UPDATE: Amazon responds: The first sentence of your story is just flat inaccurate. Nowhere in the WSJ story does it say that we are charging more for Prime Delivery. The “fast-shipping service” for small orders has been in place since same day shipping started a few years ago.
Amazon will charge customers more for shipping. This will primarily affect people who get same-day service. Amazon, desperate for revenue, has been losing money on the system, which could get customers their orders in hours.
According to The Wall Street Journal, Amazon’s traditional costs run $1.75 for the “last mile” of delivery, while same-day service costs for the same distance costs the e-commerce company $3.30 per package. Amazon keeps fulfillment centers near big cities to make the service available. Amazon management said, “We’re always exploring ways to bring our customers new levels of convenience and delivery options that work best for them. Same-Day Delivery is one of the latest innovations.”
Amazon’s pricing riddle is whether to charge extra for the service or use it as a means to keep subscribers of its $139 a year Prime service, which has free delivery costs for some packages and Amazon Prime Video. The service brings in billions of dollars, and some research shows that Prime members spend more money shopping at Amazon than people who do not subscribe.
Amazon is on the ropes financially. In its most recent quarter, its North American e-commerce segment lost $240 million on $93.3 million. This is partly due to the cost of Amazon’s massive warehouse delivery system. The number of delivery points was cut after increasing during the pandemic. Amazon has fired thousands of workers to bring these costs down.
Amazon is trapped by one of its inventions. Rivals like Walmart offer similar delivery systems. Amazon cannot pull back too much without affecting consumer loyalty and recurring revenue.
Amazon’s investors have also taken a beating, with the stock falling as much as 50%. This has put pressure on Andrew Jassy, Amazon’s relatively new CEO. He has to decide how much to charge for same-day delivery or potentially risk customer loyalty.
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