Online Retailers Deliver Faster, Still Trail Amazon.com

By Markets Fool.com

Amazon.com(NASDAQ: AMZN) has set a standard for delivering online orders that other companies have struggled to meet.

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On the positive side for other digital retailers, their shipping times have been steadily improving, but that's sort of like saying the Buffalo Bills have made some strides toward catching up with New England Patriots. Sure, the Bills might win eight games this seasonand lose the division by less than they usually do, but it's still just degrees of losing.

And when you look at every other major online retailer, it's at least as big a gulf as the difference between the Patriots and the Bills. In reality, while the non-Amazon retailers have improved, they still lag behind by a stunningly wide margin.

Amazon uses a mix of people and robots in its warehouses. Image source: Amazon.com.

How bad is it?

Amazon, which captured 33% of online sales in 2015, up from 25% in 2012, according to Internet Retailer, delivers millions of items in two days to Prime members, who pay $99 a year for that privilege. In addition, the online leader offers one-day and even same-day delivery in an expanding number of markets.

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Basically, Amazon has set a two-day standard and every other major digital company struggles to compete. Internet Retailer found in its newly released "Click, Ship & Return: Fulfillment Report" that the average delivery time for 30 top digital retailers was four days -- double Amazon's two-day standard."That might seem like an eternity to Amazon Prime customers used to delivery in a day or two, but for many e-retailers it's a major improvement from just two years ago," wrote Senior Analyst Kat Fay.

Internet Retailer tracked shipping speed, order processing times, and returns for 30 of the top online retailers in North America.

What did the survey show?

Internet Retailer worked with Slice Intelligence to track the delivery speed of 238 online retailers (excluding Amazon) from Jan. 2014 through April 2016. During that time average delivery time for all non-Amazon retailers dropped from 8.3 days to 5.1 days. The 30 retailers tracked specifically by Internet Retailer did even better, cutting their average delivery time to four days.

"Many of the largest online merchants, including Nordstrom (No. 18 in the Internet Retailer 2016 Top 500 Guide), Wal-Mart (No. 4) and Newegg Inc. (No. 17), have shaved more than two days off of delivery times in two years," Fay said.

The big winner of the survey appears to be Best Buy (NYSE: BBY), which cut its delivery time from 6.8 days in April 2014 to 3.3 days in April, 2016. Wal-Mart and Target (NYSE: TGT), arguably Amazon's biggest overall competitors, fell way behind Best Buy, coming in at 5.5 and 4.8 days, respectively.

Those are better numbers for Amazon's biggest competitors, but it's really just moving from awful to bad.

Amazon is still the king

While the rest of the field has improved, you can see that Amazon has built a lead that its rivals are going to struggle to catch up to. That's because the online leader has created its entire business around efficient delivery. Wal-Mart, Target, Best Buy, and the rest have improved, but they won't be able to quickly develop their infrastructure to close the gap.

Amazon has built a network of distribution centers around the country solely devoted to shipping individual orders. Physical retailers have built their infrastructure around supplying stores -- a very different problem than sending out single orders.

It's possible that someday Amazon, Target, Best Buy, and other retailers will be able to leverage their physical stores and distribution facilities to catch up with Amazon, but that day does not appear to be very close. The rest of the field has improved, but it still has a very long way to go.

Amazon offers Prime members free two-day delivery and that's the gold standard. In order to compete, everyone else needs to get much closer to that standard.

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Daniel Kline has no position in any stocks mentioned. He orders from Amazon nearly every day. The Motley Fool owns shares of and recommends Amazon.com. The Motley Fool recommends Nordstrom. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.