But the company is also spending more to increase both product selection and labor capacity at its fulfillment centers. Olsavsky said the biggest expense for the one-day initiative is transportation costs. “We are still learning on the one-day costs as we go, about what the long-term cost structure will be.”
On a call with analysts Thursday, Amazon CFO Brian Olsavsky admitted that there’s “certainly start-up pain in adding new capacity.” Read: Taking a Deep Dive into Amazon’s Logistics Pricing Operating income is projected for the fourth quarter at $1.2 billion to $2.9 billion, down from $3.8 billion in Q4 2018. Amazon shares were down nearly 8 percent following the earnings report. The increased expenses may be spooking some investors. The company is also going on a hiring spree - it added nearly 100,000 people last quarter - in large part to support the one-day program. It’s a safe bet that shipping costs will eclipse $10 billion this holiday quarter, adding to what could be more than $35 billion spent on shipping over 2019. GeekWire reported Amazon’s overall shipping costs have ballooned in recent years as the company aims to speed up delivery, both with products purchased on and via Prime Now, such as Whole Foods orders.ĭuring Q3, Amazon spent a whopping $9.6 billion globally on shipping, up 46 percent year-over-year, and $567 million more than what the company spent in the 2018 holiday quarter.
That includes not just the cost of getting the packages to the customers’ doors through a variety of methods, but also its expansion - on air, land, and sea - in the logistics business. The culprit: higher shipping and other fulfillment costs Amazon is now incurring in its quest to deliver ever more packages at a higher frequency.Īmazon said it spent nearly 50 percent more on shipping and fulfillment in the last three months than this time a year ago, up to $9.6 billion. While sales blew past analyst expectations, thanks largely to a record-setting Prime Day, the profit came in far under. As reported by The Verge, Amazon’s business tends to oscillate between periods of extreme high-spending and extreme profitability, and the company is now fully in the former.Īmazon posted third-quarter earnings yesterday, boasting sales of $70 billion and profit of $2.1 billion.
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