Ideas & Insights
Amazon Aims to Cut Prime Shipping to 1 Day

Amazon Prime members have long enjoyed free two-day shipping on any and all items they purchase from the online retail giant. But this perk is just about to get better, as Amazon will be cutting shipping times in half, allowing Prime members to receive one-day shipping on everything that they buy at the store.

The news was announced during an earnings call on April 25 by Brian Olsavsky, who is the company's chief financial officer. He indicated that the company is spending $800 million this quarter in infrastructure updates to facilitate the change. Initially, the change will only affect Prime members in North America, but eventually expedited shipping will roll out to the rest of the world as well. No doubt they will be using something like freight forwarder services to keep up with the demand. During the earnings call, Olsavsky also announced that the company had doubled its first-quarter profits. It made $3.6 billion in the quarter, which is a record amount for the company.

A spokesperson for Amazon said that the change in shipping times has already begun to be implemented. Recently, the company dropped the requirement that members must purchase a minimum of $35 worth of goods to receive free one-day shipping. They have also expanded the list of items eligible for one-day shipping as well as the list of zip codes that are eligible for one-day shipping.

The news of free one-day shipping for Amazon Prime members comes on heels of the company facing increased competition from other large retailers such as Target and Walmart, which have decreased free shipping times to two days in order to match Amazon. The news also comes one year after Amazon raised the price of Prime membership by $20. It right now costs $119 per year. According to Consumer Intelligence Research Partners, membership growth since the price increase has "flattened," and this could be another reason why the company is implementing faster shipping times.

The United States is the biggest market for Amazon Prime, but the company has already decreased shipping times in many of its other markets. For example, Prime members in Japan receive same-day shipping on most items, and members in the European Union receive one-day shipping.

In 2005, Amazon launched free two-day shipping for Prime members, and the perk is what has helped drive membership to more than 100 million people worldwide. Members also receive other benefits, such as access to both video and audio streaming services, and they further receive free cloud storage as well.

Along with the growth of Prime membership, Amazon has steadily been building up its shipping infrastructure. In 2017, it began developing a Kentucky air cargo hub that reportedly cost nearly $1.5 billion. They have also leased more than 3 dozen cargo jets and purchased many thousands of trucks. At about the same time, the company further established Amazon Flex, which is a crowdsourcing platform that lets independent contractors deliver packages for the retailer.

All this has not come without a cost, though, as shipping expenses for the company have increased considerably in recent years. Last year, the company spent nearly $28 billion on shipping alone, which is a nearly 28% increase from 2017. Worldwide shipping costs have also increased, but not quite as much. The company spent a little more than $7 billion on such shipping costs last year, which is an increase of a bit more than 20% from the year before.

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