Amazon ups the ante with promise of one-day shipping worldwide
Online retailer beats estimates as profits more than double in first quarter
Amazon plans to deliver packages to members of its loyalty club Prime in just one day, instead of two days, part of a spending ramp-up that may curb near-term profits and will up the ante for retail rivals.
Shares rose as much as 2 per cent in the US overnight as Amazon said faster shipping will come to customers around the world and said its profit more than doubled in the first quarter, trouncing estimates thanks to soaring demand for its cloud and ad services.
The news marks a costly challenge for competitors that will have to pour money into a logistics problem that even the king of e-commerce has yet to solve.
Amazon expects to spend $800 million toward the shipping goal in the second quarter alone. “There’s a lot of error bars around this program, especially from the cost side,” Amazon’s chief financial officer Brian Olsavsky told analysts on a conference call. “We (are) again, trying to take advantage of the fulfillment capacity and transportation capacity, especially with third-party partners, that we have.” While Mr Olsavsky did not provide a concrete timeline for the program’s rollout, he said, “We expect to make steady progress quickly and through the year.”
Mr Olsavsky said the “vast majority” of Amazon’s selection is available in two days, and the company has already expanded the number of goods eligible for same-day and two-hour delivery. “
Amazon is cranking it up a notch, trying to set themselves apart,” said Cathy Morrow Roberson, a former UPS analyst who founded consulting firm Logistics Trends & Insights. She estimated that roughly 20 per cent to 25 per cent of
Amazon’s shipping is currently within one day, noting that speedy service was easy in large US metro areas where it already had built out its delivery network. However, costs can be prohibitive elsewhere. “I don’t know how they are going to do it in ?Little Town USA,’” she said. - Reuters