Amazon Bets Big On Faster Shipping

November 15, 2019
Amazon Bets Big On Faster Shipping

Amazon spent $1.5 billion to improve its transportation and warehouse infrastructure and increase its inventory to cut its Prime shipping from two days to one.

The next-day delivery investment has brought benefits, including new record sales, improved revenue growth, increased warehouse and shipping staff, and happier customers. However, shipping costs have also increased 46% in the company’s second quarter.

Investors are overall optimistic about the outlay, but Amazon’s recently predicted weak holiday demand, which has raised some concerns.


Video Spotlight: Amazon’s profit falls due to same-day delivery costs, and other top business news


This post is based on the CNET article, Amazon’s next-day shipping ambitions are costing it a fortune, by Ben Fox Rubin, October 25, 2019, and the YouTube video, Amazon’s profit falls due to same-day delivery costs, and other top business news, by CityNews Toronto, October 25, 2019. Image source: Daniel Grizelj/Getty Images

Discussion Questions:

1. Is Amazon’s one-day Prime shipping a strategic capacity decision?

Guidance: Yes – it enables Amazon to meet customers’ demand for next-day delivery, increases operating costs, reflects a long-term commitment to e-business, and enables competitiveness in e-retailing.

2. What investment did Amazon make to cut its Prime shipping from two days to one?

Guidance: Amazon spent $1.5 billion in transportation and warehouse infrastructure improvements to increase its levels of inventories as well as warehouse and shipping staff.

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