Amazon, which built its Prime subscription program on the promise of free two-day shipping, said it plans to shift that core benefit into free one-day shipping.
The news came during an earnings call with Amazon chief financial officer Brian Olsavsky on Thursday, shortly after the tech giant announced its profits in the first quarter had doubled to a record $3.6 billion.
“We’re currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program,” Olsavsky said. “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 work to do ahead of us.”
Olsavsky said the work has already begun, although it was minimal in Q1 earnings. The company plans to spend $800 million on the effort in Q2 and in the past month has expanded both its one-day eligible selection of goods and the number of zip codes eligible for one-day shipping.
“We have been offering faster than two-day shipping for Prime members for years — one day, same day, even down to one- to two-hour delivery from Prime Now,” Olsavsky said. “So we’re going to continue to offer same day and Prime Now selection in an accelerated basis. But this is all about the core, free, two-day offer evolving into a free one-day offer.”
In many cases currently, same-day or one-day shipping comes with a minimum order requirement and is only available on certain products.
In a report published this week, Consumer Intelligence Research Partners estimated that Amazon has 103 million U.S.-based Prime members and said membership growth has “flattened” year-over-year. Amazon does not regularly provide a Prime membership count, but said in April 2018 that there were more than 100 million accounts worldwide.
Amazon’s push for faster shipping has re-shaped the retail industry, with many competitors, including Target and Walmart, offering two-day delivery options. With the announcement, Amazon is upping the ante as others have caught up.
Amazon’s shipping costs have ballooned in recent years as the company aims to speed up delivery. In 2018, Amazon spent $27.7 billion on shipping, an increase of $6 billion or roughly 27.6 percent over the prior year, according to GeekWire research. Worldwide shipping costs reached $7.3 billion in the past quarter, up 21 percent year-over-year.
“We have a network tuned to two-day delivery right now, so we do need to build more one-day capacity with our transportation partners,” Olsavsky said. “But we have a head start and we are moving quickly.”
GeekWire’s Taylor Soper and Nat Levy contributed to this report.
