Move Over, Groupon: Amazon Flexes Its Muscles with Local Deals, Same-Day Delivery Service

Inplace #2

EDITOR’S NOTE: This article, originally published on March 7, 2013, placed at No. 8 in our 20 most popular articles of the year.

ADOTAS — With all the news about the trouble that Groupon is having in the marketplace, Amazon has stepped up its strategy to provide local deals to consumers through AmazonLocal by showcasing offers by small businesses around the country and in your back yard. Amazon also recently launched same-day delivery for products purchased on its online catalog, and with Google Shops reportedly on the horizon, traditional retailers will need to uncover new ways to attract customers.

According to Forrester Research, e-commerce sales will reach $327 billion by 2016 and consumers will be purchasing everything from $12 body soap to $3,000 jackets – as well as high-ticket items like cars – all online.

The speed of delivery and access to local deals is what Amazon believes will drive consumer sales and is what the company is banking on. Amazon also has an investment in LivingSocial.

AmazonLocal operates very similarly to Groupon, in that it works with regional small businesses to provide a way to have consumers find deals for daily promotions in their area. Amazon already has the reputation and reach to make this business model a success, something that Groupon lacks.

Wall Street appears uncertain of Groupon’s outlook, with two-thirds of the covering brokers maintaining neutral ratings on the stock — despite the fact that the company’s shares have surged more than 24% since CEO Andrew Mason’s dismissal on Feb. 28.

“Ultimately, they want to push to be a destination and shift how people think about deals from the deal-of-the-day perspective now,” said Gene Munster, who covers Groupon for Piper Jaffray and has a buy rating on the company’s stock.

After its IPO, many believe that Groupon has lost its charm and appeal. Today it provides offers in categories that may not differentiate it enough in terms of credibility, range of products, experience, customer service and even price. People may still use Groupon to get deals on household items like blenders, but when planning a holiday, people might venture over to specialized deal sites like Jetsetter or Travelocity instead.

Amazon is not concerned with its lack of category focus and will take a similar approach as Groupon by offering deals that run the gamut from dry-cleaning services to car washes to local restaurants.

Mike George, vice president of AmazonLocal, said an online deals site seemed like a natural fit for Amazon because the company has always focused on helping customers find anything they want to buy.

Same-day shipping services are mirroring consumer behavior towards wanting their products delivered – and instantly. Last year, Amazon opened a multitude of new shipping centers near major metropolitan areas so that it could quickly get products to its Amazon Prime customers, often within the same day. Consumers order their purchases online and can have them delivered that same day to special Amazon-branded lockers located around the country, close to where they live.

According to TechCrunch, Google is planning to launch a competitor to Amazon called Google Shopping Express. It will also act as a semi-universal shopping cart that offers same-day delivery from stores in a consumer’s area, including Walmart and Target.

Meanwhile, Shutl, a 24/7 same-hour and same-day ecommerce delivery service, officially launched its North American operation on Feb. 26.  Shutl’s service was set to go live this month in New York City, San Francisco, and Chicago, and roll out to sixteen additional metros in the coming months. Shutl is a branded same-day delivery option enabling multi-channel (aka, “clicks and mortar”) retailers to offer delivery of online orders either within minutes of purchase or within a convenient one-hour window of choice.  It typically charges less than $10 per order, and is often offered free.

Amazon’s Diversification Strategy

The world’s largest online retailer has been working in overdrive this past year, ramping up its approach to offering the most diverse set of products available.  Earlier this year it launched its AutoRip service to automatically provide people with digital mp3 versions of past CDs purchased via its website. Last week, Amazon had another new content announcement for their Amazon Prime Instant Video service. This time it was a deal with Scripps Networks, the folks behind channels like The Food Network, The Travel Channel, DIY Network and HGTV. Shows named in the deal include “House Hunters,” “Iron Chef America,” “Cupcake Wars” and “Man vs. Food.”

Amazon also landed another deal with CBS, bringing more content from CBS and Showtime to its Prime Instant video streaming service. Amazon will be adding “America’s Next Top Model,” “Everybody Loves Raymond,” “Jericho,” “The L Word,” “Undercover Boss” and “United States of Tara” to their digital entertainment lineup.

On the grocery order and delivery side, Amazon is facing new emerging competitors to its Amazon Fresh produce and grocery delivery service. A San Francisco-based company called Good Eggs just launched a new web platform Thursday that gives people the ability to select items from local vendors and farmers and combine them in a single order ready for delivery or pickup.

“We actually had the inventory for an awesome grocery store, but the missing piece was some kind of central distribution – some way for you place an order across all of these vendors and get a single pickup or delivery,” said Good Eggs co-founder Rob Spiro. “We were experimenting with offices and pickup spots…. The model we found working well was very operational. You end up getting into the logistics game to provide a high quality of service.”