“We remain heads-down focused on driving a better customer experience through price, selection and convenience. We believe putting customers first is the only reliable way to create lasting value for shareowners.” This was Amazon’s assessment of its tactics during its recent earnings call after posting a 20.4% quarterly increase in net sales with a $437m net loss.
For the quarter, the company focused on product launches and continued expansion of its web services. From a logistics perspective, it was equally busy. For example, it expanded its Amazon Fresh services to Brooklyn, its fifth city and first location on the US east coast.
It also appears to be focused on the financial aspects of the supply chain, perhaps as an acknowledgement towards growing competition from Google, Apple, Alibaba and Paypal. During the quarter, Amazon introduced “Local Register”, a mobile app and secure credit card reader that enables individuals and small businesses to “quickly and easily” accept credit cards from a smartphone or tablet at a low, flat rate without contracts.
The financial payment theme continued during the quarter as Amazon launched “Pay with India” which is designed to help sellers across the country grow their online businesses. The service is available on mobile devices and is optimized across all operating systems. Sellers can also outsource their financial transactions to Amazon.
Along with investments in India, Amazon noted investments in Italy, Spain and China.
Within the US market, the company plans to continue to expand the number of fulfilment centres as well as sort centres. These sort centres are allowing the company to expand same day delivery now available in 12 cities plus offer Sunday delivery to about 50% of the population.
As Amazon builds out its network, it is trying to reduce shipping and fulfilment costs.
Worldwide shipping costs remain problematic with quarterly total shipping costs up almost 32% and net shipping costs up almost 20% compared to same quarter 2013. Fulfilment costs, also an issue, were up 30% for the same period and are up 29.5% for the first nine months of this year. Probably because of the continued investments in facilities, fulfilment costs represented 12.5% of total operating expenses during Q3 2014 compared to 11.9% for same quarter 2013. For the first nine months of the year, fulfilment costs represented 12.2% of total operating expenses versus 11.7% for same period 2013.
Costs remain an issue as Amazon expands its logistics network within the US and around the world. While investments to improve the customer experience is an admirable deed, doing so without paying heed to the financial ledger can prove dangerous in a growing competitive field.