Amazon picks up huge tab for same day delivery
Sales up but profits down as company keeps investing in itself.
E-commerce giant Amazon may be racking up billions of dollars in sales but it is coming at considerable cost.
Compared to the same period last year, revenue was up nearly 24 per cent, to just shy of US$70 billion, but profits fell to US$2.1 billion, a drop of about 26 per cent.
The company’s latest third-quarter results reveal that shipping expenses were up more than sales.
Total worldwide shipping costs of US$9.6 billion were up 46 per cent from the year-ago number of US$6.6 billion, while the top line of just a little less than US$7 billion was higher to the tune of 24 per cent.
Also, fulfillment costs of US$10.2 billion grew 23 per cent on a year-over-year basis.
Meantime, marketing costs grew by 44 per cent to US$4.7 billion.
Although it's driving considerable sales growth, Prime's one-day shipping is obviously costing the company a small fortune.
Amazon, which has a history of investing in its operations at the expense of ‘short-term’ profit, confirmed that new fulfilment and transportation roles were a key driver behind the company adding close to 100,000 staff members during the third quarter.
Third quarter highlights
- Total sales were up 25 per cent to US$70 billion. Sales were up 24 per cent in North America to $42.7 billion and 18 per cent in international to US$18.3 billion).
- Amazon’s first-party sales were US$35 billion, a year-on-year increase of 22 per cent.
- The number of full-time and part-time workers at Amazon totalled 750,000 at the end of the quarter versus 613,000 at the end of Q3 2018.
Two-day offer in Australia
Internationally, Amazon Prime membership typically offers same-day or next-day delivery, but this isn't included as part of Amazon's local offer.
Two-day delivery is available for Adelaide, Brisbane, Canberra, Hobart, Melbourne, Perth and Sydney and regional cities including. Albury-Wodonga, Bendigo, Gold Coast, Gosford, Newcastle, Shepparton–Mooroopna, Toowoomba, Wagga Wagga. Amazon expects other regional and rural customers to get their deliveries in four to five days.
While next-day delivery isn't free in Australia, Prime members receive a discount on priority shipping.
Date Published:
30 October 2019