Finance

An analyst thinks Amazon’s one-day shipping could add $50 billion in future revenue as Prime members are willing to shop more for faster delivery (AMZN)

  • A recent survey by investment firm Piper Jaffray found that 55% of Amazon Prime members in the US would shop more on the site as one-day shipping rolls out to most of its products.
  • They also said their spending on Amazon would increase by an average of 30% because of faster delivery. 
  • Piper Jaffray estimates a 30% increase in shopping would translate to an additional $40 billion to $50 billion in future revenue for Amazon.
  • Click here to read more BI Prime stories.

Amazon shoppers are planning to spend and shop more on the e-commerce site because of one-day shipping — showing how the company’s investment in faster delivery is likely going to lead to more sales.

According to a recent survey of over 1,500 Amazon Prime members in the US, run by investment firm Piper Jaffray, 55% said they would use Amazon more as one-day shipping rolls out to most products on the site. They also said their spending on Amazon would increase by an average of 30% because of faster delivery. 

Piper Jaffray estimates a 30% increase in shopping would translate to an additional $40 billion to $50 billion in future revenue for Amazon, once most of the products become eligible for one-day shipping.

“An increase in usage of that magnitude (~30%) by U.S. Prime members would have a material impact on Amazon revenue,” Piper Jaffray wrote in a note published on Monday.

The survey data is another sign of how Amazon’s massive investment in shortened delivery time could pay off in a big way for the company. Amazon said it’s spending about $3 billion this year — and $1.5 billion during the holiday season alone — to make one-day delivery its default shipping option for Prime members. 

Piper Jaffray’s not the only bullish analyst on Amazon’s one-day shipping program. RBC Capital wrote in a note earlier this year that Amazon shoppers who get same-day delivery are likely to be a more frequent and loyal shopper of the site compared with shoppers who don’t get same-day delivery. RBC estimates Amazon’s one-day shipping to increase its sales by at least $24 billion.

The payoff is already starting to show up in Amazon’s earnings results. The company’s online and unit sales both bounced back after it announced its one-day shipping initiative earlier this year. Revenue for its most recent quarter also exceeded Street estimates, although the increased spending cut into its profit margins.

Piper Jaffray wrote in Monday’s note that the ongoing investment will likely continue to affect Amazon’s profit margins. The firm lowered its operating profit estimates for Amazon for the next two years, citing the heavy spending, but also noted that margins would widen in a couple of quarters.

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