2 Reasons It May Be Time to Drop Amazon Prime
Amazon (NASDAQ: AMZN) has set the standard for delivery of online orders. The company made two-day shipping the norm, and now it's leading the way into next-day delivery, forcing its chief rivals, Walmart (NYSE: WMT) and Target (NYSE: TGT), to follow.
The company has been a leader, and it has offset its costs by getting people to pay for the privilege of getting two-day (and now one-day) shipping through its Prime memberships. The subscription cost of $119 per year or $12.99 per month gives members unlimited two-going-on-one-day delivery across more than 100 million items along with other perks.
That was a great deal for a really long time, but it may no longer be necessary. Many Prime members could drop the service and not really lose anything.
1. Walmart is being aggressive
Walmart's digital team, led by Jet.com boss Marc Lore, has acknowledged that it can't compete with Prime. To make its offer attractive, Lore took the bold step of making Walmart's two-day delivery free to people who place qualifying orders of $35 or more.
That's not quite as convenient as being able to order in whatever quantity you want from Amazon. It is, however, a good deal because consumers don't have to pay an annual or monthly fee. Walmart's offer only covers a few million items -- basically 100 million or more fewer than Amazon -- but for at least some people the selection is more than enough.
Walmart also has plans to improve its shipping time to one day, and it has been testing delivering grocery items straight to consumers' refrigerators. The retail giant hasn't bested Amazon, but it has a decent selection if you can order in $35 increments -- and free is appealing.
2. Target going same-day
Target has lagged behind Walmart and Amazon when it comes to offering two-day delivery for free. It has a similar offer to Walmart's, with a $35 order minimum, but it only provides a selection of a few hundred thousand items. (Holders of the company's REDcard don't need to hit the minimums.)
Where Target offers a true alternative to Prime is its same-day shipping offer through its Shipt service. The retailer offers a four-week free trial for Shipt, which costs either $99 a year or $9.99 per order.
The company offers a robust selection of grocery and household items for same-day (sometimes near-immediate) delivery. Amazon, of course, offers same-day delivery from Whole Foods and for Prime members in some markets, but Target's store base gives it an edge in this area.
Do you need Amazon Prime?
Amazon's edges are in selection and convenience. Prime members can get pretty much anything they want in two days and soon-to-be one day. That means they can order without any planning and have the items arrive at their home in two days (and eventually one).
Those may not be major advantages compared with Walmart's and Target's offers. Walmart is basically offering Prime with less choice and a $35 minimum for free, while Target is pushing boundaries in same-day delivery.
It's possible that many Prime fans won't be tempted, but for people on the fence, Walmart and Target have compelling offers. Amazon still has a good deal, but it's certainly no longer the only game in town.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.
