amazonshipping

As it turns out, sending packages to customers around the world is a costly enterprise.

amazon-fullAmazon’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.

Comments

  • Guest

    You can’t look at a rise in shipping costs by itself. If sales grow, then shipping costs will grow by a comparable amount even if the cost of shipping any given item remains constant.

    You wrote earlier (http://www.geekwire.com/2014/amazon-reports-19-7b-revenue-earnings-line-expectations/) that revenue rose by 23%. What was the rise in revenue from things that actually have to be shipped? That’s the number you should dig up and compare to the 28% you cite here.

    Unless you compare sales of apples to the cost of apple crates you haven’t really informed your readers. It’s impossible for us, based on this article, to gauge whether the increase in Prime costs is really justified primarily by shipping costs going up. Or is the main driver the price Amazon has to pay for all the content they now lump in with Prime (as reported by your colleague at http://www.geekwire.com/2014/amazon-likely-paying-big-bucks-hbo-exclusives/.

    You have most or all of the pieces. It would be great if you brought them together into a thorough analysis of the overall situation.

    I hate to sound like your journalism professor here, but it seems like that’s what tech blogs often need.

  • mark lipsky

    For the first time I was hit yesterday with “choose your Prime shipping method” and presented ONLY with the choice of 3-5 business days. Raise the price *and* eliminate 2-day shipping. I’ve been a prime member for several years but that will end now if 3-5 business days is a “Prime shipping method”.

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