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Amazon to offer free one-day shipping to Prime members, will invest $800 million to get there

Krystal Hu

Amazon Prime is about to get faster.

The e-commerce giant Amazon (AMZN) announced it would invest $800 million in the second quarter to speed up its current two-day delivery pledge for Prime members to a one-day delivery pledge.

The online retailer, known for fast delivery for its Prime members, says it’s been testing one-day delivery for certain products in some areas in the past months. To roll it out nationwide, it has been building out fulfillment centers across the country, with over ten under development this year. Yahoo Finance previously reported that Amazon has been shuffling thousands employees in its warehouses as it plans to repurpose facilities to ramp up orders fulfillment and delivery.

The company has already invested billions to build out its logistics network, and this new pledge shows it has no plans to slow down. When asked about if Amazon can offer one-day delivery to U.S. consumers by this holiday season, Amazon CFO Brian Olsavsky didn’t give a firm answer to analysts but said it will “make steady progress quickly and through the year.”

According management, the one-day promise will be supported by its own delivery arm as wells as partners like UPS (UPS), Fedex (FDX) and USPS. Amazon has been expanding air hubs while shifting more tasks to its own logistics network.

“We also do have a network that is tuned to 2-day delivery right now,” Olsavsky told analysts on Thursday. “So we do need to build out more one-day capacity along with our transportation partners.”

Amazon reported Q1 earnings on Thursday.

Nationwide one-day delivery is likely to be a game changer for the logistic industry in the U.S. and it puts pressure on competitors like Walmart (WMT) to match the offering.

Olsavsky believes offering one-day shipping could lure shoppers to buy more products on Amazon. This is in line with Amazon’s goal to increase the average spend of existing Prime users.

“We think that will open up a lot of potential purchases and will open up convenience to those customers,” Olsavsky said.

Amazon Prime membership costs $119 a year (after a 20% hike in April 2018). The program has over 100 million users across the world. Olsavsky said 2018 saw the most new sign-ups for Prime than ever before.

Management delivered the news on a conference call with analysts following the release of the company’s first quarter financial results.

What do you think of the one-day delivery offering from Amazon? Write to Krystal via krystalh@yahoofinance.com or follow her on Twitter.

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