Amazon CEO Andy Jassy recently explained the strategy behind the company’s successful execution of same-day orders. He highlighted the transformation of Amazon’s U.S. fulfillment network from a “flat regional network” to eight regional hubs, reconfiguring its placement algorithms to get items closer to customers. Additionally, he mentioned the use of “sub same-day facilities” to ship products faster, noting that many many fulfillment centers have approximately more than one million SKUs (stock keeping units) ready to be shipped out on the same day.
According to Jassy, this strategic shift has not only reduced transportation distances and costs but has also accelerated delivery times. He pointed out that Amazon moved from two-day shipping to a significant proportion of shipments being delivered within one day, and the company is increasingly achieving same day delivery.
Jassy shared that 60% of shipments in Amazon’s top 60 metropolitan areas have been same-day or one-day deliveries in the first half of the year. The emphasis on faster delivery is significant, influencing customers’ conversion rates and their willingness to make purchases. Jassy highlighted that when customers experience faster delivery, they are more likely to consider Amazon for a more extensive range of their purchases, expressing a preference for quick item arrivals.
Despite a modest decline in Amazon shares amid broader market fluctuations, the stock remains close to 52-week highs, having gained over 70% year-to-date. In a note to clients this week, Bernstein named Amazon a top pick for 2024, with analysts setting a price target of $175 per share, representing more than a 20% upside from current prices.