During Amazon’s Q1 earnings call earlier this year, CFO Brian T. Olsavsky announced that the company would be “evolving” two-day free shipping for Prime members to one-day shipping. He added that Amazon would spend $800 million to do so, although now it’s probably going to cost more.
One-day shipping = $24 billion in revenue. According to a research note earlier this week, RBC analyst Mark Mahaney projected that one-day shipping would increase adoption of Prime memberships and boost purchasing by existing Prime members. He argued that could in turn grow Amazon’s annual revenue by $24 billion.
Let’s assume Mahaney’s logic and projections are correct: one-day shipping would grow Prime memberships and spending at Amazon. The impact on the broader market could be significant in at least two ways:
- Other (traditional) retailers would potentially suffer.
- Ad spending on Amazon will grow and possibly accelerate.