Amazon’s business is swinging in between the likes of extreme high-spending and extreme profitability, which is the reason why the company is now cornered. Amazon posted its third-quarter earnings this afternoon, with massive sales of $70 billion and profits of $2.1 billion. Now that sales blew past the analysts’ expectations, all because to a record-setting Prime Day; the profits came in far under.
The culprit: despite higher shipping and other fulfillment costs, Amazon is now incurring in its quest to deliver more packages at even higher frequencies. The company made a statement that it had spent nearly 50 percent more on shipping and fulfillment in the last three months than this time but only a year ago, up to $9.6 billion.
Amazon Wants To Make Things, Even More, Easier To Buy Everything
“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Amazon CEO Jeff Bezos in a statement. “Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers. And although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer — it simply becomes impractical to use air or long ground routes. Huge thanks to all the teams helping deliver for customers this holiday.”
Earlier this year, Amazon announced that it’ll start testing a shift from Prime two-day shipping to one-day shipping. That’s on top of its existing services like Prime Now, which offers delivery the very same day of certain products in certain markets. Other than that, the company is also said to be working on building its contract delivery service, Amazon Flex, and even started exploring robotic ground delivery.
The company’s saving grace continues to be Amazon Web Services, its cloud computing division that brought in $9 billion in sales, with nearly 40 percent of that translating to profit. That’s just not it; Amazon is also known to be making profits from the sales of its Echo devices, sales from third-party Marketplace sellers, and through the ever-growing expansion of its Prime membership subscription. Another important growth area for Amazon is its ads division, which pulled in $3 billion this past quarter.
