Prime Now Has Become Amazon’s Biggest Retail Bet
A year ago, Amazon introduced Prime Now, a service that offers a limited catalogue of goods available for one-hour or two-hour delivery. The service launched first in Manhattan and has been on a tear around the country since, launching in parts of more than 20 U.S. cities as it tries to take down one of the last barriers between Amazon and physical retailers. More cities are expected to get Prime Now next year.
If you listen to Prime Now General Manager Stephenie Landry fight through Amazon’s notorious reticence around discussing future plans, it’s not crazy to think we’re staring at Amazon’s biggest retail bet since the launch of the original Amazon Prime two-day shipping program in 2005.
“When we see something” that customers love, Landry said in a recent interview, “we definitely want to expand it as fast as possible.”
The service, which is only available to Prime members, costs nothing extra for two-hour deliveries, but carries a $7.99 fee for one-hour orders. Landry declined to disclose the breakdown of orders by speed. The Prime Now catalogue is limited, with between 15,000 and 40,000 items to choose from, depending on the city, compared to millions for two-day shipping through regular Amazon Prime. Landry said the company’s Prime Now warehouses make it difficult to carry much more inventory than that, but hinted the company is thinking about other options.
“There is some functional limit if we continue to do things the way we do them right now,” she said. “But the company is really inventive.”
Even with the limited selection, Amazon hopes the service can play a big role during the holidays. The company recently added 4,000 gift-related items to the Prime Now selection and said Prime Now deliveries will be made through Christmas Eve. That means Amazon can appeal to the last-minute shopper who would typically have to head to a brick-and-mortar store to pick up a last-minute gift.
Landry’s pedigree at Amazon also tells us something about how seriously the company is taking this initiative. Before this role, she spent a year as the “shadow” — or close adviser — to Jeff Wilke, the longtime head of Amazon’s core retail business in the U.S. who many insiders believe would replace Jeff Bezos as CEO if and when he decides to retire. Bezos’s own shadows have gone on to run crucial businesses such as Amazon India and Amazon Echo.
There are real challenges to taking this model mainstream, however. First, it is only available for Prime members, which means customers have to pay $99 a year just to get access to Prime Now. There are also well-funded competitors such as Postmates, Deliv, Google and Uber in some cities. And the economics of on-demand delivery only work if a given courier is doing several deliveries per hour, which would be tough to accomplish outside of dense city areas.
“But part of what we do really well as a company is invest around the concept of efficiency,” Landry said. “That’s the challenge I’m most excited about.”
Lastly, the Prime Now service is already facing legal challenges. Four former Prime Now couriers are suing the company, arguing they were incorrectly classified as contractors instead of employees. Such a move could pose a threat to the business model if they are victorious. Landry seems unfazed.
“We’ve been doing this for a long time successfully with a lot of different partners,” she said flatly of Amazon more broadly.