$1 Billion Venture

Amazon’s (AMZN) “Prime” membership provides its customers with fast, free shipping, as well as access to entertainment such as music and videos, some of which is free to members. The service, launched in 2005, has been popular: there are currently over 200 million members world-wide. The cost to join has tracked higher over the years, with the most recent price increase in February 2022, bringing the annual cost up to $139.

The company recently announced plans to invest $1 billion to build out their fulfillment, supply-chain, and logistics. A related move will expand its Prime services to online merchants outside of Amazon, through those companies’ own websites.

Threat to Incumbents

Amazon’s plans are unlikely to be well received by delivery service operators like FedEx (FDX) and UPS (UPS). As the retailing giant continues to invest in fulfillment and logistics, all while extending its reach with third party merchants, Amazon will increasingly compete with the world’s delivery and parcel companies.

Andy Jassy, Amazon’s CEO, recently noted that these plans signal a desire to invest in worker safety as well as innovation. Initially, in 2022, the program will be offered by invitation only to select retailers who already sell on Amazon’s platform. Eventually the initiative will be rolled out to other, off-site merchants.

Consumer Impact

The new service, called “Buy With Prime” will allow online sellers to lean on Amazon’s fulfillment and payment infrastructure in order to provide a better customer experience. These third-party sites will display the Prime logo and offer fast delivery, which will also arguably make Prime membership more valuable.

For online shoppers, the expanded options may just be what it takes to entice them to swallow the ever-increasing Prime membership price tag. They may enjoy the flexibility of having more places to shop online, all while continuing to benefit from Amazon’s speedy fulfillment and delivery.

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