The Ereading Blog

Why Same Day Delivery is Largely a Marketing Ploy

LOGO-1-NBCNewsA story on today offers up this tidbit: "Everyone Likes Same-Day Delivery, Except for the Paying Part." 

I bet.  What I find odd is that the article suggests that same-day delivery has a high operating cost for everyone but Amazon.  This is, of course, ridiculous.  I virtually guarantee that Amazon is losing money on same-day delivery…a lot of money.  But we won't find out until 2016, when they announce yet another round of financial losses in virtually every area of their business except cloud computing and some areas of their retail segment.

The fact is, ever since Amazon first announced same-day delivery service I've been saying it is a "made-up need."  I've even gone a step further and said–both online and in front of the various groups I speak to–that same-day delivery is little more than a marketing gimmick, and not even a very good one.  For example, consider the rather ludicrous concept of Drone delivery, a prime (pardon the pun) element of the same-day delivery model that I discussed here

It both amuses and alarms me when companies leap at almost every money-losing marketing ploy Jeff Bezos throws out there.  I can easily imagine him sitting in his private boardroom with his top lieutenants, laughing hysterically as Wal-Mart, Target,, and others scramble to appear relevant by copying Amazon's marketing gimmicks and trying to make them viable, even when the operating costs are insanely prohibitive.

These companies don't realize they're just ensuring Amazon's name gets mentioned in the media in association with their own…costing them some customers who will inevitably migrate to Amazon…just, well, because.  There is an exception, of course: eBay.  The auction giant had the good sense to recognize that they were chasing a hare that wasn't real when it came to same-day delivery.  The company subsequently shut down its money-losing eBay Now service before it really hurt them. 

Too bad the "other guys" didn't get the common-sense memo…or, lacking one, have the business sense to see what Amazon is really doing. 

Here's the reality, folks, and you'd be surprised how many people don't know it: Amazon loses money.  Piles and piles of money.  They make up for some of the losses by mining the heck out of their few profitable divisions like Amazon Web Services and certain areas of their retail operation.  But how long will that be sustainable?   That remains to be seen.  But believe me, someone out there (kind of like can see that Amazon is precariously balanced on the head of a pin; all it's going to take to tip them off is someone (or a few someones) undercutting the profitable lines of business they do have by doing what they do now, only better.

And that doesn't mean offering stupidly expensive same-day delivery just because they can, even if it means losing millions of dollars a year.  After a while, Amazon will probably not-so-quietly phase out free same-day delivery.  When they do, see how fast such an expensive and unnecessary "add-on" service goes the way of the Dodo. 

If it does happen to survive, I predict it will wind up being a service enjoyed by the wealthy and/or the very, very impatient who are willing to pay a premium for the service.  Whether catering to that relatively small demographic will be profitable in the long-term is up for debate, but I seriously doubt it will be.