Amazon spending $800 mln to make free one-day shipping Prime default

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Amazon Fresh grocery delivery truck from the Amazon Prime service parked on a suburban street in San Ramon, California, July 5, 2018.

Amazon is making one-day shipping the standard for Prime members.

Chief Financial Officer Brian Olsavsky said on the company’s first-quarter earnings call on Thursday that it plans to shorten the current two-day default free shipping plan by one day for Prime members.

“We’re currently working on evolving our prime free two-day shipping program to be a free one-day shipping program,” Olsavsky said.

In order to make the change, Amazon is expected to spend $800 million in the second quarter improving warehouses and delivery infrastructures, Olsavsky said. The investment will cut into Amazon’s profit margins, and the company gave lower-than-expected earnings guidance for the period.

Amazon already offers one-day and two-hour shipping to Prime members for certain products and at an additional cost. But the change would significantly expand the number of product selection and zip codes eligible for one-day free shipping, Olsavsky said. Amazon says over 100 million items are currently available for free two-day shipping on its site.

The change will first take place in the North American market, Olsavsky noted, but is designed to expand globally, across all countries that offer Prime memberships. Amazon said last year that it has over 100 million Prime members worldwide.

Olsavsky said the company would use “all of the available levers” for free one-day shipping, including existing partners like the U.S. Postal Service and UPS, as well as Amazon’s own third-party delivery network. But he declined to give specific details, like the timeline for the rollout, saying the move involves many different moving parts.

“We’re taking a significant step,” he said.

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