Amazon New Site Offers Free Overnight Shipping On All Purchases

Amazon.com on Wednesday announced a new E-Commerce site?called Endless.com and focused solely on shoes and handbags?that will offer free overnight shipping for all purchases. Could the move start a shipping war?

Endless.com is focused on the highly-competitive footwear and handbag sector, where sites like Zappos.com have long offered free shipping. But by upgrading the free shipping to overnight--and coupling it with free return shipping?Amazon is trying to shake things up a bit.

Gartner analyst Avivah Litan said the move is indeed daring, but that Amazon.com needs to take a few more chances today than it did a few years ago, when it was in a stronger dominant role.

"Amazon is taking a dramatic step by offering free overnight shipping but they need to take dramatic steps to get the competitive edge back into their company. Amazon's stock has performed poorly in 2006. It is down nearly 19 percent while the major indexes went up between 8 percent and 15 percent," Litan said. "Innovation characterized Amazon back in the late 1990s, but the firm seems to have lost it in recent years."

Litan adds that this particular niche might be a good place to try out this approach. "Being able to shop for shoes by heel height and pay no shipping could be a winning formula for the millions of women who crave new shoe styles and handbags to match. Just maybe, satisfying their fetishes will help give Amazon the boost its market cap sorely needs. But even if this venture is wildly successful, it's just one step out of many that Amazon needs to take to turn its fortunes around."

Paula Rosenblum, from the Retail Systems Alert Group, saw the move as Amazon acknowledging the importance to consumers of free shipping. "Clearly, Amazon uses its customer data and analyst research. Data shows that customers still look for free shipping in their online experience," Rosenblum said. "Offering free overnight shipping guarantees new and existing customers will take a long look at Amazon?s new site. A great way to launch a new business."

Other analysts agreed that the move is a good one for Amazon, but added that it might reveal a slightly more desperate company. "This is a great way to get traffic to the site, but it signifies that either Amazon is willing to take a loss to build traffic?much like when they started Amazon?or they have killer supplier relationships that ensure that they can make a solid margin even with paying for overnight shipping," said IHL President Greg Buzek, who added that the nature of shoes might cost them a lot in returns. "My concern for them is that they are dealing in products here that lend themselves to a touch and feel consumer. Unless someone has the specific model number from bricks and mortar research so they know what it looks like and feels like, there will be an inordinate number of returns due to size and texture differences."

Jupiter Senior Analyst Patti Freeman Evans agreed that the specific challenges of footwear will teach Amazon that there's no business like shoe business. "In the shoe market, perhaps even more than in apparel, fit and fabric issues dampen customers' propensity to buy remotely," Evans said. "Offering risk-free trial from a shipping perspective is a strong incentive for consumers to take the plunge into online shoe buying."

Amazon officials in charge of the Endless.com site agreed that the competitive realities of the footwear and handbag space forced their hand. "Had we just offered free shipping, we would have had nothing more than our competitors," said Garth Mader, one of the Amazon senior managers in charge of Endless.com.

There's a reason so many retailers are paying attention to feet apparel. The online footwear space is getting very aggressive and substantial. Last year's online shoe sales were about $2 billion to $3 billion (Forrester Research estimated $2.9 billion and Jupiter Research put it at $2.3 billion) with even more solefullness projected in the near future: Jupiter is guessing $3.7 billion by 2010 and Forrester figures it to be $5.7 billion by 2011.

Still, even the more aggressive of those figures represent a tiny portion of overall footwear sales. Jupiter estimates the online shoe market will put its foot down at 3.5 percent of all footwear sales in 2006 and 5.1 percent in 2010.

Amazon's Mader said the new site logically grew out of Amazon's move into selling shoes in the Fall of 2002. To try out some new technology, the company decided to launch it as a new site, rather than add to Amazon's already overflowing site. "No other single product in the apparel space has been more successful" than shoes, Mader said.

Amazon.com is also keeping its people close to their talking points. In an interview with StorefrontBacktalk.com Wednesday night, Mader said the company wanted to start the new site from scratch and said, "We wanted to take out a fresh, clean piece of paper." About 90 minutes after Mader made that comment in the interview, the Associated Press ran a story quoting Steven Goldsmith, vice president of apparel and accessories for Amazon.com and vice president of Endless.com, saying, "We started with a blank sheet of paper."

Amazon's move follows a very similar effort launched by The Gap in mid-October, when it rolled out Piperlime.com, launching with about 100 shoe brands. By comparison, Amazon launched its site with about 250 brands and "more than 15,000 styles of shoes," Mader said.

Sucharita Mulpuru, the senior retail analyst for Forrester Research, looks at the strength and the relative maturity on the footwear space and suggests that it could be a reason for Amazon to not jump in.

"I?m baffled by Endless.com, as I frequently am by Amazon?s initiatives. Don?t know why they pursued this particular vertical as it seems like a ?me too? approach, as far as I?m concerned," Mulpuru said. "They?re copying Zappos and Gap?s new site Piperlime with their return policy."

Mulpuru also questioned how new, innovative and original Amazon is actually being here. "There?s evidently no new inventory on Endless.com. It?s essentially a new skin on old inventory that?s already on Amazon.com. And there?s the additional layer of complexity around this fact: they use partner inventory anyway?such as Shoebuy, so it is literally another URL of the same exact items just positioned differently, just a bit more costly because they now have to pay for return shipping, too," she said. "Don?t know why they would do that other than to try to drive conversion on their shoes, but that raises the question: 'Why not just offer that on Amazon?' Maybe this is an experiment to see if another differently branded site could drive traffic and customers that Amazon.com could not get on its own."

That said, Endless.com officials say that their pricing and shipping policies are indeed quite different. One pricing differentiation is that Endless.com?which went live Dec. 11, but wasn't announced until Jan. 3?is touting a 110 percent price guarantee, where the site will pay any customer a 10 percent convenience check and refund the full sale price if they can find a better price on any non-auction site within 14 days. "It really needs to be the same size, the same color, the same style and it needs to be in stock" and it "applies to Web sites only," Amazon's Mader said.

Asked about the possibility for consumers creating their own Web sites and typing in a low price, Mader said he wasn't too concerned about that possibility and that the site is imposing no restrictions on the kind of Web site the sale appears on. "We?re going to be listening and watching and seeing what happens," he said.

A 365-day return policy is fairly standard with shoe sites and Amazon's policy requires that the shoes be returned "in their original condition" and "cannot be showing any streetwear."

The site itself has some capabilities that differ it from the core Amazon site, such as automatic detailed Zoom features for all products. The site also promises that only items that are in stock will be shown, with a system that instantly deletes a product once it goes on backorder.

The site also gets creative with ways to do searches by sizes (including heel size), styles, color and vendor, even allowing shoppers to search multiple criteria simultaneously.

"If a customer would like to conduct a search for gold and red ballet flats by Jessica Simpson, Steve Madden and BCBGirls in a size 8 and an 8.5, or conduct a different search for men?s oxfords by Bruno Magli and Kenneth Cole in size 11 within a certain price range, they can," Amazon.com said in a statement.

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