Orders grouped and shipped once in a week
Besides reducing Amazon’s (AMZN) carbon emissions, the new Amazon Day delivery program could also generate cost benefits for the company in addition to making the whole delivery system more efficient. The Amazon Day program launched recently nationwide and allows Amazon retail customers with Prime membership to pick a specific day of the week to receive the items they ordered throughout the week.
By grouping orders and shipping them once a week, Amazon delivery drivers can make fewer trips to the home of a single customer, which could in turn allow Amazon to reduce its fuel expenses. Since weekly shipments also open up an opportunity for Amazon to use fewer boxes for every delivery, the company could end up saving on the cost of packaging material. At the same time, weekly shipments could also result in Amazon delivery drivers making fewer stops, allowing them to make more deliveries in a day.
Soaring shipping costs drove operating expenses
The operation of getting orders to customers is one of Amazon’s biggest cost drivers. Amazon’s shipping costs increased 23% YoY to $9.0 billion in the fourth quarter, which ended in December 2018. The increase in shipping costs drove Amazon’s operating expenses in the December quarter by 17.7% YoY to $68.6 billion. Chinese e-commerce giants Alibaba (BABA) and JD.com (JD) reported operating expenses of $13.2 billion and $19.7 billion for the December quarter, respectively. Shopify (SHOP) and eBay (EBAY) incurred $1.6 billion and $195.2 million in operating expenses in the December quarter, respectively.