Amazon, Target, Walmart: The One-Day Shipping Battle

Summary

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WSJ Your Money Briefing

Episode: Amazon, Target, Walmart: The One-Day Shipping Battle

Date: November 29, 2019
Host: J.R. Whalen
Guest: Marcelo Prince (WSJ Corporate Bureau Chief)

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Episode Overview

This episode explores the increasingly intense competition among major U.S. retailers—Amazon, Target, and Walmart—to deliver faster shipping times, focusing particularly on the push for one-day shipping. With the 2019 holiday season underway, the discussion pivots to how these companies are reshaping logistics, the pressure this creates for the shipping industry, and what it all means for consumers and the broader retail landscape.

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Key Discussion Points & Insights

1. The Rise of One-Day Shipping

• Amazon's Spending

  • Amazon is investing heavily, earmarking $1.5 billion in Q4 2019 alone to make one-day shipping a reality for a broader range of products.
    • [02:02] "They actually said they're going to spend $1.5 billion just in the fourth quarter to do one day shipping, which is putting pressure on the rest of the industry." — Marcelo Prince

• Prime Membership as an Advantage

  • One-day shipping is leveraged to entice more consumers to subscribe to Prime, which already boasts over 100 million members.
    • [02:17] "By adding more products and speeding the delivery, they see this as an advantage." — Marcelo Prince

2. Strategies of Walmart and Target

• Leveraging Physical Stores

  • Unlike Amazon, Walmart and Target utilize their brick-and-mortar locations as fulfillment centers, allowing online orders to be picked up in-store—an approach that reduces delivery costs and keeps them competitive.
    • [02:41] "They can keep pace with Amazon ... they've both had success getting people to place orders online and actually go pick them up at the stores, which for them is less expensive than delivering it to your house." — Marcelo Prince

• Membership-Free Shipping

  • Both retailers offer free shipping without requiring a special membership, particularly during the holiday season. Minimum order sizes usually apply outside of peak periods.
    • [04:04] "Walmart actually tried a membership program and gave up on it a few years ago. Neither of them currently have a membership shipping program." — Marcelo Prince

3. Logistics Challenges and the Shipping "Choke Point"

• Pressure on Delivery Services

  • The surge in online orders, especially during the holidays, creates significant strain on USPS, UPS, and FedEx, leading to double shifts and even seven-day delivery weeks.
    • [04:33] "This year both UPS and FedEx will be delivering seven days a week just to keep up with the demand ... the postal carrier will go twice over the same route in the same day." — Marcelo Prince

• Shrinking Holiday Shopping Window

  • The 2019 season has six fewer days between Black Friday and Christmas, compressing volume into a shorter period and exacerbating delivery challenges.
    • [04:33] "This year is especially difficult because there's a shorter window between when Black Friday and Christmas Day ... they have to get basically the same number of orders in six fewer days." — Marcelo Prince

4. The Importance of Product Selection

• Expanding One-Day Shipping Eligible Items
  • Amazon claims 10 million items are available for one-day shipping, seeking to grow that number to 100 million. Walmart and Target choose to limit their eligible products to high-demand items that they can reliably stock in their stores.
    • [03:38] "Amazon claims they have 10 million products already. They want to get to 100 million. I believe Walmart and Target are much smaller, but that's also by choice." — Marcelo Prince

5. Last Mile and Amazon's Evolving Delivery Network

• Amazon's Delivery Partnerships

  • Amazon has ended its relationship with FedEx, relying more on UPS, USPS, and its own growing delivery infrastructure, particularly in urban areas.
    • [05:11] "Amazon has been ramping up its own delivery capabilities ... their own prime trucks doing many of the deliveries, especially in urban cities." — Marcelo Prince

• Challenges in Rural Areas

  • Deliveries in rural regions remain less efficient and less profitable, making Amazon’s strategy more city-centric for now.
    • [05:11] "...in the rural areas it's less common because there are less profitable deliveries." — Marcelo Prince

