Amazon CEO Outlines How the Company Handles same-day Shipping

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Amazon CEO Andy Jassy shared insights into the company’s strategy for increasingly fulfilling same-day orders. Jassy explained that Amazon transformed its US fulfillment network from a “flat regional network” to eight regional hubs, optimizing placement algorithms to bring items closer to customers. The company also utilizes “sub same-day facilities” to expedite shipping. Many fulfillment centers now house around a million SKUs ready for same-day dispatch.

The changes in the fulfillment network not only reduced transportation distances, lowering costs, but also enhanced delivery speed. Jassy noted that Amazon moved from two-day to a significant portion of shipments being one-day, with a growing ability to offer same-day delivery. In the first half of the year, 60% of shipments in Amazon’s top 60 metropolitan areas were either same-day or one-day deliveries.

Jassy emphasized the impact of faster delivery on customer behavior, stating that delivery speed significantly influences conversion rates and customers’ willingness to make purchases. Amazon has observed that when customers receive items quickly, they consider the platform for a more extensive range of purchases, highlighting the importance of rapid delivery to customer satisfaction.

Despite a modest decline in Amazon’s shares in a broader market downturn, the company remains near 52-week highs and has gained over 70% year to date. Analysts have named Amazon a top pick for 2024, with a price target of $175 per share, indicating more than 20% upside from current prices.

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