Amazon Costs Are Up And Profits Are Down, Additional Warehouses Cut Into Bottom Line

Amazon just posted its quarterly profit report and it paints a rather grim picture for the merchant giant. The underlying cause of the dismal numbers is the increased cost due to additional warehouses and logistics in response to the demand by customers to expedite the delivery process.

Customers have been demanding for Amazon to make their delivery times shorter, which is why the retail giant opened several more warehouses that cut into its bottom line for Q3, The Wall Street Journal reports. Investment in more warehouses is expected to continue throughout the rest of the year, as well, with a total of 23 warehouses planned globally.

During a media call, Chief Financial Officer at Amazon, Brian Olsavsky assures that the undertaking is for the company’s benefit. Even though it was a huge commitment, Amazon is now in a much better position to respond to the inevitable flood of orders this coming holiday season.

Investors have been rattled by the news that Q3 profits are down, resulting in the company’s shares to plummet by 6 percent. The less-than-stellar holiday outlook is not doing Amazon’s stock prices any favors either.

Its push to add as many Prime members as possible is costing Amazon a lot as well, with the $99 a year service promising to deliver fast, free shipping to customers as well as a variety of other perks. As membership grows, the retail giant acquires more customers that spend double what non-Prime members do, which is why Amazon is eager to have as many of them as possible. This is also why shipping costs by the merchant company rose by 43 percent during Q3.

Amazon is attempting to assure investors that its push to gain ground in growth areas will pay off in the future. The company is particularly interested in expanding its services in India, Fortune reports, which will be receiving the bulk of a $3 billion planned investment.