon, which took as much as 50 percent of all digital retail sales, according to PYMNTS. Although its growth from 2019 to 2020 was almost equal to that of Walmart, overall, online revenues for the ultimate one-stop shop were at least 10 times more than the rival.

It isn’t surprising then that e-commerce shops both aspire and fear Jeff Bezos’s conglomerate. But here’s the thing: he didn’t do it overnight. It took many changes over the last decade to become the e-commerce leader.

At the very least, tracing the evolution of the business, particularly its supply chain, can inspire marketers and entrepreneurs today on how to scale and plan their growth.

It All Starts with Prime Services

Jeff Bezos and this then-wife Mackenzie launched Amazon because he didn’t want to miss out on the dot-com boom in the 1990s. But for this, he had to move to Washington.

He also needed to know what to sell. After listing the top popular online products, he settled on books because of the high demand for literature and the possibly low unit price—its cost is less likely to scare off new customers.

From there, his business grew until he made it public. Then, he expanded his offering to include music and clothing. But one of the reasons for its significant popularity wasn’t really a product but a service.

About 10 years after he launched Amazon, Bezos and his team then introduced Amazon Prime, the annual subscription program that allows its members to enjoy a free two-day shipping and a discounted one-day shipping for a price of only $12.99 a month or $119 a year.

That’s not all. From this, Amazon provided more Prime benefits, including the ability to borrow specific books up to a month in its Kindle lending program, Prime Pantry that ships non-perishable goods regularly for a flat fee, and Prime Now, which means that customers on certain locations can order essential goods and receive them within two hours for free or 60 minutes for less than $8.

Because the pot is certainly sweet, Prime has become one of the biggest sources of continual revenue for the business. It currently has at least 200 million members from the United States to India and generated almost $20 billion in sales in 2019.

But with Prime, Amazon also immediately changed the face of the supply chain process.

How Amazon Transformed Shipping

The demand for flatbed companies has been increasing over the years. In 2018 alone, an industry report revealed that its revenue jumped by almost 20 percent compared to the previous year. That means this sector enjoyed around $8.8 billion in sales—at least $1 billion more than in 2017.

Usually, flatbeds are essential for delivering bulky items like steel or machinery or transporting wholesale imported goods, which may occur now because of the growing e-commerce market. But this need may have also stemmed from Amazon’s launch of its Prime services.

Before Amazon Prime, most online stores could take a while to deliver goods to homes. It may take between three and five days, depending on the distance. Sometimes it could be even longer. In certain situations, buyers needed to pick up the items from the local affiliate store or branch.

Prime changed all that because it obviously shortened the waiting time. Moreover, it proved that it is indeed possible for stores to deliver products way faster than before—for free.

The impact of this perk then reflected on consumer behavior in the following years. In a 2017 survey, for example, over 50 percent said that free shipping is the most important option, while almost the same percentage counted free shipping and fast shipping as equally important.

In other reports, about 30 percent of millennials consider a business’s ability to deliver the goods on the same day they buy online. Nearly the same number of people shared that delivery speed is one of the features they look for in a shipping provider.

Amazon’s propensity—and desire—to speed up the delivery of products even in remote locations gave rise to Prime Air, which in concept means drone deliveries. Because of this, some experts believe that, should this become a hit, up to 40 percent of consumers may prefer to receive their packages from the sky.

It might take a while before Amazon finds stiff competition considering how fast it can scale, but every e-commerce shop can learn a thing or two from its supply-chains strategy to make itself more competitive.

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