As it turns out, sending packages to customers around the world is a costly enterprise.
Amazon’s shipping costs for the first quarter of 2014 hit an all-time high for a non-holiday period, according to the company’s new 10-Q filing with the SEC. The company recorded net shipping costs of almost $1 billion for the quarter, an increase of 28 percent from the same period a year ago.
This helps to explain the company’s recent decision to increase the price of Amazon Prime from $79 a year to $99 a year. Amazon cited rising shipping costs in raising the price. For now, at least, the move is paying off, with Amazon CFO Tom Szkutak saying on yesterday’s earnings conference call that Prime subscriptions continue to grow week over week even after the price increase.
It also explains why Amazon is charging Prime customers a $6 delivery fee for each box they order from the company’s new Prime Pantry service. It’s designed to offer customers a way to purchase items that Amazon says it would have been cost-prohibitive to ship before, like single boxes of cereal, personal care products and rolls of toilet paper.
This news comes after reports surfaced earlier this week saying that Amazon is looking into running its own shipping service to handle the last mile of getting products to customers, rather than relying solely on third parties like UPS or FedEx.
Following its earnings report yesterday, Amazon’s stock has plummeted almost 9 percent this morning as of this post.