Amazon南京夜网’s willingness to gain customer loyalty by shouldering the costs of nationwide shipping and access to online movies has its limitations.
After a 20 per cent jump in operating costs led Amazon to miss analysts’ fourth-quarter profit estimates, the company said that it’s considering raising the price of its $US79-a- year Prime membership for the first time.
That service, which includes two-day shipping and endless video streaming, may increase by $US20 to $US40 a year in the United States, the company said.
Amazon’s expenses have been climbing as chief executive officer Jeff Bezos pumps money into new initiatives like warehouses to speed shipments and research on home-delivery drones. While Bezos continues to tout “world-class customer service” — a phrase he used in Thursday’s statement — there are limits to how much he’s willing to subsidize users.
“They are launching drones for delivery, but when you miss earnings, investing in risky technology like that gets put on the back burner,” said Gene Alvarez, an analyst at researcher Gartner.
Net income was $US239 million, or US51c a share, Amazon said. Analysts on average had projected profit of US69c a share, according to data compiled by Bloomberg. Operating costs climbed to $US25.1 billion from $US20.9 billion a year earlier.
Sales in the holiday quarter increased at the slowest rate since 2008. Revenue rose 20 per cent to $US25.6 billion, trailing the $US26.1 billion average analyst estimate. The company’s dominance of US e-commerce isn’t translating globally, with international sales growth slowing to 13 per cent in the quarter from 21 per cent a year earlier.
“What we see is continued growth, but a slowing rate of growth,” said Michael Pachter, an analyst at Wedbush Securities in Los Angeles.
Tom Szkutak, Amazon’s chief financial officer, said on the conference call with analysts that the potential increase in Prime is the result of higher fuel and shipping costs. The company hasn’t lifted the price since introducing the service nine years ago, he said.
“Customers like the service and they are using it a lot more,” Szkutak said. He also said additions to Prime such as access to online movies and television shows, which the company must pay to acquire, is adding to the cost of the service.
Amazon, which sells everything from high-definition televisions to toy trains, is still taking market share from brick-and-mortar retailers like Best Buy Co.
The e-commerce market is expected to climb 15 per cent this year to $US300.6 billion, according to researcher EMarketer Inc. Cyber Monday, the first Monday after Thanksgiving, was the heaviest Web-spending day on record, with consumers shelling out more than $US2 billion, according to ComScore Inc.
The record holiday season brought some snafus as well. Amazon and other retailers issued rebates after United Parcel Service Inc. and FedEx Corp., overwhelmed by demand, were late in delivering some packages to customers.
“It’s entirely possible that they have trained consumers to just buy Christmas presents at the last second, and weren’t prepared for the logistical issues,” Pachter said.
Amazon’s net shipping costs in the period jumped 19 per cent to $US1.21 billion. Fulfillment expenses surged 29 per cent to $US2.92 billion. Technology and content costs — for research and development — increased 38 per cent to $US1.86 billion
Sales in North America jumped 26 per cent in the period to $US15.3 billion. Operating margin, a metric of profitability, rose to 2 per cent from 1.9 per cent a year earlier.
The company’s loyal band of investors is betting on Bezos’s ability to deliver continued sales growth as Amazon adds online video options, bolsters its line of Kindle devices, wins business customers for its cloud servers and expands its grocery-delivery service. Amazon doesn’t disclose sales of individual products.
Washington Post / Bloomberg
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