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Amazon says more packages arrive in a day or less after a big investment in fast fulfillment
said it got more packages to customers in a day or earlier, a metric the electronics retailer is promoting to customers as it faces tougher competition in online shopping.
The company said Monday that nearly 60% of orders placed through Prime in 60 U.S. metro areas. the top in the first quarter arrives the same day or the next day. That’s up from about 50% in the second quarter of 2023.
It’s a topic that will interest investors when Amazon reports first-quarter earnings after the close of business on Tuesday. Wall Street expects the company to post another quarter of double-digit revenue expansion and for profits to more than double from a year earlier.
Cost-saving efforts, demand for cloud computing and faster fulfillment have driven higher profits in recent quarters.
Fast shipping is a hallmark of Amazon’s Prime subscription offering, which charges members $139 a year for perks like two-day shipping and video streaming. The company said it wants to make same-day and next-day delivery the standard, and it plans to double the number of same-day delivery facilities in the U.S. in the next few years.
“When we get things to customers this fast, customers choose Amazon to fulfill their shopping needs more often,” CEO Andy Jassy wrote in his letter to shareholders earlier this month. “And we can see the results in many areas including how fast our daily necessities business is growing (over 20% y/y in Q4 2023).”
According to RBC Capital Markets data, consumers have been shown to shop and shop more often if they have same-day delivery.
Amazon’s physical footprint grew between 2020 and 2022 as the pandemic-fueled e-commerce boom prompted the company to rapidly add new warehouses and delivery centers to its logistics network. Amazon last year retooled the network into eight regions instead of a national model, which the company says has resulted in faster, cheaper delivery. Jassy in its shareholder letter stated that the cost to serve, or the cost to get the product to the buyer, is down in 2023 by more than 45 cents per unit year over year.
Amazon already provides more than 55 same-day delivery sites in the U.S., primarily clustered around major metro areas. The facility is about 100,000 square feet, compared to a typical Amazon warehouse, which can be the size of 26 football fields, and they stock a smaller selection of items that are best-sellers in each city.
Same-day sites also shorten the fulfillment process, typically spread across several Amazon facilities under one roof. A package makes fewer stops on its way to the buyer’s doorstep, which lowers the cost of each delivery.
Amazon has increased investment in fast delivery as a traditional retail rival to Walmart
and Target
have upped their delivery game. Walmart says it can ship items to shoppers in as little as 30 minutes, while Target in March launched a new loyalty program that offers same-day delivery on orders over $35 within an hour.
