Falling profits for Amazon: fast delivery weighs 10 billion dollars

Amazon has published the financial results for the third quarter of 2019. Although it recorded a profit of 2.1 billion dollars, the figure is down compared to the same period in 2018. Yet, sales increased by 24% compared to 2018. The reason for this discrepancy is the high shipping costs of the goods. Amazon spends a lot: almost 10 billion dollars.

Delivery costs increased by 50% in one year

If we look briefly at the published data, Amazon declares that, compared to the relative period of 2018, in the third quarter of 2019 the cash flow from operations increased by 33%, from 26.3 billion dollars to 35.3 billion and sales revenues they have gone from 56.6 billion to 70 billion rounds, increasing by 24%. However, the profit – however considerable – of 2.1 billion dollars is down compared to 2.9 billion in 2018. Part of the explanation is to be found in the costs incurred by Amazon for the shipment of goods.

Amazon said of have spent 50% more for shipping and e-commerce logistics management, which includes the receipt of orders and their execution, then the collection, packaging, labeling and all that pertains to its fulfillment. These costs have grown to $ 9.6 billion.

The costs also include the expansion of Amazon's shipping methods, which do not only affect the passage of free Prime shipping from two days to one day, but also to investments in the diversification of means of delivery: drones by land and by air.

More logistics centers, less broken areas and land

However, in a statement, Jeff Bezos explained that the change in pace of the Prime shipment is what has weighed the most on costs: "Customers love Prime's transition from two days to a day. They have already ordered billions of items with free delivery in one day this year. " He then pointed out: "It is a great investment, and it is the right long-term decision for customers. And although it is counterintuitive, faster deliveries generate lower carbon emissions because these products are shipped from logistics centers very close to the customer – it becomes simply impractical to use routes areas or long journeys by land."

Prime Day was also added to the Prime day shipment. that is the same day shipment for some products in some markets, also in Italy, which mainly concern food and household items.

The $ 10 billion in "delivery" expenses found sustenance especially in the Amazon Web Services division: the cloud computing sector which generated 9 billion sales with 40% turned into profits. In addition, it also includes revenue from the sale of its Echo devices, from the sales of third-party merchants in the Marketplace and also through the growth of the Prime subscription. In addition, the Amazon advertising division alone has raised $ 3 billion in the third quarter of 2019.