Amazon.com Inc. expects to improve the delivery times for customers who sign up for its Prime subscription program, cutting free deliveries to one day instead of two, an executive said Thursday afternoon.
In a conference call related to Amazon’s AMZN, +0.03% quarterly earnings report, Chief Financial Officer Brian Olsavsky explained that the company expects profit to take a hit in the second quarter as Amazon ramps up the change to its Prime program.
“We’re currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program,” Olsavsky said, adding that Amazon expects to spend $800 million this quarter to make the change.
Amazon offers one-day delivery on some products now, and even same-day delivery for some purchases. But Olsavsky suggested that the company now expects that the standard free two-day shipping that is the biggest selling point for the Prime subscription plan will be improved to a one-day schedule.
“We have been offering obviously faster-than-two-day shipping for Prime members for years — one day, same day, even down to two-hour delivery for Prime Now — so we’re going to continue to offer same day and Prime Now morphing into, or evolving into, a free one-day offer,” he said in response to an analyst question.
Amazon shares gained about 1% immediately after Amazon reported record profit for a fourth consecutive quarter Thursday afternoon, but fell to a slight decline throughout the after-hours session as the company’s prediction of smaller profit in the second quarter was digested. After Olsavsky explained that the Prime change was the key reason for guiding to smaller operating profit, shares returned to gains of about 1%.
