Amazon to Make One-Day Shipping the Standard Prime Offering
Amazon.com announced Thursday that it plans to invest $800 million in the second quarter of 2019 toward making one-day shipping the standard offering of its Prime loyalty program. Chief Financial Officer Brian Olsavsky said Amazon is “currently working on evolving our Prime shipping program, which has historically been a two-day program, to a one-day shipping program,” according to CNET. Olsavsky said the $800 million will go towards warehouses and delivery infrastructure improvements.
Amazon already offers one-day and two-hour shipping to Prime members for certain products and at an additional cost. The change would significantly expand the number of product selection and ZIP codes eligible for one-day free shipping, Olsavsky said. Amazon says over 100 million items are currently available for free two-day shipping on its site. The change will first take place in the North American market, but is designed to expand globally, across all countries that offer Prime memberships. Amazon said last year that it has over 100 million Prime members worldwide.
Total Retail's Take: The last mile race continues to heat up! This is a game-changing move for Amazon, as one-day delivery will be a key way to further drive growth within Amazon’s e-commerce business. It also simultaneously distances Amazon from its competitors. Rivals like Target and Walmart, for example, now offer two-day shipping, while others are leveraging store-based distribution for buy online, pickup in-store. For many consumers, two-day shipping is the new normal.
Experts agree. In a quote emailed to Total Retail, Jon Reily, vice president of global commerce strategy at Publicis Sapient, said Amazon''s announcement was "very big news tucked into a huge profit number that will have huge implications." Reily said cutting most delivery times in half to one day will be a big boon for its bottom line, as it will certainly lead to more “impulse purchases and is designed to get people to order even more, increasing Amazon’s average order value (AOV), a number it says it doesn’t pay much attention to but the rest of the world uses to measure the health of any e-commerce business.
"Amazon knows that [its] current logistics capability is a limiting factor and that delivery is a critical part of the customer experience. The company sees that other logistics companies aren't innovating fast enough, and this is an opportunity. Amazon knows that current logistics companies are built and optimized for an outdated standard, and this isn’t good enough for its customers’ expectations."
The main problem for Amazon with this move? According to Reily, a lack of drivers. "This will be Amazon’s limiter and this move shows that it knows that and is seeking alternative models from traditional shipping companies using their own technologies, and perhaps even drones and autonomous vehicles in the future."