When Amazon introduced Prime in 2005, it was an innovative concept. Give the company $79 a year and in exchange, you can get unlimited two-day shipping.
That idea sparked a race to drastically speed up delivery times for online purchases. Fourteen years later, two-day deliveries are now much more common.
Looking to stay one step ahead of the competition, Amazon on Thursday said it plans to shift its two-day Prime shipping to just one day.
‘We’ll be building most of this capacity through the year, in 2019,’ Chief Financial Officer Brian Olsavsky said. ‘We expect to make steady progress quickly and through the year.’
That change, while costly, should help Amazon stand out with its customers, who now pay $119 a year for Prime, while forcing other retailers to figure out how to keep pace with the world’s biggest online retailer. Amazon’s move may eventually be a boon for consumers, resulting in even faster delivery times from many of the biggest e-retailers. But those businesses could need to balance their shrinking profits with getting you that merino wool sweater in a single day.
So even as rivals work on faster shipments, don’t expect them to match Amazon quickly. It took traditional retailers like Target and Walmart years to build up their two-day shipping capabilities. Even Amazon, which has a more robust shipping infrastructure developed over 20 years, isn’t yet capable of one-day shipping for more than a small selection of its products.
‘When the biggest guy tells you, ‘We’re going to get you your stuff in 24 hours,’ that sets the new bar,’ Benchmark analyst Daniel L. Kurnos said. He added that rivals will need to accelerate their work speeding up shipments or risk losing sales to Amazon. The change should ‘only solidify Amazon’s dominance in the marketplace,’ he wrote in a note to investors Friday.
Amazon’s Olsavsky said the company is spending $800 million this quarter, starting in North America, and Amazon plans to spend plenty more throughout this year to build up its shipping capabilities.
The change should be most significant in the US, which is the biggest Amazon Prime market. The company has already moved to mostly one-day shipping in the European Union and same-day in Japan. But Olsavsky said this will be a global effort, so Prime customers worldwide should expect to see more selection and faster shipping times as this project moves forward.
In the US, two-day shipping is offered for more than 100 million items, while Amazon says one-day deliveries are available for ‘millions’ of items. Three million items are available for same-day delivery in a limited number of markets.
Amazon’s one-day shipping plans have already been called a game-changer in retail. But Forrester analyst Sucharita Kodali isn’t totally sold on whether that’s the case. She said customers are already getting some items ahead of the two-day shipping timeline and getting others later than two days due to delays. Considering that situation, she doesn’t expect much to change.
‘It seems to me as marketing spin to a product they’ve already rolled out a long time ago,’ she said of the one-day shipping announcement.
Other retailers are likely to respond, she said, since they typically freak out about whatever Amazon does. She cautioned that rivals should focus on something else instead. Customers just want free shipping that’s accurate, and don’t care as much about expedited deliveries, Kodali said.
Separately, the Retail, Wholesale and Department Store Union, a longtime critic of Amazon, raised concerns about how the change may harm warehouse workers.
‘Increasing fulfillment speeds means they need to hire more workers, under more sustainable speeds that don’t put workers’ lives in jeopardy,’ RWDSU President Stuart Appelbaum said.
What comes after one-day shipping?
Amazon and others are already laying the groundwork for the next step after one-day shipping.
In addition to same-day deliveries, Amazon created a two-hour shipping program called Prime Now and several retailers have worked to match that effort by partnering with rapid-delivery services like Deliv.
Amazon, Google and others are also developing delivery drones that are meant to ship products within 30 minutes. For now, these drones are very limited in the US and aren’t expected to reach the mainstream anytime soon. Amazon is testing these drones in England, and Google parent Alphabet just this week received certification to operate its drones in southwest Virginia.
A few years from now, these efforts may make even one-day shipping seem annoyingly slow.
