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Amazon's shipping costs increased 36 percent year-over-year in the second quarter of 2019 to exceed $ 8 billion. This follows three consecutive quarters in which year-over-year growth in shipping costs has not exceeded 23%.
The high shipping costs contributed to the end of the four consecutive quarters of record profits of the e-commerce giant, according to the Wall Street Journal. Amazon's net income, at $ 2.6 billion, was the lowest since the second quarter of last year.
The rise in Amazon's shipping costs is not a surprise, as the company has come up with faster delivery options for consumers, especially Prime members, at the heart of its growth strategy.
In order to achieve this goal, Amazon knows that it will have to make significant investments to develop its network and logistics capabilities. In April, Amazon had announced that it would invest $ 800 million in the second quarter of 2019 to give Premium members access to a free shipping day, down from what was traditionally an offer of two days.
But chief financial officer Brian Olsavsky, CFO, said last week that Amazon had spent more than $ 800 million, citing higher-than-expected costs badociated with warehouses in transition and the transfer of stocks to nearby consumers. "We expect that we will work in this direction for several quarters, but when the dust settles, we will recover our profitability over time," Olsavsky said.
Although Amazon is sacrificing profits in the short term, its logistics will help reduce costs while generating more revenue. While Amazon is adding more and more items to its mailing list a day, consumers may have to make purchases more often, for the sake of added convenience – a trend that would increase income.
We are already seeing an increase, partly due to changes in shipments: Amazon announced that its net sales rose 20% in the second quarter of 2019 to $ 63.4 billion, against $ 52.9 billion in 2018. The quarter rebounded after 16.8% year-on-year growth in the first quarter of 2019. The slowest growth in four years. In addition, as Amazon strengthens its infrastructure and logistics capabilities, it will rely less and less on its partners, allowing them to better control their costs.
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