The Reason Amazon Prime Is Cutting Back Two Day Deliveries For Some Products, Regions

Free shipping has helped sales grow - but related cost increases may be outpacing those of revenue. JL

Greg Bensinger reports in the Wall Street Journal:

By combining orders in fewer boxes and on fewer days of the week, Amazon would reduce shipping costs. Such expenses rose 29% to $2.34 billion in this year’s second quarter, outpacing the 17% increase in all operating expenses.
Beware Amazon Prime members: All blenders are not created equal.
A Cuisinart warehoused in California may no longer qualify for two-day shipping to a Prime member in Vermont. That’s the idea behind a new program Amazon is testing with some independent merchants.
The program, nicknamed Ship by Region, lets certain sellers designate where they’re willing to ship goods in two days or less to Prime members.
The merchants may limit how far they will ship some items – large-screen televisions, for example – with the two-day guarantee under Prime. If a Prime customer is outside that region, shipping may take longer.
Amazon, for now, is limiting the option to a select group of sellers authorized to list items as Prime-eligible even when the goods are housed in non-Amazon warehouses. That program aims to expand the number of items showing up in search results for Prime, Amazon’s $99-a-year program that offers free two-day shipping on most items. Previously, all merchants had to ship their goods to Amazon warehouses first for them to be Prime-eligible.
Peter Faricy, vice president of Amazon’s marketplace, said in an email that merchants participating in the direct-shipping program have seen sales rise.
Amazon has been bulking up the Prime program to make it more comprehensive and attractive, employing one-day sales, streaming music, free e-books and other goodies to entice customers.
The new offering also calls to mind a feature of new rival Jet.com, which promises cheaper prices based in part on how close a customer is to where products are warehoused.
Separately, Amazon has been studying a shipping program that would allow customers to receive all deliveries on a single day of the week, according to a person familiar with the matter.
That program evokes memories of “AmazonTote,” once offered in the Seattle retailer’s hometown. AmazonTote, under which goods were delivered in a large reusable bag on a set day of the week, had something of a cult following before the free service was suddenly halted in 2011.
It’s not clear when Amazon may introduce “Amazon Day,” as the new service is known. A spokeswoman declined to comment on the retailer’s plans.
By combining orders in fewer boxes and on fewer days of the week, Amazon would reduce shipping costs. Such expenses rose 29% to $2.34 billion in this year’s second quarter, outpacing the 17% increase in all operating expenses.
For customers, the appeal may be in predictability – getting all of one’s boxes on a day someone will be home, or the day before recycling is collected.