Amazon's big investments in one-day delivery will soon make two-day shipping look 'too slow,' Morgan Stanley says

Key Points
  • Amazon started rolling out free, one-day delivery for its Prime members last June.
  • Soon, the expansion of one-day delivery will make two-day shipping look "too slow," says Morgan Stanley analyst Brian Nowak. 
  • It has also widened the gap between Amazon and Walmart's e-commerce businesses. 
A worker handles a package at the Amazon fulfillment center in Baltimore, Maryland, April 30, 2019.
Clodagh Kilcoyne | Reuters

It's been less than a year since Amazon moved to shorten delivery times to one day from two days, but the change has already made an impact on consumer attitudes and its competitors, according to Morgan Stanley.

The ease of one-day delivery has increased expectations "for e-commerce shipping times, as two-day shipping may seem too slow before we know it," Morgan Stanley analyst Brian Nowak said in a note on Sunday.

He added that it has alleviated a "friction point" for shoppers that previously made it hard to purchase products in certain categories, like consumables.

Amazon started rolling out free, one-day delivery for Prime subscribers last June. The company invested about $1.5 billion in the fourth quarter to expand the service and has committed to spend $1 billion more on the initiative in the first quarter. Nowak estimates the investments helped Amazon add a record $36 billion in sales volume in 2019.

The company is gradually expanding the number of items eligible for one-day delivery. Nowak said roughly 40% of units fulfilled by Amazon in the U.S. "went through" one-day delivery in the fourth quarter. That number could grow to 50% by the end of 2020, Nowak added.

This rapid expansion of one-day delivery will only serve to accelerate Amazon's lead ahead of competitors. Nowak estimates Amazon shipped 16 times more e-commerce packages than Walmart across its network in 2019. As a result, retailers such as Walmart will be racing to catch up with Amazon's "logistics edge," he added.

Amazon is making one-day shipping the new standard for Prime members
Amazon is making one-day shipping the new standard for Prime members