When Amazon missed earnings expectations last holiday quarter, there was one big culprit: Increased fulfillment costs. The company was overwhelmed by merchants that wanted Amazon to store and ship products on their behalf, so Amazon had to rely on last-minute solutions that were more expensive.
Amazon vows not to be blindsided again by the crush of the holiday shopping season
The company is adding 18 warehouses in the third quarter of this year.
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.
Amazon says it’s not going to happen again.
On Thursday, Amazon Chief Financial Officer Brian Olsavsky told reporters that Amazon was adding 18 warehouse facilities this quarter in preparation for the holiday crush versus just six additions in the same quarter last year.
“It’s a combination of what we saw in Q4 of last year and what we’re seeing year to date in unit growth,” he said on the call.
Amazon sold 28 percent more items in the second quarter than it did in the second quarter of 2015, and the growth rate for items stored in Amazon warehouses was much higher than that, he said without providing specifics. Amazon’s second-quarter earnings surpassed analyst expectations and marked the third quarter in a row that the company has unveiled record profits.
Amazon has recently taken other steps to avoid a repeat of last year’s costly fourth quarter. In May, it raised the fees it charges merchants to store goods in Amazon warehouses during November and December in an effort to get them to only send in inventory that has a good chance of selling before the New Year.
It also now allows some merchants to ship goods from their own warehouses and have those products still qualify for Amazon’s Prime program — something that previously wasn’t allowed.
This article originally appeared on Recode.net.
