Amazon profits cut due to 1 Day delivery – Jeff Bezos says Relax

Amazon profits Jeff Bezos

Today, Amazon released their Q3 earnings report, which had many headline-making tidbits including:

• Shipping costs increasing 46% YoY, as the company transitioned from 2-day Prime shipping to 1-day

• $1.5B in expected shipping costs for the upcoming holiday quarter

Inevitably, this significant increase in shipping costs took a toll on the company’s bottom line. Amazon profits missed analyst’s EPS expectations by $0.39 per share and saw ~28% fall in Q3 net income compared to Q3 last year. When competing against retailers like Walmart and Target, who have 1000s of physical stores, it is clear that Amazon is focused on establishing a level of convenience that will shift retail consumer behaviours (shopping online v. in-store).

While Amazon spends billions of dollars on making the online ordering process as fast and painless as possible for consumers, Walmart and Target are busy optimizing their online stores. Both retailers had favourable Q2 earnings reports and boasted increased website sales.

Jeff bezos says “They missed earnings because of overspending on 1-day delivery infrastructure”

We are now watching as all of these competitors go after the same goal (consumers and their wallets) from completely different positions and strengths.

Has Amazon entered the real world of retailing? Or is this just an investment to take more share?

Amazon Profits decline

Either way it is a message that things are changing in the e-commerce world as well, competition and failing, struggling online retailers are likely to get pushed out a lot faster. What does this mean for traidtional retailers? More of the same…retailers need to get their digital strategies right…because this isn’t going to deter consumer shifting buying behaviors. Department Stores need to act much faster with their transformations.

Wall Street is an odd place. AMZN makes no money or loses money for years and investors/Wall St love them, but when they start to make money as they try to build their infrastructure out on multiple projects and have an earning miss with lowered guidance everyone freaks out. Make no money= strong, growing stock price. When AMZN starts to make money but building out other aspects of the business and miss= Everyone sells immediately if not sooner.

We will see how committed investors are to AMZN tomorrow as they are heading into the holiday season.

Who will prevail in retail? Strictly online, physical-incorporating-online or both?

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