- Amazon announced in April that it has begun evolving its two-day Prime shipping guarantee into a one-day shipping guarantee.
- The company could pass off the cost of one-day shipping to customers in the form of a more expensive Prime membership, Stifel analysts said in a note to investors on Wednesday.
- Stifel found in a survey of consumers that shoppers are overwhelmingly unwilling to pay more for one-day shipping.
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What’s more expensive than two-day shipping? One-day shipping.
It’s a reality that Amazon will have to contend with now that, as it announced in April, it has begun evolving its two-day Prime shipping guarantee into a one-day Prime shipping guarantee.
Amazon also announced that it would invest $US800 million in supply-chain improvements to deliver on one-day shipping.
That increased cost could eventually be borne by consumers, according to analysts.
“We believe Amazon can likely make consumers pay more through increasing the cost of its Prime membership,” Stifel analysts wrote in a note to investors on Wednesday.
The analysts noted that the company has raised the price of its Prime membership twice in its history – from $US79 to $US99 in 2014, and from $US99 to $US119 in 2018 – and that a price increase “is likely to occur again, in part to help offset the required investment in one-day shipping.”
The ability for Amazon to offset its one-day shipping costs is important, as Stifel found in a survey that customers overwhelmingly refuse to pay for faster shipping outright.
“Specifically, 73% of consumers said they would not spend more for a product on Amazon for next-day shipping and of the 27% of consumers who said they would spend more, approximately half, or 54%, said they would only be willing to pay 1%-5% extra,” the analysts wrote.
Amazon announced in 2018 that it had more than 100 million paying Prime members. The rate of signups seems to be staying steady even after the 2018 price increase, according to the Consumer Intelligence Research Partners, suggesting members see the service as worth the extra cost.
“We believe consumers are willing to pay more for Prime as faster shipping further improves the convenience of shopping on Amazon,” the Stifel analysts wrote.
Amazon did not immediately respond to Business Insider’s request for comment on Stifel’s findings.
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