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Visualizing Amazon’s Rising Shipping Costs

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amazon rising shipping costs

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The Briefing

  • Amazon’s shipping and fulfillment costs have soared to over $150 billion
  • Global supply chain constraints have accelerated these costs, which are now 40x their 2009 levels

Visualizing Amazon’s Rising Shipping Costs

Most investors would agree that Amazon has been a winner during the COVID-19 pandemic. After all, in two short years from 2019 to 2021, sales soared to $469 billion from $280 billion and their market cap surged towards a $1.7 trillion valuation.

But even the best of companies have had to navigate choppy waters and uncertainty during this time. For Amazon, this has come in the form of cost pressures in their shipping and fulfillment department, which are now representing an increasingly large share of revenues.

Just how large are Amazon’s shipping and fulfillment costs becoming?

In 2021, shipping and fulfillment costs added up to $151.8 billion. Shipping, which includes sortation, delivery centers, and transportation costs amounted to $76.7 billion. Fulfillment costs, which include cost of operating and staff fulfillment centers, were $75.1 billion.

As a result of these trends, Amazon’s shipping and fulfillment expenses now represent 32% of their revenues:

YearCost as a % of revenue
202132%
202031%
201928%
201827%
201726%
201625%
201523%
201422%
201320%
201219%
201118%

As you can see, costs are escalating, and today’s figure is almost twice that of the 18% figure seen in 2011.

Amazon Web Services to the Rescue

While these expenses are rising, it’s important to remember that Amazon’s profits are still healthy. They generated $33 billion in profits for 2021. One reason for this is that the majority of Amazon’s profits never came from ecommerce to begin with. Amazon Web Services (AWS), which is a much higher margin segment of their business, accounts for over 50% of their operating profits, but only 13% of their sales.

AWS is such a profit generating machine that prominent investors have called for Amazon to spin off AWS into its own entity. They argue that pure play technology companies are often assigned a higher equity multiple, and spinning off AWS would be accretive to shareholder value.

Rising Costs to Scale

The $151.8 billion in expenditures towards shipping and fulfillment is absolutely massive. On a per minute basis, this results in $288K per minute in expenses, compared to their $956K in revenue per minute.

Another way to put this gargantuan figure to scale is to remember that this business expense is greater than the equity value of about 90% of all companies in the S&P 500.

Where does this data come from?

Source: Statista
Notes: Fulfillment costs include customer service centers and payment processing costs

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Economy

Charted: Public Trust in the Federal Reserve

Public trust in the Federal Reserve chair has hit its lowest point in 20 years. Get the details in this infographic.

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The Briefing

  • Gallup conducts an annual poll to gauge the U.S. public’s trust in the Federal Reserve
  • After rising during the COVID-19 pandemic, public trust has fallen to a 20-year low

 

Charted: Public Trust in the Federal Reserve

Each year, Gallup conducts a survey of American adults on various economic topics, including the country’s central bank, the Federal Reserve.

More specifically, respondents are asked how much confidence they have in the current Fed chairman to do or recommend the right thing for the U.S. economy. We’ve visualized these results from 2001 to 2023 to see how confidence levels have changed over time.

Methodology and Results

The data used in this infographic is also listed in the table below. Percentages reflect the share of respondents that have either a “great deal” or “fair amount” of confidence.

YearFed chair% Great deal or Fair amount
2023Jerome Powell36%
2022Jerome Powell43%
2021Jerome Powell55%
2020Jerome Powell58%
2019Jerome Powell50%
2018Jerome Powell45%
2017Janet Yellen45%
2016Janet Yellen38%
2015Janet Yellen42%
2014Janet Yellen37%
2013Ben Bernanke42%
2012Ben Bernanke39%
2011Ben Bernanke41%
2010Ben Bernanke44%
2009Ben Bernanke49%
2008Ben Bernanke47%
2007Ben Bernanke50%
2006Ben Bernanke41%
2005Alan Greenspan56%
2004Alan Greenspan61%
2003Alan Greenspan65%
2002Alan Greenspan69%
2001Alan Greenspan74%

Data for 2023 collected April 3-25, with this statement put to respondents: “Please tell me how much confidence you have [in the Fed chair] to recommend the right thing for the economy.”

We can see that trust in the Federal Reserve has fluctuated significantly in recent years.

For example, under Alan Greenspan, trust was initially high due to the relative stability of the economy. The burst of the dotcom bubble—which some attribute to Greenspan’s easy credit policies—resulted in a sharp decline.

On the flip side, public confidence spiked during the COVID-19 pandemic. This was likely due to Jerome Powell’s decisive actions to provide support to the U.S. economy throughout the crisis.

Measures implemented by the Fed include bringing interest rates to near zero, quantitative easing (buying government bonds with newly-printed money), and emergency lending programs to businesses.

Confidence Now on the Decline

After peaking at 58%, those with a “great deal” or “fair amount” of trust in the Fed chair have tumbled to 36%, the lowest number in 20 years.

This is likely due to Powell’s hard stance on fighting post-pandemic inflation, which has involved raising interest rates at an incredible speed. While these rate hikes may be necessary, they also have many adverse effects:

  • Negative impact on the stock market
  • Increases the burden for those with variable-rate debts
  • Makes mortgages and home buying less affordable

Higher rates have also prompted many U.S. tech companies to shrink their workforces, and have been a factor in the regional banking crisis, including the collapse of Silicon Valley Bank.

Where does this data come from?

Source: Gallup (2023)

Data Notes: Results are based on telephone interviews conducted April 3-25, 2023, with a random sample of –1,013—adults, ages 18+, living in all 50 U.S. states and the District of Columbia. For results based on this sample of national adults, the margin of sampling error is ±4 percentage points at the 95% confidence level. See source for details.

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