Amazon pledges one-day delivery in US

Bloomberg

Amazon.com Inc will spend $800 million in the current quarter to reduce delivery times for top customers to one day from two, trying to revive its main e-commerce franchise and ward off greater competition.
The announcement came after the online retailer reported first-quarter profit that exceeded analysts’ estimates, demonstrating the company’s focus on cloud-computing, advertising, and other high-margin businesses continues to pay off.
Amazon Chief Financial Officer Brian Olsavsky later put the attention back on Amazon Prime, the subscription programme that helped make the company the world’s largest online retailer. Amazon charges Prime customers monthly and annual fees — typically $119 in the US — in exchange for shipping discounts and access to music and video programming. It offers free two-day delivery on many items.
That benefit is less of a draw now than when it was first launched in 2005. Established retailers and startups have closed the gap on Amazon’s offer of convenience. Over the holiday shopping season, Target Corp made waves by scrapping minimum order sizes to qualify for free shipping.
“To the extent it is able to fulfill this promise or, at least, the perception it is able to do, it will place a lot of pressure on the competition, most of which is still trying to ramp its 2-day efforts,” analysts at DA Davidson wrote in a note to investors.
Amazon’s e-commerce business saw unit sales grow 10 percent during the first three months of the year. That was the lowest ever. Total revenue increased 17 percent, the first year-over-year gain of less than 20 percent in a quarter since early 2015. Olsavsky said faster delivery times will increase the number and types of products customers are willing to buy from Amazon.
“We really think it’s going to be ground-breaking for Prime customers,” he said. “We have the capability because we’ve been at this for more than 20 years.” Olsavsky didn’t offer a timeline for the project’s roll out, which will begin in the US, saying “we expect to make steady progress quickly and through the year.” He also didn’t outline the extra ongoing costs Amazon will bear to take the program global .
Recently, the company started encouraging Prime members to group their orders for delivery on a single day. That helps Amazon consolidate shipping — and, if customers follow through — may hold down the cost of the new one-day pledge.
Amazon kept a lid on delivery costs in the period ended on March 31, spending $7.3 billion in the quarter. That’s a gain of 21 percent from a year earlier, but well below the pace of the increases seen in recent years.
Still, expenses related to the new Prime perk, and the suggestion of more to come in a profit forecast that fell short of estimates, contributed a dour note in Amazon’s otherwise upbeat earnings.
First-quarter earnings were $7.09 a share, the Seattle-based company said. Analysts had projected $4.67 a share. Sales were $59.7 billion, compared with $51 billion in the period a year earlier — in line with the average estimate of analysts compiled by Bloomberg.
The retailer has been buoyed in recent quarters by increasing sales in cloud-computing, digital advertising, and services for third-party sellers on Amazon’s retail site, all of which are more profitable than the company’s central online business. Chief Executive Officer Jeff Bezos for years pumped most of the cash generated from Amazon’s operations back into new initiatives. That led to prodigious revenue growth, but little income left over for investors. Now shareholders are seeking greater profit, much of which comes from the Amazon Web Services (AWS) division, the leader in the growing market for selling computing power and data storage.
“The bottom line is almost doubling,” said Brent Thill, an analyst at Jefferies LLC. “And everyone thought this was the story that could just grow and grow and not produce profits.”
AWS revenue gained almost 42 percent from a year earlier to $7.7 billion. The unit’s operating income was $2.2 billion, half of Amazon’s total.
Sales in Amazon’s “other” segment, which is mostly advertising, increased 34 percent, to 2.72 billion. The company’s digital advertising franchise has grown into the third largest in the US, trailing only Google and Facebook, EMarketer estimates.

Walmart takes on Amazon with one-day free shipping
Bloomberg

Is Walmart Inc taking on Amazon with one-day free shipping?
The retail giant appeared to be taking a jab at its rival with a tweet, teasing one-day free shipping without a membership fee.
Amazon.com Inc said it would spend $800 million in the current quarter to reduce delivery times for top customers to one day from two.
Walmart could easily match Amazon’s one-day delivery gambit, according to an analyst who previously worked at the world’s largest retailer.
“One day shipping is neither shocking nor difficult for retailers at scale,” Brandon Fletcher, an analyst at Sanford Bernstein, said.
Fletcher, who previously worked in Walmart’s strategy and operations departments, said the retailer’s existing network of 156 distribution centres, combined with the fact that much of the US population is concentrated in urban areas, means that it wouldn’t require much investment to build out a one-day service.