FT reported – Amazon unveils key logistics arm sales surge

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Amazon has started breaking out key logistics revenues in its quarterly earnings, underscoring the growing importance of such services provided for other sellers.

The Seattle-based company revealed that these accounted for $6.4bn in sales in the quarter, more than one in every six dollars of revenues during the quarter. Logistics services were the fastest-growing part of Amazon’s retail business, growing 36 per cent from a year earlier on a currency-adjusted basis.

Amazon also reported its eighth consecutive profitable quarter, a record streak for a company infamous for its poor profits. Revenues were higher than analysts expected, rising 24 per cent to reach $35.7bn for the quarter.

Amazon provides a range of services known as “Fulfilment by Amazon” for sellers who go through Amazon.com — storing their goods in warehouses and shipping them out once ordered. The fees range from $2 for a small package to more than $100 for heavy or oversized items.

The company had previously only reported revenues from these “third-party seller services” on an annual basis. Amazon said the new disclosure reflected a more “appropriate categorisation” of revenues, but declined to answer further questions.

Chief financial officer Brian Olsavsky said that the number of items sold through Fulfilment last year grew much faster than the number of items sold by Amazon directly. “We continue to see strong [Fulfilment by Amazon] adoption and it is a big part of our business, a big part of our value.”

He said logistics services were part of a “self-reinforcing cycle” that kept customers coming back.

The last time Amazon made a significant change to its earnings disclosures was when it broke out Amazon Web Services as a separate business unit in April 2015. Although growth has slowed recently at AWS — with growth falling to 43 per cent year on year — the segment remains Amazon’s most profitable.

In addition to revealing its logistics revenues, Amazon also reported its quarterly revenue from subscription services, which includes Prime membership, and digital subscriptions such as audiobooks. The company made $1.9bn from subscriptions in the quarter, or 5 per cent of revenues.

This new metric could provide something that analysts have long been waiting for — a proxy for growth in Prime members, considered one of the most important ways of measuring the health of the company. Amazon has long resisted disclosing details about revenue from Prime, and has never revealed how many members it has.

A recent study by Consumer Intelligence Research Partners estimated there are at least 80m Prime members in the US, and millions more overseas.

Meanwhile, Amazon’s core retail business continued to grow during the first quarter, with sales up 16 per cent to reach $22.8bn.

Shares rose 4 per cent in after-market trading.

Logistics has been a big source of investment, as well as growth, for Amazon. In the past 18 months Amazon has leased 40 cargo jets to start an air hub, bought thousands of truck trailers, and taken out a shipping license in China.

While the bulk of Amazon’s logistics revenues come from “Fulfilment”, the company recently started expanding into other logistics areas — including a service in China that offers cross-border transport even for businesses that do not use Amazon.com. With this broader mission, Amazon is increasingly coming into competition with traditional logistics companies like FedEx and UPS.

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