Amazon rationalises airfreight but retail demand still grows


Amazon appears to be reducing its air cargo operations. Press reports last week asserted that Amazon had terminated its contracts with Silver Airways, a small passenger and belly-freight airline operating from Florida and the Caribbean. Amazon appears to have confirmed this. Now there are reports that Amazon is reducing the intensity of its air freight operations in Europe, although some sources suggest that this is to re-orientate resources to South America. As ever with Amazon it is hard to be certain what the situation is as it makes only minimal comments about operational and business issues.

However, Amazon’s retail activities continue to grow, if not enormously quickly. It’s most recent results for the first quarter 2023 show that sales grew at 11% year-on-year and sales outside North America grew by an underlying 9%. It should be noted that the retail business outside North America remains loss making.

And Amazon is not facing the sort of huge increases in its logistics cost base that it saw in 2021 and 2022 when shipping costs were increasing in low double-digit percentages. Over the past two quarters shipping costs have increased by 4% and 2% for the first and second quarters respectively. Bearing in mind the growth in sales, this suggests that the proportion of costs accounted for by logistics is falling. Therefore, the imperative for Amazon is to rationalise its logistics ,may be more moderate than assumed.

Similarly, the trajectory of e-retail activity may not be as dismal as is perceived. The latest US Department of Commerce numbers for retail sales for Q1 2023 saw a seasonally adjusted increase of 7.8% as compared to Q1 2022. This compares to a total increase in sales of 3.4%. That said, as compared to the fourth quarter of 2022, total retail sales increased faster, by 9% in the first quarter. This is a slightly confusing picture, however it does suggest that e-retail activity in the US is not falling violently. There may be changes in the type of service offered by e-retailers and some other economies may be seeing different demand dynamics to the US, however e-retail is still a very important market segment.

Source: Ti Insights

Author: Thomas Cullen

Supply chain strategists can use GSCi – Ti’s online data platform – to identify opportunities for growth, support strategic decisions, help them stay abreast of industry trends and development, as well as understand future impacts on the industry. 

Visit GSCI subscription to sign up today or contact Michael Clover for a free demonstration: [email protected] | +44 (0) 1666 519907