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Why Amazon's Expensive One-Day Shipping Effort Can Pay Big Dividends




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Since Amazon in April reset the industry standard and revealed its intention to make one day free shipping of the new norm for its Prime members, rivals from Walmart to Best Buy have followed their own one-day announcements, but the Seattle giant online is not about to be surpassed, not even at a huge cost of profits. & nbsp; [19659006] Amazon shares fell 7% in afternoon trading on Thursday after the company reported a 16% decline in operating revenues, the first fall in two years. Shipping costs, thanks to a one-day delivery, ballooned by 46% to $ 9.6 billion, the fastest island at least two years and three times what Amazon was crazy about in operating profit. & nbsp;

And that increase is not about to come down anytime soon. & nbsp; Amazon expects to pay a $ 1.5 billion "penalty" related to a day's shipment, mostly still in the United States this holiday quarter, Amazon Finance Minister Brian Olsavsky said in a conference call late Thursday. That was about twice the $ 800 million incremental cost, he said, which Amazon called for the initiative in the second quarter.

One day's initiative will also lead to Amazon's increase in hiring despite expanding its marketing and sales staff for its AWS cloud service, he said.

"There is a drastic change in the entire network," Olsavsky said. We make "fast progress in a day's shipping."

Despite the cost of making money, the faster rate has paid off in orders and the number of items customers buy, he said. Amazon's online store sales increased 22%, the biggest gain in two years. Unit growth in pay was the largest increase in six quarters. & Nbsp;

"We attribute a day-to-day transportation" to "growth acceleration" over the past two quarters, he said, and allowed the initiative to help demand across categories. & nbsp;

As Amazon expands a day's shipping, it can help it cut down on retailer's pricing games. An increasing number of consumers appear to be choosing to shop on the site for "convenience" and "selection" rather than "low prices," according to a recent survey by investment bank Stifel. The study showed "an expanded price gap" between & nbsp; Amazon & nbsp; and other major retailers over the past 12 to 18 months. & Nbsp;

"Although price is still the main driver of the overall shopper's intention, it has become less so on & nbsp; Amazon," according to the Stifel & nbsp; report. "This may reflect the transition to a one-day shipment. We wonder on whether & nbsp; it is a calculation by & nbsp; Amazon & nbsp; that convenience will ultimately outweigh higher prices as the primary driver of shopper intention. "

The percentage of buyers who cited price as the main reason to shop at Amazon has dropped to 26% at the end of September from 30% in June, while those who cited convenience as the main driver have increased by a similar percentage, according to the company's survey. & nbsp;

More than 10 million articles now qualify for Amazon's one-day free shipping, much more than what its competitors offer. & nbsp;

Picking up the growth of ecommerce is key for Amazon at a time when sales increased by its profit crown jewel AWS has slowed amid increased competition from rivals led by Microsoft. Meanwhile, its brick-and-mortar rivals, including Walmart and Target, have increased their e-commerce game, showing their physical footprint as a competitive advantage that allows them to send or fulfill pickup orders right from their stores already in close to many of their customers.

Amazon, to expand its physical footprint, introduced in June & nbsp; Amazon Hub Counter & nbsp; staffed pick-up points that allow customers to pick up their orders at a partner site. The company said on Wednesday it has added GNC grant shop and regional department store Stage Stores among new partners. & Nbsp; & nbsp;

Kohl's for his part, Amazon is now taking back more than 1100 of its stores nationwide.

The various initiatives, not to mention the perks like Amazon Prime Video, can well hook Amazon's customers and keep it at the forefront. & nbsp; Market Research Company & nbsp; Packed facts Thursday estimated that Amazon's US gross sales will represent nearly half of US e-commerce sales by 2022, up from 43% this year and 28% in 2015. & nbsp;

Related to Forbes: Nordstrom's first NYC flagship, seven years to be finally opened

Related at Forbes: & nbsp; Don't be surprised if your holiday gifts are unpacked this year

Related to Forbes: What does teen shopping behavior mean for brands

Related to Forbes: & nbsp; Healthcare can eventually become a bigger business for Best Buy

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Since Amazon reset its industry standard in April and revealed its intention to make a day's free shipping a new norm for its Prime members, rivals from Walmart to Best Buy have followed its own day announcements, but the Seattle giant online is not in the running

Amazon shares fell 7% in afternoon trading on Thursday after the company reported a 16% decline in operating revenues, its first fall in two years, shipping costs, thanks to a one-day delivery, ballooned with 46% to $ 9.6 billion, the fastest increase in at least two years and three times that Amazon did in operating profit.

And that increase is not about to come down any time soon. Amazon expects to pay a "$ 1.5 billion" penalty related to a day's shipment, mostly still in the United States this holiday quarter, Amazon Finance Minister Brian Olsavsky said in a conference call late Thursday. That was about twice the $ 800 million incremental cost, he said, which Amazon called for the initiative in the second quarter.

One day's initiative will also lead to Amazon's increase in hiring despite expanding its marketing and sales staff for its AWS cloud service, he said.

"There is a drastic change in the entire network," Olsavsky said. We make "fast progress in a day's freight."

Despite the cost of making money, the faster rate has paid off in orders and the number of items customers buy, he said. Amazon's online store sales increased 22%, the biggest gain in two years. Growth in paid units had the largest increase in six quarters.

"We attribute a daily transport" for "growth in growth" over the last two quarters, he said, adding to the initiative that helps demand across categories.

As Amazon expands a day's shipping, it can help cut down on dealers' profit-reducing price games. An increasing number of consumers appear to be choosing to shop on the site for "convenience" and "selection" rather than "low prices," according to a recent survey by investment bank Stifel. The study showed "an expanded price gap" between Amazon and other major retailers over the past 12 to 18 months.

"Although price is still the main driver of the overall shopper's intent, it has declined in the Amazon," according to the Stifel report. “This may reflect the transition to a day's shipment. We wonder if it is an estimate from Amazon that convenience will eventually outweigh higher prices as the primary driver for shopper intention. ”

The percentage of buyers who cited price as the main reason for shopping at Amazon has dropped to 26% in late September from 30% in June, while those who cited convenience as a main driver have increased by a similar percentage, according to the company's survey.

More than 10 million items now qualify for Amazon's one-day free shipping, much more than what rivals offer.

Picking up ecommerce growth is key to Amazon at a time when sales growth on its profit crown jewel AWS has slowed amid increased competition from rivals led by Microsoft. Meanwhile, its brick-and-mortar rivals, including Walmart and Target, have increased their e-commerce game, showing their physical footprint as a competitive advantage that allows them to send or fulfill pickup orders right from their stores that are already close to many by their customers. .

Amazon, to expand its physical footprint, introduced in June Amazon Hub Counter manned pickup points that allow customers to pick up orders at a partner site. The company said on Wednesday it has added GNC grant shop and regional department store Stage Stores among new partners.

Kohl now takes Amazon back to more than 1100 of its stores across the country.

The various initiatives, not to mention the perks like Amazon Prime Video, can well hook Amazon's customers and keep it at the forefront. Market research firm Packaged Facts on Thursday estimated that Amazon's US gross sales will represent nearly half of US e-commerce sales by 2022, up from 43% this year and 28% in 2015.

Related to Forbes: Nordstroms first NYC flagship, seven years in the making, finally opens

Related to Forbes: Don't be surprised if your holiday gifts are unpacked this year

Related to Forbes: What changing teenage behavior means for brands

Related to Forbes: could eventually become a bigger business for Best Buy


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