Amazon.com Inc. is raising the stakes in Canada's e-commerce landscape by launching free same-day delivery for its Prime members in Toronto and Vancouver just ahead of the busy holiday shopping season.
Starting on Tuesday, Amazon is offering free same-day deliveries on orders over $25 of one million items in Toronto and 700,000 in Vancouver, ranging from everyday household goods such as coffee makers, snacks, drinks and shampoo to toys, electronics and luggage.
"We think it's a very powerful offer," Alexandre Gagnon, country manager at Amazon.ca, said in a telephone interview.
The move comes as a growing number of retailers are investing heavily in upgrading their e-commerce amid rising demand from customers for more convenient services that are offered by global powerhouses such as Seattle-based Amazon.
The spectre of Amazon.ca arriving with free same-day service for Prime members, whose annual fee is $79, can be daunting to incumbent retailers, observers warned.
"Retailers are really going to have to step up, in terms of their offers but also their convenience of shopping," said Suthamie Poologasingham, senior adviser of e-commerce at retail consultancy J.C. Williams Group. "It will make it tougher."
Same-day e-commerce delivery is in its early stages in Canada, she said. Some retailers, such as Sport Chek (owned by Canadian Tire Corp. Ltd.) are testing same-day shipping in local markets (in the Toronto area in the case of Sport Chek).
Indigo Books & Music Inc., Best Buy Canada, Ssense and Frank + Oak are other retailers that offer same-day shipping, with fees of roughly $12 to $14, said Danielle Doiron, director of parcels market development at Canada Post.
Discounter Wal-Mart Canada Corp. was among major chains that introduced same-day deliveries in a pilot project with Canada Post in the Toronto area during the 2013 holiday season. Wal-Mart subsequently offered it on its own but has since dropped it.
Canada Post's research has found a burgeoning demand for same-day delivery, especially when consumers see it available in other markets such as the United States, Ms. Doiron said.
"The convenience that e-commerce provides Canadian consumers is having an impact on their complete expectations," she said. "They want in many ways to replicate the in-store experience online."
Canada Post found that 16 per cent of online shoppers abandoned their cart as a result of delivery times displayed at the checkout being longer than desired, she said. And 4 per cent of online shoppers would choose to pay for same-day service to get urgent items faster.
Major grocers have teamed up with startups, such as Urbery, which do local same-day deliveries.
And Urbery this week partnered with consumer packaged goods giant Unilever to ship three flavours of its Ben & Jerry's ice cream in 30 minutes in downtown Toronto ($8.99 a pint plus $4.50 delivery charge; free if two or more pints are ordered).
"As online shopping evolves in the marketplace, customers expect short wait times," said Mudit Rawat, founder of Urbery.
Jessica Armstrong, digital director at Unilever Canada, said it will look at the "always-on" fast shipments for its other key products, which include Becel margarine and Dove soap, if the Ben & Jerry's test is successful. "The retail landscape is drastically changing in our market and we want to lead in this space."
Wal-Mart offers same-day pickup of e-commerce grocery orders, including fresh food, at its Toronto-area stores, while Loblaw Cos. Ltd. has same-day "click-and-collect" grocery online order pickup service.
But the arrival of free same-day delivery by Amazon.ca would inevitably put pressure on rivals in the crucial months leading up to the holiday shopping period, Ms. Poologasingham said.
Mr. Gagnon said Amazon.com's free same-day shipping has taken off south of the border in the 27 U.S. cities where it is now available since being rolled out starting last year. "We know our customers really appreciate that level of convenience."
Amazon.com customers use it for last-minute needs, such as buying toys for children's birthday parties, and toiletries before going on a trip. "People like it because it makes their life easier. ... It saves people time so they can spend their time on something they value more."
The service is available seven days a week, so it is particularly useful on weekends, he said. It entails placing orders by noon and receiving packages by 9 p.m. the same day. Afternoon orders are shipped the next day. It is also available to non-Prime members for $11.99 an order plus $1.99 a pound per item.
While the threshold for the Prime same-day shipments is a $25 order, Amazon.ca last week raised the minimum order to $35 from $25 last week for non-Prime purchases, Mr. Gagnon said.
Still, consultant Ms. Poologasingham said rival retailers with brick-and-mortar stores as well as e-commerce have the advantage over Amazon of using their stores as shipping hubs to draw more customers. "How retailers who are in both channels make use of the store will become even more important in terms of their ability to compete with a large behemoth like Amazon," she said.