Amazon (AMZN) is spending $800 million this quarter to make free, one-day delivery standard across its Prime members in the United States. The company aims to make its $119 per year Prime membership even more irresistible to Americans.
According to a report by CNET, Amazon is offering the third-party merchants on its platform discounts on storage fees in order to reach its one-day delivery goal. The report noted that Amazon emailed the third-party sellers last week and offered a whopping 75% discount on storage fees at its warehouses if they store their best-selling items in the warehouses.
If more sellers are willing to store their best-selling items at Amazon’s facilities, the company will be able to fulfill its one-day promise.
One-day shipments could pull more members to Prime
In a recent letter to shareholders, Amazon’s CEO, Jeff Bezos, highlighted that sales from third-party vendors account for over 58% of the gross merchandise sold on the company’s platform. The sales from third-party vendors accounted for $160 billion last year.
Amazon already dominates the US e-commerce space. The free one-day shipping to Prime members could draw more people to Amazon’s Prime membership. The company’s revenues from subscriptions, which mostly include revenues from Prime membership, saw strong growth in the previous quarter as the above graph shows. However, as CNET pointed out, Amazon’s competitors, including Walmart, will likely speed up their deliveries.
So far, Amazon stock has risen more than 21% in 2019.