The pioneering e-commerce giant is battling soaring costs and a stagnating legacy business
Save time by listening to our audio articles as you multitaskAll the superlatives notwithstanding, it is equally hard not to recognise that Amazon finds itself in something of a funk. With a downturn on the cards in America, its biggest market, shoppers are tightening their purse strings and corporatedepartments are paring back cloud spending.
, an advisory firm, calculates that Amazon added about 130m square feet to its global footprint in both 2020 and 2021. In those years Amazon’s cumulative capital spending reached $100bn. No company anywhere in the world invested more in that period. Last year it may have invested another $60bn, again more than anyone else.
The combination of loss-making retail, slowing profit motors and growing competition is hammering Amazon’s profitability. The firm’s overall operating margin in the third quarter of 2022 was just 2%, the lowest since 2017. In the past four quarters Amazon lost $26bn in free cashflow . Now such moves may be in the offing. Last February the price of Prime membership in America rose for the first time since 2018, from $119 a year to $139. European Prime members have seen a similar increase. Fees that merchants on Amazon’s marketplace pay for fulfilment grew by more than usual in 2022, and on top of that the company levied additional surcharges for inflation and the holiday shopping season.
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