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Amazon says it will roll out one-day Prime shipping

Other retailers are going to have to find new ways to compete with Amazon.

Amazon Opens New Fulfillment Center In Aurora, Colorado
A worker moves packed boxes at the Amazon fulfillment center May 3, 2018, in Aurora, Colorado. The million square foot facility, employing 1,000 full-time employees, has more than 2 million products ready to ship to customers globally.
Rick T. Wilking/Getty Images

Amazon is planning to roll out one-day shipping for Prime members. In an earnings call on Thursday, chief financial officer Brian Olsavsky told investors that the company is doubling down on its quick delivery promise — and spending heavily to make one-day shipping a possibility.

“We’re currently working on evolving our Prime shipping program, which has historically been a two-day program, to a one-day shipping program,” Olsavsky said, according to CNET. “We’ll be building most of this capacity through the year, in 2019. We expect to make steady progress quickly and throughout the year.”

Amazon more or less singlehandedly created the expectation of two-day shipping and, as a result, changed the way we think about online shopping. For years, the company has increased the amount of money it spends on shipping to keep up with customer demand — and cater to a growing customer base.

More than 100 million people now use Amazon Prime, which launched in 2005, though the company does not offer standard two-day shipping to all customers worldwide. The company has also introduced other delivery streams, including Amazon lockers, central delivery hubs where customers can pick up their packages, and Amazon Day, which lets customers choose a specific day for all their orders to arrive.

Guaranteeing one-day shipping for Prime customers isn’t going to be cheap — CNET reports that Amazon is pouring more than $800 million into the endeavor. Amazon has also been building up its in-house delivery infrastructure, perhaps in an attempt to streamline its supply chain and reduce its dependence on third-party companies like UPS and FedEx. The company now has more than 40 cargo planes in its fleet and will soon have two regional air hubs: one at the Fort Worth Alliance Airport in Texas, which is slated to open this year, and another at the Cincinnati/Northern Kentucky Airport, which is expected to open in 2021.

“Amazon has pursued a growth trajectory rather than a profit one,” Anne Goodchild, a professor of civil and environmental engineering at the University of Washington who focuses on supply chain transportation and logistics told me in a previous interview. “I think everyone would agree that their strategy has been to please customers and, in doing so, grow their market share.”

In a statement to Recode, Vox’s sister site, Amazon said one-day shipping is a way of expanding its quick shipping options to even more Prime users. “We have offered ‘faster than two day’ shipping for a number of years — through one day, same day, and one/two hour delivery through Prime Now,” Amazon spokesperson Julie Law told Recode. “We will continue to offer same-day and Prime Now selection, but this is about offering more of our selection with free one-day shipping as the default, rather than free two-day shipping.”

One-day shipping would give Amazon an edge over its competitors, many of whom have attempted to cut their delivery times to avoid losing customers. Amazon’s strategy appears to already be working: CNBC reports that Target and Walmart’s shares both fell Friday morning. As CNBC notes, Walmart started offering free two-day shipping on orders above $35 in 2017. It also bought Jet.com, an Amazon competitor, in 2016.

“To me, this whole thing is Amazon flexing their ability to do this,” Juozas Kaziukėnas, the founder and CEO of the business intelligence firm Marketplace Pulse, told me. “This renders Prime shipping much more valuable, because even if some orders are delayed, the perception of one-day shipping is very valuable, because no one else can do it. That’s what’s going to keep people subscribing to Prime.”

Kaziukėnas added that other retailers will have trouble competing with one-day shipping — and that some shouldn’t even try.

“I think for everyone else, doing one-day shipping is borderline impossible, at least for the next five years,” he said. “For everyone else who’s barely caught up with two-day shipping, this isn’t something they can do. It’s also something they shouldn’t worry about too much; maybe a better [idea] is to find something else to diversify themselves from Amazon and find their own ways to offer a reason to shop on their own sites. It’s probably something better left to Amazon, because no one else has the infrastructure and transportation to compete.”

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