Amazon's 1-day delivery seen as Big Bang that redefines e-commerce
AMAZON.COM says it will spend US$800 million this quarter to expand one-day shipping, a move analysts say, may well re-define e-commerce, reports CNBC News.
Amazon is now capable of same-day and next-day delivery to 72 per cent of the US population, including 95 per cent of households in 16 of the wealthiest and most populated states, according Toronto's RBC Capital Markets.
Said Morgan Stanley analysts: 'We see Amazon's 1-day Prime shipping raising consumer expectations and increasing the cost to compete in e-commerce.'
'The faster you ship, the more people buy,' said RBC, while also noting that 15 US states still don't have access to Amazon's same-day or next-day delivery, so the company will have to spend more heavily to reach those areas.
Said BMO Capital analysts: 'While this is a drag on profitability near term, we believe enhancements like this should encourage incremental spending by customers and attract new Prime members.'
Another benefit is improvements in warehouse efficiency. Since products are shipped faster, more inventory will move in and out of Amazon's fulfillment centres more quickly.
Said Japan's Mizuho Securities: 'The long-term benefit is that turnover will be faster in the warehouse so efficiency can be gained for fulfilment as a percentage of revenues.'
It's having an impact on the stock market. Rival retailers, Walmart and Target, saw their shares drop following Amazon's announcement.