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.
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
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.