The Ruthless Strategy Behind Amazon's Offer of Free Same-Day Delivery

Maybe, with this announcement, impatient investors will begin to understand the strategic advantages of amassing a huge war chest rather than paying out bigger dividends.

Amazon is using its scale and cash reserves to crush competitors with ever more operationally challenging and expensive customer service offering. These services differentiate Amazon and make it that much more difficult for those within its ecosystem to consider alternatives - as well as making it harder for competitors to, well, compete. Financial benefits flow from operational domination. JL

James Vincent reports in CNN/Money:

Available for more than one million items in 14 metropolitan areas. Amazon Prime is estimated to have 30 million to 40 million customers in the US, with an additional 40 million to 50 million worldwide.
Amazon is offering free same-day delivery for Prime members, dropping the $5.99 fee it usually charges for the service. Although the announcement is definitely another string to Prime's bow, it does come with a few limitations. Free same-day delivery will only be available for around one million items (compared to the 20 million covered by free two-day delivery), and is limited to 14 metropolitan areas, together covering a sixth of the US population. Orders also need to be over $35 and placed before noon to be eligible.
Amazon says the ability to offer free, same-day shipments is thanks to investment in its fulfillment centers — facilities that combine the functionality of warehouses and delivery hubs. "We can get items closer to customers, get more items in stock and be able to deliver as quickly as possible," Chris Rupp, vice president of Amazon Prime, told CNET.
Amazon Prime is estimated to have 30 million to 40 million customers in the US
Although the company doesn't release statistics for how many Prime members have signed up, analysts estimate that the figure is somewhere between 30 million and 40 million in the US, with an additional 40 million to 50 million members worldwide. Some researchers even predict that half of the US population could be signed up by 2020, each paying Amazon's annual $99 subscription fee for free access to music and video streaming, as well as speedy deliveries. The company continues to add new perks to Prime, offering one-hour deliveries in certain locations (though these cost extra) and expanding to deliver groceries and baked goods from third-party stores.
Other companies are certainly trying to catch up. Walmart announced plans earlier this year for a service with unlimited free shipping for $50 a year, and eBay is testing its own loyalty scheme offering faster shipping for an annual subscription fee of around $20. However, no major rival has yet been able to match the sheer aggression and ambition of Amazon's tactics — as this most recent announcement demonstrates.