Amazon dropped a bombshell during its Q1 earnings call on Thursday—free two-day shipping with Amazon Prime is about to become free one-day shipping.
In a Q&A with analysts, Amazon’s senior vice president and chief financial officer Brian Olsavsky said the company has “significantly expanded our one-day eligible selection and also expanded the number of ZIP codes eligible for one-day shipping” in the past few months. But he also said, “It will take us time to achieve.”
“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 [there’s] a lot of work to do ahead of us,” Olsavsky said.
That’s because Amazon’s existing network is built for two-day delivery and it needs to build out its one-day capacity within Amazon Logistics as well as its third-party transportation partners.
“There is a certain tranche that we can dial up quickly, and we’ve started to do that, and you’ll see that very quickly in Q2,” Olsavsky said. “And then stay tuned, because we’ll be building this—most of this capacity—through the year in 2019.”
Amazon included approximately $800 million of incremental spend for the endeavor in its Q2 guidance.
Olsavsky didn’t get into specifics, such as whether one-day shipping will be available throughout the U.S. by the end of the year or how many SKUs will be eligible for free one-day shipping. However, he did say the program will be global, but most of Q2 spend will be in North America.
“By going to one-day, it increases the convenience and it increases the available selection into the consideration set,” Olsavsky said. “Although, we have many items that are available in one to two hours and also same day, the vast majority of our selection is available to you in two days.”
He also said he thinks one-day shipping “will open up a lot of potential purchases … and it will open up convenience to those customers.”