Amazon can already ship 72% of the US population in a day, says the map

A closer look at Amazon's distribution network shows why the company is now ready to make daily delivery the default delivery for its premium members.

Amazon is already able to deliver same-day and next-day delivery to 72% of the total US population, including almost all households (95% or more) in 16 of the richest and most affluent states. more populous and in Washington, DC, according to a report released in March by RBC Capital Markets.

The vast distribution network is the result of significant investments over the past four years, during which Amazon built distribution centers across the country, tripling its US logistics infrastructure, RBC said. Amazon has added approximately double the distribution space currently held by Home Depot.

This means that the company has a huge lead in realizing its plan outlined in its latest earnings report, which is to shorten the current two – day free shipping program for Prime members on a day – to – day basis. , who pay $ 119 a year for fast delivery as well as services such as unlimited music, access to the video catalog and exclusive offers.

"We believe that Amazon's One-Day Expense Expansion is increasing consumer expectations and increasing the costs of competition in e-commerce," Morgan Stanley analysts wrote in a note after the review. ;ad.

The RBC card below shows the evolution of the distribution of the Amazon distribution over four years. It already covers most coastal cities, as well as Texas and the major metropolitan areas of the Midwest.

"While store-level distribution remains the fastest way for a consumer to acquire a product, Amazon's continued roll-out of same-day and next-day delivery capabilities continues to reduce this historic competitive hurdle and represents a growing risk for retailers fighting yesterday's (two-day) delivery wars, "wrote RBC Capital.

Following the announcement of Amazon, RBC said in another report that "the more you ship, the more people buy."

One of the main reasons why customers shop at a physical store is the immediate need to obtain a product. By reducing the delivery time to one day, Amazon modifies this equation. Brian Olsavsky, chief financial officer of Amazon, said at the call of the first quarter results that the company was already starting to see a "good order trend" after deploying a default delivery. a day in some areas.

This also has an impact on the stock market. Competitive retailers, such as Walmart and Target, saw their shares fall after Amazon's announcement. Most retailers are just starting a two-day expedition and will be forced to spend more to improve their logistics infrastructure to keep pace with Amazon.

Even on Amazon, the change will not be cheap. The company has announced plans to spend $ 800 million this quarter alone to develop one-day shipments. RBC noted that 15 US states still did not have access to same-day or next-day Amazon delivery, which would require the company to spend more to reach these areas.

"While this is a drag on short-term profitability, we believe such improvements should encourage customers to increase their spending and attract new Premium members," writes BMO Capital. in a note following the profits of Amazon.

Another advantage is the improvement of the efficiency of the warehouse. As products ship faster, more inventory will move in and out of Amazon distribution centers faster.

"The long-term benefit is that the turnover will be faster in the warehouse, which will lead to increased efficiency in terms of percentage of revenue," wrote Mizuho Securities in a recent note.

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