Amazon is already capable of offering same-day and next-day delivery to 72% of the total U.S. population, including almost all of the households (95% or more) in 16 of the wealthiest and most populated states and Washington, D.C., according to a report published in March by RBC Capital Markets.
The vast delivery network is the result of significant investments over the past four years, a period during which Amazon built out fulfillment centers across the country, nearly tripling its U.S. logistics infrastructure, RBC said. Amazon has added roughly double the amount of distribution space Home Depot currently owns.
That means the company has a huge head start in fulfilling its plan laid out in its latest earnings report to shorten the current two-day free shipping plan by one day for Prime members, who pay $119 a year for fast delivery as well as services like unlimited music, access to the video catalog and exclusive deals.
“We see Amazon’s 1-day Prime shipping raising consumer expectations and increasing the cost to compete in e-commerce,” Morgan Stanley analysts wrote in a note after the announcement.
One of the biggest reasons people shop at a physical store is because of the immediate need to get a product. By shortening delivery time to one day, Amazon changes that equation. Brian Olsavsky, Amazon’s CFO, said on the first-quarter earnings call that the company is already starting to see “good order trends” after rolling out one-day default shipping to certain areas.
Even at Amazon, the change won’t come cheap. The company said it’s planning to spend $800 million during this quarter alone to expand one-day shipping. RBC noted that 15 U.S. 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.