E-commerce giant Amazon has seen its profits halve and is warning of a challenging fourth quarter: the big winner of the pandemic is struggling with weak sales figures, high costs, staff shortages and supply issues.
No improvement
In the third quarter of this year, Amazon saw its sales increase by 15 per cent to 110.8 billion dollars (95 billion euros). This means a reduction by 50 per cent of the growth rate because sales still increased by 27 per cent in the second quarter. The net result also halved, reaching a disappointing 3.2 billion dollars (2.7 billion euros).
There is no sign of improvement: for the fourth quarter, the company expects sales growth of between 2 and 4 per cent and a net result of between 0 and 3 billion, a sharp drop compared to the 6.9 billion dollars (6 billion euros) achieved in the fourth quarter of 2020. What is going on? Four factors can be identified as contributors to the disappointing results.
Rising costs
Online retail sales are slowing down now that consumers can revisit physical stores. Other online retailers, such as Coolblue and Zalando, also reported weaker sales in recent months. Moreover, Amazon had to make substantial investments to cope with its growth during the pandemic: since the outbreak of the crisis, the e-commerce player has almost doubled its network of distribution centres.
Labour shortages are leading to operational difficulties and higher wages. Global supply chain disruptions and the sharp rise in transport prices also weigh heavily on the figures. These four factors together will burden Amazon with several billion dollars in additional costs.
“We will do whatever it takes to minimise the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritisation for our customers and partners”, said CEO Andy Jassy.
