Amazon's profits plummeted! Is my brother-in-law planning to take action against sellers?

Everyone should have known about this in the past two days. Last weekend, Amazon released its Q3 financial report for this year. Subsequently, Amazon’s stock price plummeted by 9%, and my brother-in-law was forced to give up his seat as the world’s richest man.

Why is the content of this financial report so destructive?

Because the Q3 financial report showed that Amazon's profits plummeted by 26%, which was the first time in two years that Amazon's profits had dropped significantly.

However, the financial report also shows that Amazon’s actual sales have increased to a considerable extent. The reason why the profit plummeted in the third quarter is that Amazon’s investment in “one-day delivery” has led to a 46% increase in overall logistics costs. The logistics costs for the entire third quarter were as high as 9.6 billion US dollars.

We introduced the one-day delivery service at the beginning. At that time, we also said that Amazon's move was very big and effective, but the investment was terrifying. However, even Amazon itself did not estimate the actual investment.

▲When the news was released, Amazon predicted that it would invest $800 million in a single quarter

What impact will this drop have on Amazon and our sellers? Will sellers be ripped off by Amazon again?

Amazon is losing money but still wants to deliver within one day?

Amazon has never stopped its pace of expanding and consolidating its business territory. In addition to working overtime to open new sites around the world, it has also been engaging in ruthless intrigues with its old rivals Walmart and Target in its home base in the United States.

At the beginning of this year, in order to fight against its competitors and seize more e-commerce market in the United States, Amazon announced that it would increase investment and gradually upgrade the current Prime delivery time to one-day delivery.

Up to now, the scope of one-day delivery has been greatly expanded compared with the beginning of the year, and it can almost cover most of the areas where Prime delivers.

▲Changes in one-day delivery range

My brother-in-law will definitely not make an investment that will lose money. The upgrade of the one-day delivery service costs so much money. Has it brought any benefits to Amazon?

Also in the Q3 financial report, sales for the entire quarter increased by 24% to US$70 billion, a rare growth rate in recent years.

One-day delivery service can undoubtedly increase Amazon's sales, and the initial investment cost can be paid back in the future. Industry analysts generally believe that Amazon's move is a long-term investment. Although the expenditure in the third quarter exceeded the forecast, it is still within an acceptable range.

At the same time, Amazon also stated that it will continue to invest in the "one-day delivery" service in the coming Q4 quarter, and the investment amount is expected to reach about US$1.5 billion.

For Amazon, the "one-day delivery" service will bring considerable costs at present and require a lot of money to open up, but it will become the driving force for Amazon's continued sales growth in the future. The decline in stock prices is only temporary, and it will naturally rise after enjoying the market share brought by "one-day delivery".

But for us sellers, this news is not so good.

We third-party sellers all have a piece of Amazon's pie. My brother-in-law can make the overall pie bigger, and naturally each of us will get more.

This may be the biggest positive significance of the "one-day delivery" service for sellers. It is very hidden and can be easily offset by other competitors entering the market. However, when it comes to the disadvantages of the "one-day delivery" service, there are many.

First of all, Amazon has always been about making money, which I believe everyone has already experienced. This time, they spent a lot of money on investing in the "one-day delivery" service, and they must find other ways to make the money back.

As a result, recently all the products displayed at the top of the front-end search page are Amazon's own products. Amazon wants to make a lot of money from its own-operated section during the peak season to make up for the expenses of the "one-day delivery" service.

Not only that, the "one-day delivery" service also has a very disgusting negative impact on sellers, which is the warehouse distribution problem.

In order to achieve such a fast delivery time, the inventory of goods must be dispersed enough so that they can be shipped from the warehouse closest to the consumer. Even my brother-in-law himself said so.

Sellers in our communication group also generally reported that after the implementation of the "One-Day Delivery" service, they were increasingly being split into warehouses. (To join the group, scan the QR code at the end of the article)

In order to implement this "one-day delivery" service, not only does Amazon have to spend more than a billion dollars, but we sellers also have to pay more for the distribution warehouse and the first-mile fee. The benefit brought by it is just a little increase in market share. One-day delivery is really a very unprofitable business for us sellers.

However, for Amazon's platform-based strategic decisions, we ordinary sellers can also follow Amazon. Since the increase in our logistics costs is an unavoidable situation, we can only use profit margins to offset this part of the increase, otherwise the sellers will only suffer if they make less money.

Finally, I have collected a high-profit operation skills package for everyone. You can scan the QR code below to get it from me~

PS. If you want to join the seller discussion group, you can also private message me to let me add you to the group