Policymakers Should Not Slow Down Fast Deliveries
The introduction of Amazon Prime and two-day shipping in 2005 changed the fulfillment and e-commerce industry. Since then, Amazon has continued pushing advancements in delivery timelines and logistics. These innovations have had a strong ripple effect across the industry, and consumers now enjoy faster delivery at a lower cost from many retailers. Policymakers should consider these consumer benefits against potential legal or regulatory actions that could stifle innovation in the logistics space, harm product availability, or slow down delivery.
Product deliveries are arriving faster and faster, and Amazon has helped push these timelines forward. Amazon Prime initially offered two-day shipping on many in-stock products, setting a precedent that other retailers soon followed. Since then, Amazon has remained committed to advancing delivery schedules and made changes to continually improve timelines. In 2019, Amazon began offering one-day delivery for certain products and then later introduced same-day delivery. Walmart matched this standard and rolled out one-day delivery in May 2019. Retailers use gig workers and private delivery people for last-mile delivery, which is the final journey of a product from the distribution center or retail store to the consumer.
Retailers can offer quick shipping because of their logistics and fulfillment planning. Amazon, for example, relies on warehousing innovations and a regional fulfillment network. The regional fulfillment network is made up of eight independently operating zones. In this model, products are shipped from the closest warehouse in the region, reducing the distance a product must travel before reaching the customer. Amazon also uses advanced technology to optimize the delivery route and process and relies on automation in warehouses to reduce the time spent sorting, finding, packaging, and loading products for shipment.
The steps taken to enhance delivery timelines are highly effective. In the first half of 2023, Amazon delivered 1.8 billion items the same day or next day— that’s more than four times the volume during the same period in 2019. According to research from Insider Intelligence, Amazon’s average delivery time decreased from 3.4 days in June 2021 to 1.5 days on average in June 2023. Similarly, other retailers completing digital purchases saw their average delivery time drop from 7.4 days in June 2022 to 5.2 days in June 2023. Consumers are 73 percent more likely to purchase again from a retailer if a product is delivered in a timely manner. Retailers want to control their delivery networks to ensure a good consumer experience.
Retailers aim to extend their delivery services to as many products as possible. Many platforms operating both third-party marketplaces and first-party retail provide sellers with the opportunity to leverage their logistics capabilities. For example, third-party sellers on Amazon can choose to manage every facet of end-to-end fulfillment independently or use Amazon’s logistics infrastructure for product fulfillment. Opting for Amazon’s fulfillment services entails entrusting storage, packaging, shipment, and returns to Amazon itself. This lets more products become eligible for Amazon Prime and guarantees that Amazon, as the shipping overseer, can maintain the expected delivery timeline. Sellers, in exchange for these services, will pay the platform a fee and a percentage of sales. Previously, third-party sellers could fulfill their own orders while retaining the Prime designation for products. However, fewer than 16 percent of orders met the two-day shipping expectations, and Amazon changed requirements for the program in October 2023 in order to ensure sellers meet the fulfillment timelines.
However, regulatory or legal actions could halt delivery speeds for consumers. Amazon offers free, two-day shipping to Amazon Prime members for products marked as eligible for Prime. The Federal Trade Commission (FTC) has criticized Amazon for allegedly coercing third-party sellers to use its fulfillment services by only offering “Prime eligibility” to items fulfilled by Amazon. However, it’s unclear how regulators would want Amazon to remedy this situation. Potential regulator-imposed changes to its fulfillment and delivery services could result in slower delivery and less availability of third-party products for consumers.
However, Amazon isn’t the only platform that provides fulfillment services to third-party sellers. Walmart introduced fulfillment services for its third-party marketplace in 2020, creating new opportunities for third-party sellers to tap into Walmart’s logistics services and enhance their fulfillment capabilities and offering more products through Walmart’s membership service. Walmart also offers a white-label delivery service to independent businesses, providing flexible delivery options throughout much of the United States.
Consumers have benefitted from these innovations. Fast shipping has become so common that consumers expect shipping to take no longer than 3 days. Retailers also use enhanced delivery services to make more products available and offer inexpensive or free shipping options. Nearly 75 percent of retailers offer some version of free shipping. This results in higher savings for the consumer.
Sellers also benefit. Most sellers do not have the scale to complete deliveries efficiently on their own. For example, it only takes one of Amazon’s same-day fulfillment centers an average of 11 minutes to prepare an order. Sellers can access logistics advancements such as warehouse automation and delivery optimization to make fulfillment easier. They can also set prices according to consumer delivery preferences, since some consumers are willing to pay higher prices for faster or guaranteed on-time delivery.
Given that the current regulatory landscape allows consumers cheaper, faster delivery with a wider range of products, policymakers should weigh these consumer benefits against any regulatory or legal actions that might stifle innovation in logistics or limit product accessibility. Policymakers need to consider the long-term interests of consumers and the continued growth of the e-commerce sector when drafting and implementing new laws and regulations that could slow down the fast logistics networks that consumers depend on.
