Amazon to invest $800 million in Prime One-day Shipping

By Chris Dawson April 26, 2019 - 10:15 am

Amazon are to invest $800 million, in the second quarter of 2019, cutting their delivery speed in half for US customers. Amazon Prime One-Day Shipping is going to come to the US and they’ve already started to prepare for this. They cite their 20 year history in the logistics field as an asset and a springboard to change the face of retail in the US.

“We’re currently working on evolving our Prime free Two-Day Shipping program to be a free One-Day Shipping program. 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.”
– Brian Olsavsky – Senior Vice President and Chief Financial Officer, Amazon

Amazon have been building up to Prime One-day Shipping for years

Amazon have already been offering, faster than Two-Day Shipping for Prime members for years in the US with one day, same day and even one to two hour delivery for Prime Now but this has been for selected products in selected areas. Now Amazon are going to continue to offer same day and Prime Now selection in an accelerated basis.

The aim is to morph the core free Two-Day offer morphing into a free Prime One-day Shipping offer. On the past months significantly expanded their Prime One-day Shipping eligible selection and also expanded the number of zip codes eligible for one-day shipping.

So we’re taking a significant step. It wasn’t showing up in Q1. It was minimal in Q1’s results. It’s a significant step and it will take us time to achieve. And we want to ensure that we have good delivery experience for our customers as we evolve this offer.

Here in the UK we’re already accustomed to Prime One-day Shipping but even here we’re seeing signs of change with an increasingly large selection of products available for Same-day Shipping, even in areas where Prime Now isn’t available. One thing that Amazon consistently do is delivery as fast as they can in an effort to delight the customer. In the US this isn’t so easy to do the vast size of the territory the US covers which will mean cleverly managing stock and using their growing fleet of planes to move stock to where it needs to get to.

Prime One-day Shipping roll out and third party carriers

Amazon are aiming to migrate to Prime One-day Shipping in the US this year and will use their own Amazon Logistics network in conjunction with their third party carriers to do so.

“I would say that while our 20-year head start in investments in logistics and fulfillment capacity and partner networks that we’ve built are helping us, we also do have a network that is tuned to two-day delivery right now, principally for two-day delivery. So we do need to build out more one-day capacity along with our transportation partners, but we’re moving quickly and we’ve got a good head start. There is a certain tranche that we can dial up quickly, and we’ve started to do that and you’ll see that very quickly in Q2. And then stay tuned, because we’ll be building this – most of this capacity through the year in 2019.”
– Brian Olsavsky – Senior Vice President and Chief Financial Officer, Amazon

One can expect a tranche of the US to have Prime One-day Shipping by Prime Day in July and a much larger tranche to be covered in time for the Black Friday holiday in November. Amazon probably won’t cover the whole of the US by the end of 2019 but we’d expect to see just about every major US city to have Prime One-day Shipping by Q4.

Driving retail standards with Prime One-day Shipping

The real change here is to make Amazon’s inventory, including the inventory of third party merchants, available to consumers across the US and change the needle on retail standards once again. Where Amazon lead other retailers aspire to follow and if Amazon are undertaking Prime One-day Shipping in the US then this will drive competitors to do the same or at least for a selection of their merchandise.

Prime One-day Shipping Potential merchant impact

The impact for merchants, especially merchants selling on from outside the US, will likely be that you’ll need more inventory in the US and that Amazon may be more keen for your inventory to be split between multiple warehouses – whether they ask you to do this or if they split your inventory on your behalf. It may also mean that Amazon will display different offers from different merchants with potentially different prices dependant on where the consumer is located.

This could impact the frequency that you win Buy Box – if Amazon know that your product is in an FBA warehouse on the West Coast they may decide the Buy Box offer will be from a seller who’s stock is in FBA on the East Coast because they know that they can deliver faster. Equally if Amazon’s own stock isn’t conveniently located you could win the Buy Box over Amazon if your stock is closer to the end customer.

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