Amazon and the Race to Next-Day Shipping
Amazon Wants Next Day Shipping – Now.
Amazon’s one-day shipping reach is now at 72 percent of all households in the United States. Included in that percentage is 16 of the wealthiest and most populated states plus Washington, D.C. In early April, Amazon announced plans to increase delivery speed for Prime members during Q2 with an investment of $800 million. The main goal was to move from the two-day shipping model to one day, but only for Prime members.
One of the perks of shopping at a store is the ability to get the product right away. Amazon is now able to compete with that need for instant gratification with their one-day model. Amazon has already seen a rising trend after launching one-day shipping in select locations.
The original $800 million investment has already increased the projected profits for Q2 to between $2.6 billion to $3.6 billion, which is below the $4.2 billion Wall Street estimate.
The main goal of one-day shipping is to gain more Prime members. Statistically, Prime members are ]loyal Amazon shippers that spend more than twice as much per year than nonmembers. With Amazon currently on pace to spend more than $7 billion on digital advertising this year, they’ll need to make up for it in sales.
Walmart and Target Compete for Market Share
With Amazon’s move to one-day shipping becoming the norm, Target and Walmart have seen their shares fall, forcing them to spend more on their internal shipping operations to compete with Amazon.
Earlier in 2018, Target announced it would offer free two-day shipping to its’ customers. For some Target shoppers, the store was just like any other brick and mortar store. Now, the store’s logo can be seen on parcel boxes that arrive at the customer’s doorstep.
On April 26, Walmart’s official Twitter account tweeted: “One-day free shipping…without a membership fee. Now THAT would be groundbreaking. Stay Tuned.” With Amazon dominating the market share in the next-day shipping sector, could we see Walmart and Target eventually make their way into the space? Only time will tell.
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