ECOMMERCE

Amazon turns up the heat as it eyes one-day Prime shipping

BY Dan Berthiaume

Amazon Prime members can look forward to getting their purchases even faster.

In a move sure to rattle the competition,  Amazon plans to cut its standard Prime shipping time from two days to one day,  CFO Brian Olsavsky said during the company’s earnings call on April 25.  The call occurred shortly after Amazon announced blowout earnings for its first quarter.

“(W)e’re currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program,” said Olsavsky. “We’re able to do this, because we spent 20-plus years expanding our fulfillment and logistics network, but this is still a big investment and a lot of work to do ahead of us.”

Amazon included $800 million of incremental spend related to this investment in its second quarter outlook. Olsavsky said the shift in standard shipping time is an extension of work the retailer has already been doing to get purchases to customers as quickly as possible.

“(W)e have been offering, obviously, faster than two-day shipping for Prime members for years, one day, same day, even down to one to two hour delivery for Prime Now,” said Olsavsky. “So we’re going to continue to offer same day and Prime Now selection in an accelerated basis. We’ve in the past months significantly expanded our one-day eligible selection and also expanded the number of zip codes eligible for one-day shipping.”

Although Olsavsky said the results of efforts Amazon has already taken to offer shipping in one day or less did were “minimal” in the first quarter of fiscal 2019, it will be a “significant” step.

“(I)t will take us time to achieve,” said Oslsavvsky. “And we want to ensure that we have good delivery experience for our customers as we evolve this offer.”

According to CNBC, Wall Street analysts were generally bullish about Amazon’s one-day shipping announcement. Here are a few reported quotes:

Doug Anmuth, J.P. Morgan

We believe the move is consistent with Amazon’s long-standing goal of convenience & selection, but also likely reflects the increasingly competitive retail environment…we come away with more confidence in Amazon’s ability to stabilize and potentially accelerate revenue growth, and more clarity on Amazon’s 2019 investment spend with Prime one- day shipping.”

Lloyd Walmsley, Deutsche Bank

“The company’s history with faster shipping shows that while it weighs on unit economics, it can make up for lower profit contribution per order with an overall increase in orders, driving more contribution per Prime member.”

Brian Nowak, Morgan Stanley

“Just as Amazon did with Prime two-day delivery 14 years ago, we see a broad-based one-day shipping offering increasing consumer e-commerce expectations (essentially more people will get used to one-day vs. two-day shipping… and grow to expect 1-day shipping). This, in our view, is likely to cause other brands, manufacturers, retailers, and logistics companies to have to invest more aggressively to compete with Amazon and its differentiated delivery. The cost to compete within e-commerce continues to rise.”

Within the past few months, Amazon has been attempting to boost its proprietary delivery capabilities with efforts such as expanding its Amazon Air Network fleet, and reportedly using fabric tents to quickly create temporary delivery storage stations.

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