Market Overview

Amazon Expands Same-Day Delivery Service to More Cities

Amazon.com (NASDAQ: AMZN) has announced the expansion of its same-day delivery service to six cities. These include Baltimore, Dallas, Indianapolis, New York City, Philadelphia and Washington DC.

Amazon introduced this service in 2009 and recently expanded it to Dallas and San Francisco. The service allows customers to order items any day of the week, latest by noon, and receive the deliveries at their home on the same day. This service is applicable for millions of items including popular movies, video games, travel needs, school supplies and day-to-day household goods.

Prime members can avail the service for $5.99 which will cover all the items in a single order. However, the service is expensive for non-subscribers who need to pay $9.98 for the first item and 99 cents for each additional order.

This is the latest effort by the company to expand its operational activities (shopping) and increase delivery options. In May 2014, Amazon and Twitter (NYSE: TWTR) sealed a deal to enable Twitter users to shop directly from Amazon's e-Commerce portal. In the same month, Amazon announced the expansion of its Sunday package delivery service to nearly 15 cities. In 2013, Amazon expanded its Prime Pantry, a grocery delivery service, to Los Angeles and San Francisco.

We believe the company's ever-expanding content portfolio will attract more subscribers, thereby expanding the company's revenue base.

Online shopping has changed the shopping scenario. Customers visit retail shops to physically check the products but they finally purchase it online to avail attractive discounts. Therefore, prompt and accurate delivery of products is essential for any company to succeed in the e-Commerce world.

With a view to make this expansion a success, Amazon has already started investing in warehouses.

However, the same-day delivery field is getting more crowded by the day. Increasing competition from eBay (NASDAQ: EBAY), Google (GOOGL) and other online retailers remain a matter of concern. In June, Google expanded its same-day delivery service into rural areas to gain a competitive advantage. Also, uncertainty regarding its investment plans and the probability of continuing losses in the near term compels us to be cautious regarding the shares.

Amazon shares currently carry a Zacks Rank #4 (Sell).


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