Through a special arrangement, presented here for discussion is a summary of a current article from Supply Chain Digest.
The headline news around Amazon’s recent first-quarter results was that e-commerce’s dominant player just keeps growing. Revenue expanded 28 percent to $29.1 billion. In 2015, Amazon surpassed the $100 billion mark for the first time, reaching $107 billion.
At Supply Chain Digest, we look at Amazon’s actual merchandise sales to gain a view of the most relevant comparisons to the overall retail sector.
In North America, Amazon’s merchandise sales rose an incredible 31.8 percent, to $13.5 billion, as it simply continues to defy the law of large numbers. Internationally, merchandise sales were up 30 percent to over $7 billion, giving Amazon total first-quarter merchandise sales globally of over $20 billion.
Amazon managed some profits for the second quarter in a row, but at $513 million, that represented just 1.7 percent of total sales. However, Amazon’s operating cash flow jumped 44 percent to $11.3 billion for the trailing twelve months.
In terms of logistics, as usual Amazon lost money on shipping. Shipping revenue of $1.8 billion worldwide in the quarter minus spending at $3.27 billion shows a net loss of about $1.4 billion.
That loss on shipping represents a whopping 6.8 percent of merchandise revenue, which we think is a better way of looking at it than in comparison to total revenue, which includes web services, digital media and other categories that don’t use shipping. It used to be shipping was a profit center for most companies — that’s long gone in an e-commerce world.
In addition, fulfillment costs — which don’t include shipping but rather the costs of fulfillment center operations, depreciation on those FCs, and inbound freight — came in at $3.68 billion, or 17.9 percent of merchandise revenue, slightly above what it was for all of 2015, so that number isn’t getting any better.
Together, net shipping and fulfillment costs represent 24.7 percent of merchandise sales.
With gross margins of only about 35 percent, it shouldn’t be any surprise Amazon struggles to make a profit, but a vigorous top line and continued gains in market share keep the stock moving higher.