Amazon launches Instant Pickup service near college campuses

Dive Brief:

Amazon on Tuesday announced a new free "Instant Pickup" service for Prime and Prime Student members, who can order from a selection of daily essentials for pickup in two minutes or less, according to a company press release. As usual, returns are free.
The service is now available at five of Amazon’s fully staffed pickup locations in Los Angeles, Atlanta, Berkeley, California, Columbus, Ohio, and College Park, Maryland, and that will expand in coming months, the retailer said. Amazon operates 22 staffed pickup locations on or near college campuses nationwide. The locations are likely to be in areas where the retailer’s Prime membership and purchasing are highest, Jim Fosina, CEO of Fosina Marketing Group, told Retail Dive in an email.
Items available for Instant Pickup include snacks, drinks and electronics, including some of Amazon’s most popular devices, the company said in a press release. These are convenience items that likely enjoy hefty margins, Fosina noted.

Dive Insight:

Amazon continues to drive up expectations for speedy fulfillment, garnering precious purchasing data in the process. Some 68% of consumers expect their orders to be delivered within three days, according to research from omnichannel solutions platform Kibo. With this new promise of in-store pick-up of products in under two minutes, Amazon is once again "pushing the envelope" and putting competitors on notice, Kibo CMO Tushar Patel told Retail Dive in an email.

Indeed, experts warn that this kind of service will pose a challenge to local rivals. "This service is to prevent the customer from looking for an alternative local retailer to provide them with their immediate and urgent need for a product," Fosina said. "Expect Amazon to do more of these units in regions and zip codes where the concentration of Prime Members is the highest and have demonstrated the frequency of purchase pattern on certain items that places them in the Pick up profile category. VERY smart idea [from] the folks at Amazon."

Luke Starbuck, vice president of marketing at customer care automation firm Linc, says that no corner of the retail market is safe. "As 7-Eleven execs recover from the Amazon-cart that just knocked them off their feet, a close look at the positioning of this new offering shows a bold move into a new shopping space for Amazon," Starbuck said in a statement emailed to Retail Dive.

Instant Pickup appears to be the next step on a continuum of fast delivery from the e-retailer — starting with free two-day delivery for Prime members and expanding in recent years to next day and same-day delivery — but two-minute pickup is another ballgame. "While fast delivery has been at their core for a long time, the combination of speed and pickup is a different model than 2-hour delivery, or pickup from a locker," according to Starbuck, who suggested that the retail giant may be eyeing a convenience store chain for acquisition. "Effectively, this new combination places convenience stores squarely in the cross-hairs, although Amazon has a lot of ground to make up before they have the store distribution."

Beyond luring in more sales and sticky Prime members, Amazon will benefit from yet another vein of data flow. "You can be sure that this service is Amazon flexing it's analytical muscles," Fosina said. "Amazon is mining it's customer transaction data and cross referencing this information with zip code and product purchase sku level information."

But the effort also comes with costs, which Amazon has largely absorbed thanks to the beefy profits from its AWS cloud services unit and the patience of its investors. And it will entail more of a brick-and-mortar mindset. "Amazon’s Instant Pickup offering will require tight control of inventory, which can be especially difficult for food items," Patel noted. "Snacks and beverages are also items that tend to be more impulse purchases. It's unclear how much foresight consumers will have to get on their phones to order these items first, rather than walking into a store to select an item and walk to the checkout."