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REUTERS/Albert Gea
Those Prime boxes move fast.
NEED FOR SPEED

Amazon wants to replace free two-day shipping with free one-day shipping

By Alison Griswold

The world moves fast, but Amazon moves even faster. The company wants to make one-day shipping the new standard for members of its signature Prime program, executives said on a call this afternoon, and plans to put $800 million behind the effort in the upcoming quarter.

“Our goal is to evolve the two-day free shipping program into a one-day free shipping program,” said Brian Olsavsky, Amazon’s chief financial officer. “We expect to make steady progress quickly and through the year.”

Olsavsky said Amazon would use “all of the available levers” to build out one-day shipping, including its own delivery infrastructure and third-party logistics providers. He said Amazon “significantly expanded” its one-day shipping zip codes and eligible items over the past month. The one-day shipping will be a “global improvement in speed tied to our Prime program,” Olsavsky said, starting with North America.

Amazon has pushed steadily toward faster shipping with programs like Amazon Prime Now, which offers free two-hour delivery on certain household items and essentials in eligible zip codes. It also offers free same-day shipping to customers in eligible zip codes with orders over $35.

The company believes one-day shipping could help it bring in the next wave of customers, an important consideration as third-party data indicates that Prime subscriptions have slowed. As of March 31, research firm Consumer Intelligence Research Partners estimated Amazon had 103 million US Prime members, an 11% increase from the same period a year earlier. Equity research firm Cowen estimated Amazon’s US Prime households at 61 million in the first quarter, unchanged from the second half of 2018 and up just 5% from the same period a year earlier.

Analysts believe Amazon is struggling to attract users who earn less than $75,000 a year. Amazon’s attempts to attract lower-income users include a monthly Prime membership ($12.99) and a discounted Prime program for low-income Americans ($5.99 a month).

As that $800 million allocation should make clear, rolling out free one-day shipping won’t be cheap. Olsavsky warned the cost impact from the initiative would be visible “almost immediately” in the second quarter. “We’re able to do this because we’ve spent 20-plus years expanding our fulfillment and logistics network, but this is still a big investment and a lot of to-do ahead of us,” he said.

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