WHAT AMAZON’S COMMITMENT TO ONE-DAY SHIPPING MEANS FOR INDUSTRIAL REAL ESTATE
During Amazon’s Q1 2019 earnings call last week, CFO Brian T. Olsavsky talked about the company’s plan to make free one-day shipping the standard for its Prime members. While this new shipping policy will take a few years to be fully implemented across the board, Amazon plans to spend $800 million dollars in the next quarter alone on the ambitious project.
This move by Amazon represents another raising of the bar when it comes to online delivery standards for e-commerce. Since 2005, Amazon has offered free two-day shipping to Prime members, though in recent years free one-day shipping has become available for an increasing number of Amazon’s goods for Prime members in large metropolitan areas with direct or adjacent access to large quantities of industrial warehouse space.
Xebec has made it clear that we see e-commerce as a vital cornerstone of the modern industrial and logistics real estate market. Xebec believes that as consumers increasingly come to expect fast shipping from online retailers, demand for last mile and infill properties to serve dense urban populations will continue to remain high.
Amazon’s shift to one-day shipping will almost certainly put major pressure on other retailers in the e-commerce space to speed up deliveries to their customers as well, simply due to rising consumer expectations of fast shipping speeds.
In the words of John Bonno, a managing director in retail practice at consulting firm AlixPartners, LLP, “Most people didn’t need two-day delivery until Amazon made it ‘necessary.’ The same is likely to happen with one-day.”
In fact, Walmart’s CEO Doug McMillan stated last fall that same-day shipping is the real battleground of e-commerce, indicating that Walmart is already looking toward the next step up in fast delivery, and has been for some time.
All in all, Xebec sees Amazon’s announcement as another positive sign that e-commerce should continue to help support the growing industrial and logistics real estate market, as online retailers continue looking for ways to provide faster service and more convenience in an industry that keeps growing both in size and in expectations.