Amazon's Flywheel Gets a Boost with Free 1-Day Shipping
Apr 25, 2019
Quick Take on Amazon's Q1 Results##
Amazon notched a 4th straight record profit, but Q1 sales growth slowed to its lowest level in nearly four years. The company also forecasted a lower profit margin in Q2 than Wall Street expected.
But put aside these short-term metrics that Wall Street media pundits like to latch onto. What's the real story here?
Amazon Prime: 2-Day Becomes 1-Day Shipping##
Amazon officially announced that it is in the process of migrating all items on Amazon.com, globally, from the classic Free 2-Day Shipping program to a Free 1-Day Shipping program.
This will be a massive competitive advantage in our view.
The company obviously needs to make significant investments in preparing its warehouse & delivery capacity, making certain supply chain changes, and more.
There's a reason why competitors don't offer Free 1-Day Shipping already: it's enormously expensive, complex, and time-intensive. And we like that.
It means this effort will create a moat. Or rather, it will widen the already widening moat around Amazon's flywheel. It's a challenging feat that we think is worth a quarter or two of "missed earnings estimates" or "lowered guidance."
Why 1-Day Shipping?##
What is the key strategic rationale behind investing in Amazon 1-Day Shipping as the default Prime shipping option globally?
It comes down to Amazon's three core principles of focus: Price. Selection. Convenience.
By going to 1-Day, Amazon increases the selection and convenience. Many items are already available within 1-2 hours and Same Day, but vast majority is still 2-Day. There is plenty of room to improve selection and convenience, management says.
We believe this move will open up many more potential purchases that customers otherwise would've purchased at, say, the local drug store or big-box store. Think: toilet paper, light bulbs, and other items we don't want to wait two days to receive.
Our Take##
Amazon is the only company in the world that has the capabilities to do this.
It has made massive multi-billion dollar investments in logistics and capacity over the past 20 years. Those costs will now pay off and put competitors further behind, unable to match Amazon on the "convenience x selection" equation.
Long story short, Free 1-Day Shipping will widen Amazon's moat.
One last tidbit: Amazon says they've seen good order trends to date on products that they've moved from 2-Day to 1-Day Shipping on Amazon.com. These trends give them confidence that this Prime shift will drive better sales growth. And we think Jeff Bezos and Amazon management has higher "believability scores" than financial pundits looking at Q1 sales growth as a proxy for the stock price.
The flywheel spins onward…
Cash Management
© Copyright 2024 Titan Global Capital Management USA LLC. All Rights Reserved.
Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.
Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.
The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit www.titan.com/legal for applicable terms and conditions and important disclosures.
Cryptocurrency advisory services are provided by Titan.
Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
Contact Titan at support@titan.com. 508 LaGuardia Place NY, NY 10012.