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Coronavirus Scare Spikes Online Orders, Amazon Sparks Delivery War

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The coronavirus outbreak is rapidly taking the shape of a global pandemic with several countries other than China, including United States, Italy, South Korea, India, Israel, Denmark and Japan affected already. This is acting as a headwind.

The fear of COVID-19 infection is compelling people to stay at their homes, which in turn is resulting in problems as they are unable to procure items required on a daily basis.

However, this pandemic is leading to an increase in the Internet and online services usage, which underscores the importance of online shopping. Medicines and grocery items are essential daily items and consequently door-to-door delivery of these products are likely to gain traction in this crisis scenario.

Moreover, rapid delivery of these items is expected to help people counter the hard times. Notably, this demand bodes well for the online retail companies, which are making every effort to enhance their delivery system.

Additionally, Amazon (AMZN - Free Report) is leaving no stone unturned to cater to customers in such a scenario. Further, initiatives by Walmart, Target (TGT - Free Report) and Kroger (KR - Free Report) toward strengthening their e-commerce capabilities remain noteworthy.

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Amazon’s Same-Day Delivery Move

Per Bloomberg, Amazon is witnessing flurry of orders on account of customers’ unwillingness to visit offline stores on fears of contracting the deadly virus. Although the company’s delivery capacity remains constant, overflowing orders have been slowing down delivery.

Nevertheless, the e-commerce giant has recently taken an initiative to strengthen its Same-Day Delivery program by making same day delivery service available in the cities of Philadelphia, Phoenix, Orlando and Dallas for the Prime members.

Further, the service in these cities has been equipped to deliver three million items across various product categories. The company has also built mini-fulfillment centers, which are first of their kind buildings.

Notably, the new facilities are located closer to customers, which will help Amazon to reduce the number of hours taken to deliver orders via same-day delivery services.

We believe the latest move is anticipated to help this Zacks Rank #3 (Hold) company manage the increasing number of orders during the crisis.

Moreover, this reflects the company’s commitment toward the betterment of customers, which in turn is likely to drive customer momentum.

Apart from this, the company’s one-day shipping and many other fast delivery services remain noteworthy and are likely to instill investor confidence.

Should Target, Kroger & Others Worry?

Traditional retailers including Walmart, Target and Kroger are already reeling under the competitive pressure exerted by Amazon backed by aggressive retail strategies and robust delivery and fulfillment network.

Moreover, the latest same-day delivery initiative is likely to make it tougher for these retailers in this crisis scenario.

Nevertheless, the strengthening endeavors by these retailers to narrow the gap with Amazon should not be ignored.

Target, which carries a Zacks Rank #3, leverages its network of stores to meet its same-day orders. Further, the company’s Shipt buyout has been expanding its same-day delivery capabilities.

Walmart is leaving no stone unturned to expand its same-day delivery service. Its extended partnership with Deliv and Parcel buyout to support its same day delivery initiative remains a major positive.

Additionally, the company’s partnership with Point Pickup, Skipcart, AxleHire and Roadie has expanded its same-day online grocery delivery service.

Meanwhile, Kroger, which carries a Zacks Rank #3, also offers grocery delivery service in as little as one hour from its local stores to customers.

Additionally, Costco (COST - Free Report) offers same-day grocery delivery service on the back of its partnership with Instacart.

Notably, Costco carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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