(Mildly) Good News at Amazon: Kindle Downloads Don’t Occur Via UPS or FedEx
Amazon (AMZN) Prime, the ship-all-you-want-for-one-annual-fee deal, and various other free shipping offers, have both boosted sales and saddled the online retailer with rising costs in recent quarters, producing a loss in the third quarter.
It ain’t a pretty picture, though investors, as YCharts has written, seem to expect some development in the near future that would make Amazon as profitable as it is popular. We won't bother charting the company's PE ratio.
So far, Jeff Bezos hasn’t pulled the rabbit out of his hat. While not a dramatic development, the slight decrease in net shipping costs (that’s total shipping costs minus the portion customers actually pay for) as a percentage of sales – to 4.6% in the third quarter from 5.1% a year ago.
That’s a significant improvement, even if it didn’t push Amazon into the black, and it likely reflects a rising percentage of sales that are digital, like books and movies ordered by Kindle owners. No shipping costs, there. Amazon doesn’t break out such sales (it’s disclosures are only adequate if you are of the have-faith-in-Bezos school). But it has said repeatedly that Kindle devices (which is sells at a break-even price) are its hottest items. Presumably, all those Kindle owners are buying the gadgets and then also buying some content to consume on the things.
More of that -- vs. sales of diapers, shoes, big-screen televisions and heavy books – would go further in widening Amazon’s very narrow margins.
Barely room for a sheet of paper between those lines.
Jeff Bailey is the editor of YCharts, which includes the just-released YCharts Pro Platinum for professional investors.
Filed under: Company Analysis