Dive Brief:
- Amazon plans to bring same- and next-day delivery to more than 4,000 small towns and rural communities by the end of the year, the e-commerce giant said on Tuesday.
- The company in April said it would invest more than $4 billion by 2026 to expand its delivery network in rural America.
- Early results from the 1,000-plus smaller cities, towns and rural communities already enjoying the faster fulfillment have been “very positive,” Amazon said Tuesday.
Dive Insight:
With these ambitions, Amazon is plowing right into Tractor Supply’s turf.
Upgrading the service in these areas appears to be a priority for the e-commerce giant, given that CEO Andy Jassy called it out in his annual letter to shareholders this year.
“As some other companies are abandoning small-town customers due to cost to serve, we’re going the other way—we’re investing to serve our rural customers even better,” Jassy said in the letter, published in April. “We’ve already expanded Same-Day and Overnight Delivery to dozens of smaller cities and towns across the U.S., with more coming.”
Also in April, Senior Vice President of Amazon Worldwide Operations Udit Madan similarly said the company is making the $4 billion-plus investment “at a time where many logistics providers are backing away from serving rural customers because of cost to serve.”
Indeed, the U.S. Postal Service earlier this year announced a set of changes to its protocols that could slow down delivery to some rural areas, while last year UPS cut delivery days in such areas.
But Tractor Supply, which caters to consumers in rural and small-town America, has been stepping up its logistics in these areas. Five years ago the retailer said it was expanding same-day delivery from all of its 1,800 or so stores, in partnership with UPS-owned Roadie. At the end of last year, Tractor Supply said it was upgrading its fulfillment to include more bulky items.
Tractor Supply may be quite insulated from this push by Amazon, which began even before last year when the e-retailer said it would cut delivery times to rural areas by half, according to research from Jefferies analysts led by Jonathan Matuszewski last year. In 2021, Amazon said it was partnering with local shops in Nebraska, Mississippi and Alabama on some deliveries, Matuszewski noted.
The relative isolation of Tractor Supply customers likely motivates them to get out to stores, plus the nature of the retailer’s products and services often warrant the trip, per Jefferies. Still, with drastically shorter delivery options, Tractor Supply loyalists could find Amazon’s offer compelling, especially if Amazon is competitive on Tractor Supply’s best-selling items, Matuszewski said.
“This push is squarely targeting [Tractor Supply’s] customer,” Matuszewski said.
