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Amazon, in response to increased competition in the online shopping arena, is intensifying its efforts to deliver packages to customers within one day or less. The e-commerce giant revealed that nearly 60% of Prime orders in the top 60 U.S. metro areas were delivered the same day or the next, a significant increase from roughly 50% in the second quarter of 2023.
This surge in rapid delivery is expected to draw considerable attention from investors as Amazon prepares to report its first-quarter earnings after Tuesday's trading session. Wall Street anticipates another quarter of double-digit revenue growth, with profits projected to more than double from the previous year.
Amazon attributes its recent profit growth to cost-cutting measures, increased demand for cloud computing services, and improvements in fulfillment speed.
Speedy delivery has long been a cornerstone of Amazon's Prime subscription service, which offers members benefits such as two-day shipping and video streaming for an annual fee of $139. The company aims to make same-day and next-day delivery the standard, with plans to double the number of same-day delivery facilities in the U.S. over the next few years.
CEO Andy Jassy emphasized the impact of fast delivery on customer behavior in a recent letter to shareholders, noting that faster delivery results in increased customer preference for Amazon. This sentiment is supported by data from RBC Capital Markets, showing that consumers tend to spend more and shop more frequently when offered one-day shipping.
Amazon has already established over 55 same-day delivery sites across the U.S., primarily located near major metropolitan areas. These facilities, approximately 100,000 square feet in size, stock a select range of top-selling items tailored to each city.
By condensing the fulfillment process and reducing the number of stops a package makes before reaching the customer, these same-day sites help cut down on shipping costs per delivery.
In a bid to stay ahead of traditional retail rivals such as Walmart and Target, Amazon is doubling down on its investment in fast shipping. Walmart boasts delivery times as short as 30 minutes, while Target recently launched a loyalty program offering same-day delivery on orders over $35 in as little as one hour. As online shopping competition heats up, Amazon's commitment to rapid delivery is expected to play a crucial role in maintaining its market dominance.
