All Due Credit to Amazon: Prime's Free Shipping Perk Is Paying for Itself
Over a year and a half ago, I expressed concern that Amazon (NASDAQ: AMZN) could face debilitating costs linked to its then-expanding Prime program. Sure, free next-day shipping on millions of items was bound to draw a crowd of spenders. If Amazon's delivery costs for an item are as much or more than the item's gross profit, though, what's the point? Never even mind the added costs of picking and boxing lower-cost goods eligible for speedy, no-cost delivery.
Looking at the latest earnings results, my concern was clearly unmerited. The offer isn't costing too much at all.
Granted, the COVID-19 pandemic helped, supplying Amazon with a much-needed scale that kept relative costs down. Efficiency ramps up when employees can focus on one task or when a piece of equipment is always in use. Nevertheless, Amazon's costly free-shipping endeavor is paying for itself, widening profit margins as a result.
Source Fool.com
