Free shipping costs hit Amazon profits
Launch of Amazon Prime hits first quarter income
Online retail giant Amazon has seen first quarter profits dip as continued investment in free shipping was compounded by a tax-related charge.
For the three months to March 31, Amazon’s net income was $78m, compared to $111m in the first quarter of 2004.
As well as a $56m tax charge, Amazon said it’s shipping loss was $55m, an increase of 29 per cent on a loss of $43m a year ago.
The Amazon Prime membership program, launched in February, allows US customers unlimited free shipping for a flat fee of $79 per year. Amazon sees its free shipping offers as essential to retaining long-term customer loyalty, despite some analysts’ concerns about the cost.
Jeff Bezos, founder and CEO of Amazon.com, said: “We’re seeing especially heavy use of Amazon Prime in electronics, tools, kitchen, and health & personal care. For $79 a year, Amazon Prime members get ‘all-you-can-eat’ free express shipping. Getting your items right away changes the way you use and think about Amazon.com.”
Net sales increased 24 per cent to $1.9bn in the quarter. North American sales through the US and Canadian sites were $1.03bn, up 21 per cent, while international segment sales, representing the UK, German, French, Japanese and Chinese sites, were $875m up 28 per cent.
Across the year to the end of the quarter international accounted for 45 per cent of Amazon’s worldwide sales.
[img r]harrypotterhalfblood.jpg[/img]The company said has received 700,000 pre-orders for [i]Harry Potter and the Half Blood Prince[/i], the sixth book in J.K. Rowling’s epic Harry Potter series. The book is published on July 16.