6. Broader Retail Trends

• Online vs In-Store Sales
  • Despite rapid online growth, ecommerce still accounts for just 20-25% of total spending during the holidays. Most purchases still happen in physical stores, though much of the research is done online.
    • [06:03] "...online sales become a bigger piece of spending, but they're 20 to 25% of all spending. Most of the purchases are still happening in physical stores." — Marcelo Prince

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Notable Quotes & Memorable Moments

• On Costly Convenience:
  [02:02] Marcelo Prince:
  “They actually said they're going to spend $1.5 billion just in the fourth quarter to do one day shipping, which is putting pressure on the rest of the industry.”

• On Retailers’ Store Strategies:
  [02:41] Marcelo Prince:
  “They can keep pace with Amazon and they both had strong sales in recent quarters leading up to this holiday season. They've both had success getting people to place orders online and actually go pick them up at the stores, which for them is less expensive than delivering it to your house.”

• On the Human Cost for Shipping:
  [04:33] Marcelo Prince:
  “This year both UPS and FedEx will be delivering seven days a week just to keep up with the demand. The post office sometimes runs double routes. The postal carrier will go twice over the same route in the same day as the shipping moves online. This is becoming a bigger and bigger choke point or challenge for everyone in the industry.”

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Important Timestamps

• 00:20 — Introduction to episode and holiday shopping context
• 02:02 — Amazon's $1.5 billion investment in one-day shipping
• 02:41 — Walmart and Target's use of store-based fulfillment
• 03:38 — Number of products eligible for one-day shipping
• 04:04 — Walmart and Target’s membership-free shipping approach
• 04:33 — Shipping crunch and pressure on carriers
• 05:11 — Amazon’s delivery network evolution and partnerships
• 06:03 — Online vs. in-store sales during the holidays

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Tone & Style

The episode is brisk, informative, and pragmatic—reflecting Wall Street Journal’s characteristic focus on data, business strategy, and practical implications for both consumers and the retail industry. Both host J.R. Whalen and guest Marcelo Prince maintain a clear, analytical tone, using real-world examples and industry numbers to anchor the discussion.

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Transcript

[A]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. [e-mail] Washingtonwise.

[B]

Here's your money briefing for Friday, November 29th. I'm J.R. whalen in the newsroom of the Wall Street Journal. Online shopping sites will get a workout on Black Friday and Cyber Monday. Shoppers not only want to find the perfect gift, they want a delivered asap. We'll discuss the one day shipping war being waged between Amazon and its rivals. First, some money in market news you should know. Get ready to dig deeper in your pocket to pay for your morning cup of joe. Lower coffee production in Latin America caused by dry weather has sent futures prices up by 20%. The weather has particularly affected the harvesting of Arabica, a premium variety of coffee in Honduras that's the world's third largest producer of Arabica coffee. Dry weather has also affected Arabica output in Brazil and Peru. All told, global Arabica production is expected to drop by about 3% this year to its lowest annual rate since 2015. But higher demand is also behind the price increases. Consumption in Asia and the Pacific region are projected to increase by 3% in the coming year, while bigger consumers such as Europe are expected to grow by about 2%. Amazon pioneered two day shipping more than a decade ago, but two day shipping? That takes forever. Shoppers want their order tomorrow. The center of competition among the big retailers this holiday season is is one day shipping and Wall Street Journal corporate bureau chief Marcelo Prince is here to discuss. So Marcelo, Amazon has repeatedly set the pace with offering more and more efficient shipping logistics and it is spending a lot of money on one day shipping this year.

[C]

They actually said they're going to spend $1.5 billion just in the fourth quarter to do one day shipping, which is putting pressure on the rest of the industry.

[B]

Clearly, Amazon sees a market here. Its Amazon prime service has been a beneficiary.

