Amazon.com Inc.'s first-quarter shipping costs hit $3.27 billion, a 42-percent jump from the same period in 2015, the Seattle-based e-tailer said in releasing its results after the markets closed.
The company's shipping revenue came in at $1.82 billion, a 40-percent increase from year-earlier levels. That means Amazon spent $1.45 billion more on shipping in the quarter than it took in.
Amazon's transport costs have long exceeded its revenue, as the company spends big on shipping to meet consistently surging demand. Amazon sold $20.6 billion in merchandise in the first quarter, up 20.5 percent from $17 billion a year ago. Revenue collected from services rose 52 percent, to $8.5 billion.
Amazon pays to ship products ordered from its web site, as well as to support fulfillment services to other merchants. As its shipping costs grow with total demand, the company has explored ways to take greater control of its transport and logistics operations. For example, during the quarter it agreed to lease 20 freighters from Air Transport Services Group Inc. (ATSG) to support one- and two-day deliveries in the U.S. ATSG will also operate the aircraft.
Colin Sebastian, an analyst covering Amazon for Robert W. Baird and Co. Inc., has written that Amazon would gain competitive advantage by managing the logistics of its core revenue-generating business and then extending the capacity as a service to other companies. Sebastian estimated the global logistics market available to Amazon to be about $400 billion. He added that, given Amazon's already enormous scale, there are efficiency gains to be had from internally operating fulfillment, logistics, and delivery.
Amazon's shipping requirements will deepen as it expands its delivery commitments. During the quarter, it expanded its "Prime' same-day delivery network, where it offers free delivery, to 11 U.S. metropolitan areas. The network now serves 27 metro areas.
Most of Amazon's domestic deliveries are handled by the U.S. Postal Service and by Atlanta-based UPS Inc.
