How Much More Expensive for Amazon Is Prime One-Day Shipping Than Two-Day Shipping?
Amazon (NASDAQ: AMZN) CFO Brian Olsavsky made waves earlier this year when he told analysts the online retail giant would "evolve" Prime shipping from its standard two-day delivery into just one-day delivery. He also mentioned the company would invest an extra $800 million in its fulfillment network in the second quarter in order to reach that goal. He reiterated a continued level of heightened investment during the company's second-quarter earnings call.
Those efforts to speed up its shipping operations have already had a noticeable impact on Amazon's top line. North American retail revenue growth accelerated in Q2 thanks, in large part, to the one-day shipping available on 10 million products.
But those orders came at a cost. Indeed, Olsavsky disappointed analysts with his third-quarter operating income outlook. Analyst Brian Nowak from J.P. Morgan recently released an estimate that one-day shipping costs per unit were 2.2 times higher than average shipping costs, leading to total fulfillment costs two times higher.
Source Fool.com
