Amazon’s shipping splurge delivers payoff

A worker sorts products during Cyber Monday operations at the Amazon's fulfillment center in Robbinsville, New Jersey, U.S., November 27, 2023. Acquire Licensing Rights

NEW YORK, Nov 27 (Reuters Breakingviews) - Amazon.com (AMZN.O) has a special delivery this Cyber Monday. The online retailer’s turbocharged push into distributing packages has helped it overtake UPS (UPS.N) in U.S. volume after it earlier surpassed FedEx (FDX.N) , the Wall Street Journal reported. Even better, there are indications that the investment is paying off.

The $1.5 trillion company has long attracted customers with a heavily subsidized delivery service. In 2016, before its in-house logistics initiative took off, global shipping costs tallied about $16 billion, with customers covering about half. Last year, the total expense was about five times higher. It’s unclear how much of the burden shoppers absorbed, but net revenue – less sales from its Amazon Web Services cloud-storage business – has grown by less than four times over the same span.

At the same time, however, Amazon is becoming more efficient at getting goods to recipients’ doors. Shipping costs as a percentage of revenue has decreased over the past year. Moreover, higher turnover means higher profit, especially from ancillary services such as advertising. The North America division’s net revenue tripled between 2016 and the first nine months of 2023, while operating profit through September reached $8.4 billion, or almost quadruple the annual sum seven years ago. And that’s before the generally lucrative holiday season, which should bring Amazon shareholders some more upbeat shipping news. (By Robert Cyran)

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