Amazon's Prime Service can have good things for a giant technology.
The offer has attracted 100 million subscribers. The customer's basic customer has also promoted a greater number of third-party merchants to register as Amazon customer service provider. This is the right to receive premium free shipping offers from the products offered by the program.
So far, right? This Prime offers more customers to Amazoni, which is why, thanks to more merchants, Amazon helps to expand product offerings, attract more buyers and buy more Amazon items.
The company's problem is that shipping costs are rising, reducing profits and offering more free imports. Amazon's compliance costs have risen faster than revenue, says Dan Morgan, senior developer of Synovus Trust, with Amazon shares.
One of the company's keymaps, he said in an email, "How can Amazon pay for its compliance / shipping costs to pay higher volumes?"
Free shipping is a costly offer from Amazon
Morgan is still a bull of the Amazon, but his company's optimism is that Amazon Web Services is a business cloud computing company and its advertising business. The prospects for its traditional retail business are more skeptical.
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Amazon charges $ 119 for its first subscription. But half of that amount is currently consuming the cost of offering free consignment to the consumer, Morgan is estimated to be.
The costs may increase.
Amazon spent 25.2 million dollars in 2017 compliance costs, 43% more than the previous year and 14% of the company's revenue. This figure was $ 35,000 million, or 15.1% of company sales by 2018, and probably $ 43.3 million or 15.4% of sales would be sold this year. Daniel Kurnos calculates analyst Benchmark in a recent report.
In fact, Kurnos worried about the delivery factors that could result in Amazon's results on holiday. All analysts at Wall Street believe that the company earned $ 3.7 million in operating fourth quarter, Kurnos is forecasting $ 3.2 billion.
Amazon reported on Thursday's outcome.
"We are somewhat wiser … the pressure on shipping costs and the significant increase in shipments of the same day on the same day," he said.
Amazon is pre-eminent
Concerning the problem of Ammonia, three of the most important domestic carriers will be included this year: the US Mail Service, FedEx and United Parcel Service have increased their prices. Amazon has directed its positions to merchants to customers, making use of the compliance services. But it is clear that the higher charges will increase their costs. And, whatever happens, the fees apply only to third-party retailers, not the Amazon product itself.
Add everything and Prime's free shipping is becoming a better customer and is worse for the Amazon.
"The rise in compliance costs does not only affect the operating margin, but the income of the first members also falls, as the cost of evaporating the $ 119.00 annual fee increases," Morgan said.