Amazon Investing $800M This Year To Make 1-Day Shipping Its New Standard
Amazon's standard of two-day shipping set off an arms race among major retail supply chains, and it might be starting all over again.
The e-commerce behemoth will be spending $800M this year alone to bring its standard free shipping time for Amazon Prime members down from two days to one, Retail Dive reports. One-day shipping is already available to members in certain high-density areas in North America, but Amazon seeks to make it the company's global standard as soon as possible, Chief Financial Officer Brian Olsavsky told analysts in a Thursday conference call.
The acceleration announcement comes less than three months after another major logistics shift for Amazon: the creation of its own shipping arm to service both its own deliveries and that of other retailers. It has not renounced its partnerships with UPS, FedEx or the United States Postal Service, as Olsavsky said on the conference call that the transition to one-day shipping will require "the continued support of our partners."
Olsavsky did not specify how the $800M would be spent among acquiring more real estate, upgrading technology or boosting its driver fleet, but when the industry leader announces such a broad shift in strategy, it has implications that reach far beyond its own balance sheet.
In the last few years, Target and Walmart have made major strides to match Amazon in terms of delivery speed, and have also been among the wave of brick-and-mortar retailers using their stores as one-day or same-day pickup spots. The competition is catching up to Amazon, and perhaps casting Prime memberships in a less favorable light in the process.
Further increases in shipping speed could prove more challenging for Amazon and others, as real estate for last-mile facilities is among the hardest to come by. Over the holidays, Amazon resorted to setting up tents on vacant lots to satisfy the seasonal demand. A more long-term shift would require more permanent, and costly, solutions.
One potential solution will likely come from within Amazon's portfolio. The company has long suggested that it would use Whole Foods stores as shipping hubs, and was searching for larger locations to do so.