Amazon return policies

Today, I learned something new about Amazon return policies. As a Prime subscriber, I used to think that regardless of the reason behind the returns, they would always be free. I was wrong.

As I had to return some items that I didn’t like and there was no fault on Amazon or the manufacturers’ part, I was presented with esentiall two options: drive to UPS or Kohl’s store to drop off for free or pay to have the items picked up. Below are the screenshots when I choose the reason as “Bought by Mistake” or “No longer needed”

Had I chosen something that indicated the return wasn’t my fault, the options would be different

I guess it is sensible and smart of Amazon to implement this control. Otherwise, there would be abuses from customers (myself very likely, I have to admit) and the logistics costs would be even higher than what they are nowadays.

On a side note, the return experience I had at Kohl’s was very smooth. You can actually return Amazon items at any Kohl’s nationwide and all that it takes is QA code which can be stored and shown via your phone.

It made me think: how does this partnership benefit Amazon and Kohl’s? I am speculating here, but I guess this option makes sense financially for Amazon as they piggyback on the scale of Kohl’s logistics or business with shipping partners like USPS, UPS or FedEx. Instead of 100,000 items delivered a month, I imagine the deal with Amazon would bump the number up for Kohl’s. The increased volume can give them the leverage to negotiate a lower unite rate and have Amazon share the extra cost. From Amazon side, it would be cheaper to share with Kohl’s than to handle the entire costs alone.

Additionally, customers are given another option. I can imagine in some cases it would be more convenient to drop items off at Kohl’s stores than packaging and labeling the items.

On Kohl’s side, they might be banking on the fact that as customers have to come in their stores to return items, it will increase impulsive purchase in the stores.

Amazon’s Quarterly Earnings

On that FY2019 Q2 earnings by Amazon…

Revenue

In the last 90 days, Amazon recorded $63 billion, meaning that it took the company less than 36 hours to make $1billion. An extraordinary rate. Compared to last year’s Q2, revenue rose by 20% with Services (31%) outperforming Products (12.5%). Nonetheless, gross margin slipped as this quarter’s figure is at 4.8% compared to 5.6% last year.

Source: Amazon

AWS

Among Domestic, International and AWS categories, the latter continues to lead the way in terms of YoY growth. AWS’s revenue in the last 90 days is $8.3 billion, a rough equivalent of about $32 billion annually. It’s pretty impressive for just a segment of a company. Not many standalone companies can generate that much revenue in a quarter. It’s even more telling when we put AWS next to GCP. Google announced last week that GCP’s annual run rate is $8 billion, meaning that AWS is approximately 4 times bigger than its rival from Google.

Despite making up only 13% of Amazon’s revenue, AWS is responsible for about 69% of the company’s operating income.

At 37%, AWS’ YOY growth is the lowest recorded in a long time, but the law of big numbers should be taken in account here as the division is not as small as it used to be. If broken down into more strategic categories, AWS isn’t the segment with the biggest YoY growth (Excluding FX) in the company. It’s Subscriptions. Subscription memberships, especially Prime, play a crucial role in Amazon’s ecosystem. The fact that it notched the biggest growth, ahead of AWS, is very positive for the company.

Advertising

As can be seen above, advertising slowed down significantly after a hot streak just 12-15 months ago. YoY growth decreased noticeably compared to the 3-digit growth just a while ago. Still, it contributed $3 billion to the company’s top line.

Free Cash Flow and Shipping Costs

Amazon’s free cash flow this quarter is truly insane with 65% YoY improvement in Operating Cash Flow and a 3-digit growth in Free Cash Flow.

Source: Amazon

Shipping costs continued to rise with 36% YoY difference compared to previous second quarter’s. It’s worth noting that none of the Online Stores, Physical Stores and 3rd Party Seller Services have the same growth (all grew at a slow pace than shipping costs)

Sometimes, it’s hard to believe that a company founded roughly 25 years ago can be this powerful and big. A segment responsible for only 13% of its revenue is the dream of so many and it continues to deliver at an impressive rate.