Amazon says it expects to incur “several billion dollars” of additional costs this holiday season in order to ensure customers receive their orders on time.
Andy Jassy, who replaced Amazon founder Jeff Bezos as CEO of the company in July, said this week that the online shopping behemoth would be spending big to deal with “labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs.” The spending is meant to ensure there is minimal impact on customers and selling partners in the coming months.
“It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners,” Jassy said.
His comments came as the company released financial data for the third quarter that shows a revenue of $110.8 billion, marking the fourth consecutive quarter of revenue hitting $100 billion. The figure also marked a 15% increase from the same period a year earlier, but it was significantly lower than the 27% increase seen with the second quarter. Profit came in at $3.2 billion, about half of that of the same period a year ago. Overall, the figures missed Wall Street expectations, causing Amazon shares to drop more than 4% on Thursday.
As part of efforts to ensure a smooth delivery operation for customers over the holiday season, Amazon is taking on 150,000 seasonal workers in the U.S., with an average starting pay of $18 per hour, sign-on bonuses up to $3,000, an additional $3 per hour for some shifts in certain locations, and the opportunity to turn the position into a long-term career at the company.
In other efforts this year aimed at improving its colossal shipping operation, Amazon recently opened its new air cargo hub in Northern Kentucky. Based at Cincinnati/Northern Kentucky International Airport, the facility serves as the main base for Amazon Air’s U.S. cargo network, processing millions of customer packages every week.
Amazon is currently getting its ducks in a row for November’s Black Friday and Cyber Monday shopping extravaganzas, with the busy retail events set to push the company’s complex delivery network to the limit.
In an effort to ease the demand on delivery services and avoid a sudden rush around the time of the shopping festivals, many retailers have already started running some early Black Friday deals.
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