Amazon.com Inc. has released figures detailing how much money it brings in through its Prime membership program, shedding some light on the secretive company.
In a 77-page document filed by the company, Amazon said it seeks to mitigate costs of shipping over time through achieving higher sales volumes, optimizing its fulfillment network, negotiating better terms with suppliers, and achieving better operating efficiencies.
The money Amazon brings in from Prime and other subscription programs nearly covers its net shipping costs, one of its largest expenses. Shipping revenue in 2106 had 38% growth year-over-year, while shipping costs had 40% growth.
"We expect our cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, our product mix shifts to the electronics and other general merchandise category, we reduce shipping rates, we use more expensive shipping methods, and we offer additional services."
"We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers."
Amazon said the increase in cost of sales in absolute dollars in 2014, 2015, and 2016, compared to the comparable prior year periods, is primarily due to increased product and shipping costs resulting from increased sales. Cost of sales primarily consists of the purchase price of consumer products, digital media content costs where we record revenue gross, including Prime Video and Prime Music, packaging supplies, sortation and delivery centers and related equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider.
"While costs associated with Amazon Prime memberships and other shipping offers are not included in marketing expense, we view these offers as effective worldwide marketing tools, and intend to continue offering them indefinitely," Amazon said in the document.