The eCommerce giant said it is facing higher costs in infrastructure as well as the costs associated with one-day delivery. Amazon’s changes will go into effect on Feb. 18.
Most orders are handled in-house through a logistics department, and the company continues to invest in itself. It’s going to spend about $1.5 billion during the holiday season to honor its one-day delivery guarantees.
Fast delivery is a key reason many people sign up for Amazon Prime, which is a monthly subscription service. It currently has more than 100 million members.
Amazon emailed merchants on Friday (Dec. 20) and said its invested $15 billion in tools, programs like Fulfillment by Amazon (FBA) and infrastructure.
“Driven by FREE One-Day Delivery, this was the largest one-year investment we have ever made in FBA,” the email read. “Nevertheless, in 2020, we will make only moderate increases (about 3 percent) in fulfillment fees, below industry average, because we remain committed to your continued success.”
Amazon told Reuters that the investments are meant to boost sales for merchants and that Amazon is “the most competitively priced option for entrepreneurs to reach customers with fast shipping.”
In other Amazon logistics news, Morgan Stanley recently released a report stating that Amazon is already delivering in the neighborhood of half of all its own packages, and it will soon surpass FedEx and UPS in terms of volume.
“Our AlphaWise analysis shows that Amazon Logistics already delivers ~50 percent of Amazon U.S. volumes, focused on urban areas,” Morgan Stanley said.