Amazon switching from 2-day to 1-day Prime free shipping

Amazon's mastery over logistics has been a major factor in the company's evolution into the largest e-commerce marketplace in the world. The tech giant's ability to provide standard free two-day shipping to Amazon Prime members has been a key factor in its growth, and in 2018, CEO Jeff Bezos announced the company had achieved over 100 million Prime members worldwide.

And now even more membership milestones appear likely, after Amazon CFO Brian Olsavsky said during the company's recent first-quarter earnings call that over the course of the next year, the online retailer will transition the standard shipping time for Prime members from two days to one day.

The gold standard for free shipping grows even more refined

Since it first began in 2005, Amazon Prime free two-day shipping has been the gold standard by which all other competitors have been judged. It has also pushed the other industry players, and the third-party logistics partners that support them, to fulfill and deliver faster.

Currently, Amazon also offers one-day, same-day and even one-hour to two-hour shipping on select items, through its Prime Now service.

"We've already started down this path," Olsavsky said. "We've, in the past months, significantly expanded our one-day eligible selection and also expanded the number of zip codes eligible for one-day shipping."

With competitors like Walmart and Target offering two-day shipping, Amazon is moving swiftly to retain its advantage over other online retailers.

According to Supply Chain Dive, Olsavsky emphasized the necessity of third-party logistics partners to accomplish one-day shipping, while also praising the internal logistics capability Amazon has developed as an essential component of the ambitious new service. Focusing on the balance between logistics partners and internal logistics development has been a frequent subject of recent earnings calls, as some suspect the company of making moves to become a 3PL itself.

"I would say, we're going to be using all of the available levers that we have right now, both AMZL and also third-party carriers, and we'll just see how it develops going forward. But we're going to definitely need continued support of our external transportation partners," Olsavsky said.

With this move, Amazon is continuing to move the goalposts for its competitors. In the last year, other retailers like Walmart and Target have matched the two-day shipping bar set by Amazon, while also providing alternative options such as in-store pickup for online purchases and same-day delivery services. With this move to one-day shipping, Amazon stays a full day ahead of the competition, which helps explain why the day after the announcement, Target shares closed down almost 6%,

Walmart shares fell by 2% and Amazon's stock finished up 2.5%, according to CNBC.
Amazon says it is initially allocating $800 million for the transition from two- to one-day shipping. The money will be spent on improving warehouses and delivery infrastructures during the second quarter of this year.

"We're able to do this because we spent 20 plus years expanding our fulfillment and logistics network, but this is still a big investment and a lot of work to do ahead of us," Olsavsky said.