From Breakingviews - Amazon applies therapy to retail
The logo of Amazon is seen at the company logistics center in Lauwin-Planque, northern France, November 15, 2022. REUTERS/Pascal Rossignolis rolling out a new program to sell toys through mobile games while pushing incentives of $10 to get customers to pick up their stuff rather than have it delivered. Little wonder why. Rising costs and customers battered by inflation are hampering Amazon’s efforts to get its retail division on a path to sustainable profitability.
In the first quarter, Amazon’s North America and International units, which collectively reflect the retailing parts of the $1.1 trillion company, reported a combined operating loss of $349 million. Worldwide shipping costs play a big role: they rose 2% to $20 billion. While the rate of sales growth has outstripped growth in costs of distribution, the retail business over the past 12 months has lost $8 billion.
The company led by Andy Jassy has attracted customers – and market share – who have become accustomed to getting goods delivered tomorrow, with a prime subscription. It’s unclear how offering t-shirts through video games will change Amazon’s trajectory. More important, investors haven’t loved the idea of subsidizing delivery costs at the expense of profit.
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