Amazon Will Invest Nearly $1 Billion in Q2 to Pursue One-Day Global Delivery

Strategy is directed at its Prime program membership, which is experiencing flattening growth
Posted: Apr, 26 2019
 
 
  • Strategy is directed at its Prime program membership, which is experiencing flattening growth

E-commerce giant Amazon wants to translate online orders into real-world deliveries at a faster pace going forward, with plans to make one-day delivery the standard for members of its Amazon Prime program. The company will invest $800 million in the second quarter of this year to move toward that goal.

That was the strategy unveiled by Brian Olsavsky, Amazon’s chief financial officer, during a recent earnings conference call.

“Our goal is to evolve the two-day free shipping program into a one-day free shipping program, and we’re making strides on that,” Olsavsky said. “We expect to make steady progress quickly and through the year.”

He added that the company plans to use “all available levers” to accomplish the one-day-delivery goal, including bulking up its internal resources and its third-party carrier network. Olsavsky said the company plans to invest $800 million into the effort in the upcoming quarter “and we will see where we stand at the end of the quarter … and what our outlook is for future quarters at that time.”

Olsvasky added that most of the money being invested in the second quarter in ramping up to a one-day standard delivery for the Prime program is “starting in North America, but this is intended to be a global improvement in speed tied to our Prime program.” The Amazon Prime program offers members perks such as Amazon Prime Video, free shipping and value deals and other services for $119 a year.

A report published in October of last year by Consumer Intelligence Research Partners LLC (CIRP) estimated that some 97 million Amazon customers in the U.S. had Prime memberships and spent on average $1,400 a year on purchases, compared to about $600 per year for non-Prime customers. The report also states that Prime membership growth is flattening.

Membership growth was up 8% year over year as of September 2018, “the lowest annual rate since we started tracking Prime membership in 2012,” the CIRP report notes. As of year-end 2018, CIRP estimated Amazon’s Prime membership had grown to 101 million, a 10% year-over-year gain.

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