Costs of One Day Delivery Puts a Dent in Amazon’s Growth in Second Quarter
Over the course of the last two decades, Amazon has created a new industry altogether and has become the biggest e-commerce company in the world. The primary reason why the company has grown at such a breakneck pace and has spread all over the world is due to its commitment to innovation. The company has introduced a range of services that have made it a more attractive proposition for customers, and its latest initiative is one day delivery for its Prime members. Needless to say, the company wants to make it possible for customers to get their products as soon as possible and consequently raise the number of sales the company actually completes in a year. The Chief Financial Officer of Amazon, Brian Olsavsky spoke about the issue during a conference call when the second-quarter results were being discussed with analysts.
Olsavsky stated that the introduction of one-day delivery has proven to be far more complex and expensive than the company had expected. However, he did state that it is possibly a case of the initial shock, and in the course of time, the company will derive benefits from the one-day delivery service. He said,
It does create a shock to the system now. We’ll work through that over the next several quarters, and when the dust settles, we’ll return to increased efficiency.
Earlier in the year, the company had stated that it was going to spend $800 million in order to introduce the service, but the costs have ended up going beyond that in the quarter.
That being said, it is important to note that throughout its existence, Amazon has reveled in introducing new services and stuck with most of those throughout. It is unlikely that the company is going to abandon the one-day delivery project due to a slowdown in growth. At the end of the day, the service could give the company a major competitive advantage over many of its e-commerce rivals, and that is something that could return significant long-term dividends.