Dive Brief:

• Amazon on Thursday announced a set of services, dubbed Amazon Local Selling, which offers in-store pickup and local delivery for businesses, according to a company press release.
• Customers can purchase items from merchants and select same-day pickup at the seller's local store or opt for delivery in specific zip codes. Businesses can also offer add-on services like installation or product assembly.
• Local Selling is currently available for national retailers and small- and medium-sized businesses, per the announcement.

Dive Insight:

Amazon is expanding the scope of its omnichannel services. This time it's helping ease a friction point that is becoming increasingly tense heading into the 2021 holiday season — delivery.

Over half of all products purchased on Amazon are sold by third-party sellers, and the e-commerce giant is increasingly reliant on those merchants to bolster its revenue streams. In the company's second quarter this year, revenues from services for its third-party marketplace sellers rose 38% to $25.1 billion, and marketplace growth outpaced the company's own retail sales growth.

Local Selling is an additional sign of Amazon broadening its capacity when it comes to supply chain and logistics, similarly to what Walmart is constructing through selling its omnichannel capabilities to other businesses.

Amazon has been on a logistics-related expansion spree as it works to internally control its supply chain. The company spent $35 billion in capital expenditures in 2020, dwarfing Walmart's $10 billion. Amazon has directed much of its investments to establishing a footprint close to consumers. Now, 63% of the U.S. population lives within an hour drive of Amazon's fulfillment and redistribution centers.

"Local Selling presents enormous opportunities to a large number of sellers who want to bring more product selection to their Amazon business, enabling many to expand their multichannel offerings by integrating their physical stores and delivery capabilities with their digital operations," Jim Adkins, vice president of recreational and vocational Categories at Amazon, said in a statement. "Our research shows that many customers will opt for local pickup when given the choice." 

Additionally, consumers may be primed to pick up items at local stores due to pandemic-related shopping patterns. Last-mile delivery, and the cost it incurs, has long been a retail issue. But, last year saw a significant increase of retailers of all sizes offering BOPIS services, cutting back on the time and expense of getting goods in the hands of consumers. That trend was in part fueled by concerns regarding timely holiday fulfillment.

Those delivery concerns are prevalent this year as well, along with widespread supply chain bottlenecks as consumer demand surges. UPS CEO Carol Tomé estimated that during this year's peak season, volume would exceed capacity by 5 million parcels each day.

The services may also give Amazon third-party sellers additional options when met with costly delivery expenses. This year, both UPS and FedEx announced surcharges ahead of the peak shipping season, and smaller businesses typically don't have clout or scale to negotiate with these services on price.