Jeff Bezos, the CEO of Amazon.com, goes on and on about how much he loves his customers. But he’d like you to up your commitment level.
That’s the rationale behind the apparently planned expansion of AmazonTote, a weekly free delivery service, as reported in the Financial Times and elsewhere. Even today, the bulk of Amazon’s customers turn to Amazon.com for holiday gift-giving and purchases of physical media, as its financials show. Amazon.com wants to expand customers’ online shopping into everyday household goods, like diapers, paper towels, and laundry detergent.
Because AmazonTote has only been operating in the Seattle area, there are a lot of misconceptions out there, leading to faulty reporting. AmazonTote offers doorstep deliveries, but not of perishable groceries like milk, as Mashable has suggested. New Yorkers, predictably, have compared it to FreshDirect, a local meat-and-produce delivery service. And those with long memories have said it’s Webvan 2.0, recalling the famous flameout of a nationwide online grocery-delivery service.
Adding to the confusion, AmazonTote is managed by AmazonFresh LLC, an Amazon.com subsidiary which also happens to deliver perishable food items in the Seattle area.
But groceries are the wrong way think about AmazonTote. What it really is: another way to get items to customers faster, cheaper, and more reliably, like Amazon Prime, its free-shipping subscription plan, or Super Saver Shipping, where most purchases over $25 can get shipped slowly for free. With AmazonTote, customers are assigned a delivery day, and at some point during the course of the day, they’ll get their orders delivered in velcro-sealed tote bags. It’s pretty obviously not designed for perishable items, since you can’t pick a time slot.
What’s really interesting is the expansion of AmazonTote in connection with Amazon.com’s purchase of Quidsi, the parent of Diapers.com and Soap.com, which offers free shipping of frequently consumed household items. Before buying Quidsi, Amazon.com introduced Amazon Mom, a competing free-shipping program for similar merchandise.
Besides expanding the kind of items customers purchase and upping the frequency of their buys, AmazonTote could ultimately give Amazon a better handle on shipping costs, a major expense. In the Seattle area, Amazon uses its own trucks to fulfill AmazonTote deliveries, bypassing the postal service, UPS and FedEx. It also doesn’t pack items in boxes, reducing another cost.
The one question, as Amazon.com expands its own delivery services, is whether it will have to collect sales taxes where it rolls trucks, a burden it has so far escaped. (States can impose sales taxes on out-of-state deliveries, but can’t force retailers to collect them, and most consumers don’t bother to pay voluntarily.) Amazon may conclude that some kind of sales-tax reform is inevitable. And with the likes of Walmart expanding in-store pickup of online orders, Amazon will face more competition on the convenience front. That will be Amazon’s new sales pitch: What are you buying this week?