Amazon is shaking up its strategy with a service that will allow merchants to offer the benefits of Prime to their e-commerce customers.
The new offering, Buy with Prime, will allow merchants themselves to offer Prime benefits to 200 million-plus Prime subscribers. Those benefits include free and next-day delivery and free returns on eligible orders, Amazon (NASDAQ: AMZN) announced Thursday.
Customers on retailers’ websites will see the Prime logo next to products eligible for free and next-day delivery. Shoppers will then be able to check out using the information stored in their Amazon account and will receive shipping and delivery notifications from Prime. Merchants, meanwhile, will gain access to order information for Buy with Prime orders.
Amazon said it will roll out the service throughout 2022, initially offering it by invitation only to merchants who use Fulfillment by Amazon (FBA) services. More retailers, including those not selling on Amazon or using FBA, will be invited to participate in the coming months.
Participating merchants will have to pay service fees, payment processing fees and fulfillment and storage fees. However, the company said no fixed subscription fees nor long-term contracts are required to use the service.
Watch: Amazon Logistic, the most valuable logistics company in the world
“With the introduction of Buy with Prime, we’re expanding where members can enjoy trusted and convenient Prime shopping benefits beyond Amazon, adding even more value to their membership,” said Jamil Ghani, vice president of Amazon Prime. “Members will have the flexibility to shop from merchants directly, all while enjoying the fast, free delivery, seamless checkout and easy returns they’ve come to know and love.”
Amazon will lose some control over its customers, something the e-commerce giant has valued heavily over the years to collect customer data and remove sellers it deems fraudulent from its platform. But there’s a huge benefit: the ability to rival other e-commerce marketplaces like Shopify and major carriers like FedEx and UPS.
Up until this point, Amazon’s logistics network had been nothing to sneeze at. The company was offering FBA services to retailers as early as 2006, allowing them to store inventory in Amazon warehouses for a fee and leverage the company’s gargantuan delivery network, which includes both air- and ground-based transportation.
Amazon also offers a service called Multi-Channel Fulfillment that allows retailers to fulfill orders from any e-commerce sales channel, including marketplaces. It even has its own gig economy offering, Amazon Flex, which allows drivers to use their own vehicles to deliver for Amazon.
Buy with Prime could add yet another dimension to Amazon’s network. While the service will be small at first, limited to a select group of merchants, it has the potential to bring the e-commerce giant on level footing with rival Shopify. That’s because it will offer the benefits of Prime delivery free from the vice grip of Amazon that some merchants say has given them the squeeze.
Equally significant is Buy with Prime’s potential to put Amazon in more direct competition with carriers like FedEx and UPS. The company’s CEO of worldwide consumer, Dave Clark, told CNBC in November that by early 2022, Amazon would overtake both carriers to become the nation’s largest delivery service.
That projection might have been a bit ambitious — Amazon delivered around 5 billion packages in 2021 compared to closer to 5.5 billion for UPS, according to respective company data. But some experts believe that Clark’s claim holds some legitimacy and that Amazon could dethrone both UPS and FedEx as early as this year.
Even if it doesn’t, it’s clear that Amazon’s network is gaining fast. In Q4 2021, its worldwide shipping costs grew by 10% over Q4 2020, the sixth quarter in a row during which such costs increased year-over-year. That signals a steady expansion, one that could soon turn Amazon into the largest logistics provider in the U.S. — and maybe the world.