We Took Amazon's Free, Fast Delivery for Granted. Will We Pay for It?

(Bloomberg Opinion) -- In the pre-coronavirus world, retailers big and small were in an arms race over free and fast delivery. In New York City, where I live, that meant you could get a range of items from toothpaste to batteries within 48 hours or less without paying an extra fee. Now, the wait for such items via my Amazon Prime account is nearly a week. And that’s actually a pretty good pace these days: Prime members are reportedly facing month-long delivery delays for some items as Amazon prioritizes getting household staples to those in need. And those staples are hard to find online, or come with big strings attached. Last week, Walmart.com offered me the option of paying $75 to get speedier delivery on a bottle of Zicam cold-remedy medicine that typically retails for about $10 to $15. The item is now out of stock. 

Demand for essential items is skyrocketing as people hunker down in their homes, and many are turning to delivery services, straining networks that even after years of growth in e-commerce weren’t built for such astronomical spikes. With orders for things like thermometers and toilet paper getting canceled as inventory dries up, I’m less concerned these days about when my delivery shows up and just happy if it gets here at all. And there are, of course, much bigger concerns about the health and safety of the employees that make these deliveries possible. About 100 Amazon.com Inc. workers at a Staten Island, New York fulfillment center plan to go on strike at noon on Monday. They’re demanding the facility be closed for two weeks and sanitized amid the spread of the coronavirus and that workers continue to be paid. It remains unclear how long such coronavirus-related disruptions will linger, but expectations for daily life are already being reset. What if some of those changes stick?

Wary of another pandemic, people may be more vigilant about stockpiling essentials at home, to the point where it’s really not necessary to get a fresh pack of toilet paper delivered in two hours versus two days. For those who do want fast service, Amazon, Walmart Inc. and other retailers will eventually be able to start putting packages on people’s doorsteps at their previous pace as the flow of goods starts to normalize. But the perception of the value of that service seems to have changed. I don’t think I’ll take it for granted in the way that I did before. I might even be willing to pay for it. 

A 2019 report from the National Retail Federation found that 75% of consumers surveyed expected to get free delivery even if their order total was less than $50. Meeting those expectations eats into profit margins for retailers, and even when a fee is assessed, it’s usually well below what it actually costs to ship the package. And that's before you think about the cost of shipping it back. “Retailers Gave You Free Returns and You Ruined It,” was the title of a December 2019 story by Bloomberg News about how consumers were taking advantage of free-return policies by ordering a range of sizes or many more products than they ever intended on keeping. U.S. consumers were expected to send back $100 billion worth of goods purchased last holiday season, according to forecasts from retail technology company Optoro cited by the Financial Times. Retailers foot the bill for both the two-way logistics and the resulting pileups in inventory, some of which may be unsellable upon its return, but they seemed sort of stuck with this dynamic. While some outlets such as Urban Outfitters Inc.’s Anthropologie had started charging fees for returns by mail in an effort to incentivize customers to bring items back into a store to ease the logistical challenges, this was far from a widespread process.

The whole history of e-commerce has been about making the process as easy for consumers as possible, and retailers weren’t keen to rock the boat. In a way, the coronavirus crisis has done that for them. While sales of food and other essential items are rising, less-vital retailers have been forced to shutter their stores and their e-commerce operations are fielding little interest for more discretionary products like clothing or home goods. As they dig themselves out of that hole, the margin squeeze from free delivery and free returns may matter in ways it hasn’t before. Maybe that means a small fee is assessed; maybe that means incentivizing customers to use a buy-online, pick-up-in-store model. If there was ever going to be a moment to adjust the expectations of the American consumer, this may be it. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

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