Fulfillment and Shipping Costs Continue to Rise versus OnLine Sales

Late last week, Amazon released its Q2 2024 earnings report. Below you will find some of the highlights.

Supply Chain Digest Says... In Q2, services were 58.4% of total Amazon sales, a number than continues to increase. What do you say? Click here to send us your comments Click here to see reader feedback

We’ll start here: The year-over-year growth in Amazon’s on-line store sales was 5% in Q2 versus 2023. That is was down versus the 7.0% year-over-year growth seen in Q1, as ecommerce’s days of rapid growth are long gone.

Overall, and working off a very large number, net sales increased 10% to $148.0 billion in Q2.

As a note, Amazon’s on-line stores sales of $5.3 billion in Q2 were just 37% of the total, as Amazon continues to adapt its business model.

It was also a pretty profitable quarter, with Amazon’s net income increasing to $13.5 billion compared with just $6.7 billion the prior year, for a rise of 101.1%.

Operating income was also way up, reaching $14.7 billion in Q4 versus $7.7 billion in 2023.

Fulfillment costs increased 10.3% in Q2. Those include the cost of workers need to run its fulfillment centers, sortation centers and other logistics facilities. Also under fulfillment costs are any lease payments for these building, or depreciation costs if Amazon owns the facility. Some inbound logistics costs are also included.

It’s worth noting that the 10.3% gain in fulfillment costs in the quarter were 5.3 percentage points above the 5% growth in on-line store sales, reaching $23.5 billion dollars, and with fulfillment costs not accounted in shipping costs.

Those were a whopping $21.9 billion in the quarter, up 8.0% versus previous year, again well above the 5% increase in ecommerce revenue. Note this is not net expense, meaning it is not offset by Prime membership fees or any paid shipping, which the company used to provide.

Fulfillment costs were thus 42% of on-line store sales, while shipping costs represented 39%. Together, fulfillment and shipping were 81% of ecommerce revenue, again excluding shipping revenue.

Also worth noting is the fact that services revenue, such as its Marketplace, Fulfillment by Amazon, and AWS businesses, increasingly exceed product sales.

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In Q2, services were 58.4% of total Amazon sales, a number than continues to increase.

Amazon’s AWS web services segment sales increased 19% year-over-year to $26.3 billion.

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