Amazon.com Inc.’s (NASDAQ: AMZN) Prime customers can now get free same-day delivery in 11 new metro areas, including Nashville. The caveats include the need to order in the morning and to make an order over $35. Additionally, the Prime membership, at $99 a year, comes with access to the company’s huge streaming video library and free two-day shipping. Presumably the free same-day service replaces the two-day shipping in the 27 metros (including the 11 new ones) with the free same-day shipping option.

Investors who want to know how Amazon makes money on this service, or the Prime service in general, have been left in the dark. Is it more expensive to provide Nashville with the free-same day service, or in Richmond, another of the cities added to the program?

Amazon management announced:

… the expansion of Prime FREE Same-Day Delivery to even more metro areas including Charlotte, Cincinnati, Fresno, Louisville, Milwaukee, Nashville, Raleigh, Richmond, Sacramento, Stockton, and Tucson, plus new areas in Central New Jersey, Dallas-Fort Worth, Los Angeles, and San Diego. Prime members can place an order in the morning and receive all Same-Day orders over $35 before bedtime that very same day, seven days a week – even Sunday. With these newly added areas, Prime FREE Same-Day Delivery now serves 27 metro areas in the US, accounting for more than 1,000 cities and towns.

Amazon has a number of other shipping options. The most amazing are one- and two-hour shipping. Amazon must have an algorithm that tells its shipping department which items consumers are most likely to order and it stocks those in its delivery centers. The process has to be extremely expensive. Prime Now, the name of the service, charges $7.99 for one-hour shipping, while two-hour shipping is free.

Amazon management is notorious for layering more and more options for Prime customers to hold them as loyal visitors to Amazon.com and to services such as video streaming. Most likely, these are, from a financial standpoint, investments that may not pay off for years, but they keep people from shopping at Wal-Mart or buying streaming services from Netflix.

Amazon has launched free one-day shipping for Prime members in 11 new cities. Whether Amazon eventually will benefit from this, and related services, is anyone’s guess (except for Amazon’s management).

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.