Last week, during their quarterly conference call Amazon announced they are working on a new program for one-day delivery for Prime members. They currently have free two-day shipping for Prime members, so one-day shipping cuts that standard in half. They are developing this new service during their second quarter and are projected to spend $800 million during the quarter, solely on the program. The new program is a logistical challenge with a hefty price tag. However, Amazon currently offers two hour and same day delivery windows with their Prime Now membership option. They have also recently expanded their delivery areas, adding new zip codes and additional products.
The two-day Prime standard delivery window already relies on outside providers like UPS, FedEx and the U.S. Postal Service to deliver 88% of Amazon packages. Making one-day delivery the new Prime standard will only put more reliance on these providers. Not only are outside providers going to feel the pressure but retailers and merchants will also have to work faster to get their products to those outside providers. There is no current timeline for rollout but Amazon will begin the program in the U.S. and has not announced plans for a global program as of yet.
Amazon Deliveries By The Numbers
For an outside delivery partner like UPS, their numbers for domestic air shipments have increased by 8% each year since partnering with Amazon. On the other hand, Amazon had their fulfillment costs increase from $7.7 billion to $8.6 billion over the course of the 12 month period ending March 31, 2019. The cost of shipping increased by 21% and hit $7.32 billion. Amazon transports 12% of its goods and relies on outside partners for the rest, as mentioned previously. They are expecting these numbers to change as they begin to add more trucks and eventually aircrafts to their fleet. They will also begin using the rail system to transport goods at some point. After the announcement, shares skyrocketed at the open of day on April 26 while big retail competitors like Target and Walmart saw a substantial drop.
In response, Walmart released a statement via Twitter hinting at free one-day shipping without requiring a membership fee. Target also already offers one-day shipping to REDcard holders, which also has no membership fee. The advantage that Target and Walmart have over Amazon are their local retail stores. They also offer same-day pickup. The race for the most convenient shopping experience continues. Who will come out with the most convenient service?
Sunship & Amazon
Hearing that one-day delivery is coming doesn’t surprise many, especially us. Amazon has been cutting delivery times since 2005. Sunship already offers end-to-end fulfillment solutions for Amazon FBA. Our in-house technology integrates with existing online stores and allows for live map shipment tracking. We look forward to the one-day shipping challenge.