Amazon Will Charge More Money for Shipping

By Douglas A. McIntyre Updated Feb 28, 6:05AM EST · Published Feb 26, 1:11PM EST

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Amazon Will Charge More Money for Shipping — © AdrianHancu / iStock Editorial via Getty Images

UPDATE: Amazon responds: The first sentence of your story is just flat inaccurate. Nowhere in the WSJ story does it say that we are charging more for Prime Delivery. The “fast-shipping service” for small orders has been in place since same day shipping started a few years ago.

Amazon will charge customers more for shipping. This will primarily affect people who get same-day service. Amazon, desperate for revenue, has been losing money on the system, which could get customers their orders in hours.

According to The Wall Street Journal, Amazon’s traditional costs run $1.75 for the “last mile” of delivery, while same-day service costs for the same distance costs the e-commerce company $3.30 per package. Amazon keeps fulfillment centers near big cities to make the service available. Amazon management said, “We’re always exploring ways to bring our customers new levels of convenience and delivery options that work best for them. Same-Day Delivery is one of the latest innovations.”

Amazon’s pricing riddle is whether to charge extra for the service or use it as a means to keep subscribers of its $139 a year Prime service, which has free delivery costs for some packages and Amazon Prime Video. The service brings in billions of dollars, and some research shows that Prime members spend more money shopping at Amazon than people who do not subscribe.
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Amazon is on the ropes financially. In its most recent quarter, its North American e-commerce segment lost $240 million on $93.3 million. This is partly due to the cost of Amazon’s massive warehouse delivery system. The number of delivery points was cut after increasing during the pandemic. Amazon has fired thousands of workers to bring these costs down.

Amazon is trapped by one of its inventions. Rivals like Walmart offer similar delivery systems. Amazon cannot pull back too much without affecting consumer loyalty and recurring revenue.

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Amazon’s investors have also taken a beating, with the stock falling as much as 50%. This has put pressure on Andrew Jassy, Amazon’s relatively new CEO. He has to decide how much to charge for same-day delivery or potentially risk customer loyalty.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.