With online retail taking a bigger chunk out of brick-and-mortar businesses, shipping and fulfillment services are becoming a commodity in their own right. How fast can you get it to my doorstep?
One place you might not expect online retail to be turning into a way of life, though, is rural Alaska.
“We’re good for a couple weeks,” said Betsy Brennan after opening up a box with a few dozen rolls of toilet paper. Brennan works at a radio station in Nome, three blocks from the Bering Sea, and hundreds of miles from Alaska’s road system. She has an auto-order set up through online retail giant Amazon’s Prime service so that office essentials like paper towels, printer cartridges, and coffee arrive regularly by mail.
Prime’s popularity is exploding across rural Alaska because of the free shipping that comes with the $99 annual subscription fee. Brennan set up her household account two years ago for things one could easily take for granted in places that are accessible by road.
“Really heavy items like flour,” she explained. “All kinds of food items that we pay a lot more for locally. Or very similar.”
For thrifty shoppers with discretionary income, the most cost-effective way of running a household used to be loading up on supplies at wholesale stores in Anchorage, then mailing them back home, or packing them into checked bags on commercial flights.
For Brennan and others, the service is a huge time-saver, and that is a big part of the appeal for placing online orders. “It comes, many times, right to your doorstep.”
Prime also does not charge anything extra for heavy items, even if they may not be eligible for two-day delivery. “We had a friend that ordered a wood-splitter through Amazon Prime,” Brennan said matter-of-factly, “a fairly heavy item.” She summarized a few other orders from around town: dozens of bags of potting soil, bird-seed, and a $1,200 grill. A local sled-dog racer had even started ordering pallets of dog food.
Amazon is not a shipper itself. Instead, it takes advantage of where the U.S. Postal Service and freight companies already go. In doing so, it is bringing eCommerce further into markets where it has not had much of a foothold. For example, Unalakleet, 145 miles from Nome (by air), with around 700 residents, including Jeff Erickson, who has been using Amazon more and more over the last six years.
Recently, he ordered a mattress. “Three days later I hear somebody struggling up my stairs, and it’s the UPS boy who’s dropping it off,” Erickson recounted, sitting near a window in the library of Unalakleet’s one school.
He was disappointed because the box was smaller than he had expected, and he figured there had been a mix up with the order. Luckily, Erickson hauled the package up to his bedroom before opening it. “I got my knife out, made a tiny split in it, and all the sudden I had an instant California King-sized mattress that exploded in my face,” he says.
Overall, Erickson estimates he gets about 30 percent more purchasing power for all shipping fees that are no longer an expense. Before finding out his mattress was eligible for Prime shipping, he was prepared to bite the bullet and pay six or seven hundred dollars in freight fees. At $99, Prime is a bargain for rural customers.
Both Erickson and Brennan think that if Amazon knew what a steal they were getting, the company would put an end to Prime.
But others disagree.
“Amazon is incredibly data-savvy,” explained R.J. Hottovy, a senior eCommerce analyst for research firm Morningstar. “I am absolutely sure they see higher penetration rates in rural markets, and I think part of that is by design.” Hottovy thinks the company is trying to build customer loyalty, and has decided it is worth losing money right now on mattresses and wood-splitters if that means recruiting long-term users.
Plus, Prime entices customers with free shipping to get them to use ancillary services like music and video streaming. Although that is not the case in Unalakleet, where 3G service only became available last month. “We just suffer with bandwidth and speed issues out here,” said Erickson. “We’re using Amazon Prime for the free shipping.”
For the bargain-hunters out there eager to get the most bang for your buck, I recommend buying the JET 20×80 Geared Head Engine Lathe. It may cost $23,999 and weigh 8,514 pounds, but the price for having it mailed to your doorstep if you’re a Prime member? Zero.
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