[C]

They see this as a way to add to the number of people who are willing to pay. They already have over 100 million prime subscribers and by adding more products and speeding the delivery, they see this as an advantage.

[B]

You know, some other traditional retailers have really struggled to keep pace here, but Walmart and Target seem to have cracked the shipping code. Though they go about things a little differently than Amazon, both of them have

[C]

found that if they invest in their stores and use the stores themselves to help fulfill either orders that people place online or pick up at the stores. They can keep pace with Amazon and they both had strong sales in recent quarters leading up to this holiday season. They've both had success getting people to place orders online and actually go pick them up at the stores, which for them is less expensive than delivering it to your house.

[B]

And there's another layer here, and that is the cutoff, Dave, to offer shipping so people get it in time for Hanukkah and Christmas.

[C]

They'll shift their messaging from this week where they're focusing getting you to place the orders and they're less dependent on whether you pick it up in the store or they deliver it to. As you get closer to the holidays they do turn the messaging to you still have time, place the order, come pick it up at the store.

[B]

You know, it seems like also the new arms race here is adding products and adding products to the list that is eligible for the one day shipping.

[C]

Amazon claims they have 10 million products already. They want to get to 100 million. I believe Walmart and Target are much smaller, but that's also by choice. They're sort of focusing on what they think are the most commonly ordered items that they can stock in their stores and deliver without having hundreds of warehouses like Amazon does.

[B]

And Amazon requires customers to be prime customers to get the one day shipping. But Target and Walmart, they don't require a membership.

[C]

Walmart actually tried a membership program and gave up on it a few years ago. Neither of them currently have a membership shipping program. When it's done the holidays, they'll give you free shipping on many more orders. Sometimes you have to have a minimum order size outside of the holidays. They generally require you to have a certain basket size to give you the free shipping.

[B]

You know, on the other end of this is the post office and the UPS guy and the FedEx guy that's got piles of boxes. It looks like the pyramids outside of apartment buildings and houses.

[C]

That's right. And they have to run double shifts, overtime shifts. This year both UPS and FedEx will be delivering seven days a week just to keep up with the demand. The post office sometimes runs double routes. The postal carrier will go twice over the same route in the same day as the shipping moves online. This is becoming a bigger and bigger choke point or challenge for everyone in the industry. This year is especially difficult because there's a shorter window between when Black Friday and Christmas Day. And so they have to get basically the same number of orders in six fewer days.

[B]

It's a big test for Amazon. Back in July they had some snafus that they're trying to work out and it's really put the spotlight on them.

[C]

They have prime day and that's a big one day sale that they have on the website. And they actually had some trouble delivering the products within the one day window that they had promised. We'll be monitoring this holidays to see how they hold up. They actually ended a relationship with FedEx. So they're more dependent on UPS, the Postal Service and their own delivery. So Amazon has been ramping up its own delivery capabilities. They have, I'm sure you've seen trucks, their own prime trucks doing many of the deliveries, especially in urban cities where they can group a bunch of packages together. And in the rural areas it's less common because there are less profitable deliveries.

[B]

And back in July, Amazon pretty much owned the stage and now they're competing for space in the trucks and just logistics space with the post office and UPS handling all the other retailers products, correct?

[C]

Yeah. And it's the big challenge is not just having the right products at the right prices, but also being able to get it to people when and how they want it. And you know, it's worth keeping in mind that in the holidays, online sales become a bigger piece of spending, but they're 20 to 25% of all spending. Most of the purchases are still happening in physical stores. More research happens online. In other words, people are looking at what they want to buy, figuring out what the prices are, where they're going to go. But it's not that every order or every present is coming through Amazon or through these delivery services.

[B]

All right, that's Wall Street Journal corporate bureau chief Marcelo Prince with us. Marcel Marcelo, thanks for coming on the show.

[C]

My pleasure.

[B]

And that's your money briefing. I'm JR Whalen in New York for the Wall Street Journal.

[A]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. [e-mail] WashingtonWise.