Amazon’s Sunday Delivery an Effort to Retain Sales

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Residents of 15 more U.S. cities are now eligible for Sunday delivery of their orders from Inc. (NASDAQ: AMZN). The company launched the service last November in New York and Los Angeles for its Amazon Prime customers.

Sunday delivery is now available in Austin, Cincinnati, College Station, Columbus, Dallas, Houston, Indianapolis, Lexington, Louisville, New Orleans, Oklahoma City, Philadelphia, San Antonio, Shreveport and Waco. The packages are delivered by the U.S. Postal Service under a contract with Amazon.

Sunday delivery is available only on some items and in the designated cities. Customers will see an option at checkout time if an item can be delivered on Sunday.

We noted Wednesday that FedEx Corp. (NYSE: FDX) will begin charging shippers based on dimensional weight pricing, which takes into account a package’s size as well as its volume. If United Parcel Service Inc. (NYSE: UPS) also adopts a similar policy (and history says it will), Amazon’s shipping costs will no longer be a bargain for the company nor a gift to Amazon’s customers.

For a firm that runs on such thin margins, Amazon cannot afford to absorb more costs. It may have to absorb those costs because customers are used to it now. Having to pay state sales tax is having an impact on Amazon’s sales, and tougher competition from other retailers, particularly Wal-Mart Stores Inc. (NYSE: WMT), and now potentially higher shipping costs, will start putting pressure on sales as well as profits.

Investors have generally accepted Amazon’s growth strategy, but if that should stall the share price could plummet. Sunday delivery, a fleet of delivery trucks, same-day delivery — all these are things Amazon has to try as it attempts to shore up its sales.

Amazon shares were up about 0.5% in the noon hour on Thursday, at $294.20 in a 52-week range of $256.88 to $408.06.

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