Amazon says more packages are arriving in a day or less after hefty investment in speedy fulfillment
Amazon says it is getting even more packages to customers in one day or sooner, a metric the e-retailer is promoting to customers as it faces heightened competition in online shopping.
The company said on Monday that nearly 60% of orders placed through Prime in the top 60 U.S. metro areas in the first quarter arrived the same or next day. That is up from roughly 50% in the second quarter of 2023.
It is a topic that will be of notable interest to investors when Amazon reports first-quarter earnings after the close of trading 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-cutting efforts, cloud-computing demand and faster fulfillment have driven higher profits in recent quarters.
Speedy delivery is a hallmark of Amazon’s Prime subscription offering, which charges members $139 a year for benefits such as two-day shipping and video streaming. The company has said it wants to make same- and next-day delivery the standard, and it plans to double the number of same-day delivery facilities in the U.S. within the next few years.
“As we get items to customers this fast, customers choose Amazon to fulfill their shopping needs more frequently,” CEO Andy Jassy wrote in his letter to shareholders earlier this month. “And we can see the results in various areas including how fast our everyday essentials business is growing (over 20% y/y in Q4 2023).”
According to RBC Capital Markets data, consumers have been shown to spend and shop more often if they have one-day shipping.
Amazon’s physical footprint swelled between 2020 and 2022 as the pandemic-driven e-commerce boom pushed the company to rapidly add new warehouse and delivery centers to its logistics network. Amazon last year retooled that network into eight regions instead of a national model, which the company says has resulted in faster yet cheaper deliveries. Jassy in his shareholder letter noted that cost to serve, or the cost to get a product to a shopper, was down in 2023 by more than 45 cents per unit year over year.
Amazon has already stood up more than 55 same-day delivery sites in the U.S., primarily clustered around major metro areas. The facilities are roughly 100,000 square feet, compared to a typical Amazon warehouse, which can be the size of 26 football fields, and they store a smaller selection of goods that are the top-selling items in each city.
Same-day sites also condense the fulfillment process, typically spread across multiple Amazon facilities under one roof. A package makes fewer stops on its route to a shopper’s doorstep, which cuts down on costs per shipment.
Amazon has bolstered investment in fast shipping as traditional retail rivals Walmart and Target have stepped up their delivery game. Walmart says it can deliver 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 more than $35 in as little as an hour.