Supply chain nightmares are doing what regulators and rivals can’t: curb Amazon

The company’s earnings and sales in the third quarter. was well below Wall Street projections. It was a rare mistake for Amazon that caused its stock to drop about 3% in midday trading on Friday. Apple (AAPL) it also said Thursday that chip shortages and manufacturing disruptions caused it to lose $ 6 billion in sales in the latest quarter.

Buyers are not what holds Amazon back. The US economy remains strong and demand for online shopping is growing, albeit at a slower pace than last year when stores closed and everyone stayed home.

The problem: Amazon simply can’t get all of its stuff to customers quickly enough.

“This shows that it’s not regulators or competition holding Amazon back, it’s the supply chain nightmare,” said Daniel Ives, technology analyst at Wedbush Securities.

Amazon said supply chain bottlenecks and inflation in raw materials, labor and transportation costs depressed earnings during its latest quarter. Those ongoing problems will cost the company an additional $ 4 billion this quarter, reducing profits during the upcoming holiday shopping period, the company added.

“We are dealing with workplace hazards and supply chain disruptions like many other companies,” Amazon CFO Brian Olsavsky said in a call with analysts on Thursday. “Certainly the cost of compliance in the last few months and what we forecast for the next quarter is not what makes us happy.”

Olsavsky said staffing shortages at some warehouses last quarter forced him to redirect products to other facilities that were fully staffed but less convenient. This resulted in a “less optimal location, leading to longer and more expensive transportation routes.”

Amazon’s results and investor response are new signs of the far-reaching impact of the supply chain crisis and hiring struggles. Small stores, without the scale to keep prices low in the face of high costs or the logistics networks to overcome supply shortages and delays, are getting hit hardersay retail analysts.

But these problems also affect corporate giants.

On average, between 15% and 23% of products are out of stock in Amazon’s online marketplace, a historic record, according to Guru Hariharan, who worked in Amazon’s retail business for five years and runs CommerceIQ, a company from e-commerce analytics advising leading brands like Kellogg, Colgate, and Duracell selling on Amazon. CommerceIQ tracks the out-of-stock rates of its customer range on Amazon, which it then aggregates as a representative sample of a product category on the site.

Amazon declined to comment on the data.

The company increased promotions in October to encourage customers to shop early for the holidays. Boosting demand helps Amazon avoid a backlog of orders later in the holiday that can affect its delivery operations.

Christmas will be great for stores, if they are called Walmart or Target

“That works better for us than having it all in a couple of weeks concentrated around Cyber ​​Monday and Black Friday,” Amazon’s Olsavsky said Thursday. “From an operational point of view, it is easier to do when the volume is extended.”

He added: “I love it in October, but we will take it in November and December as well.”

The company is also using more containers and bringing goods to new US ports. clogged entrances on the west coast.

On the labor side, Amazon is increasing salaries and hanging login bonuses to alleviate “inconsistent staffing levels at our operations,” he said.

Amazon is hiring 150,000 vacation workers to meet the demand. Their starting median hourly wage is over $ 18, with an additional $ 3 per hour for certain shifts in some locations and signing bonuses of up to $ 3,000.

Despite the pessimistic quarter and challenges facing Amazon, many analysts say it is still gaining market share from its competitors and remains in a stronger position than its rivals to deal with supply and workforce disruptions. . The company has also invested heavily in recent years to build new warehouses and add capacity in an effort to speed up delivery times. Analysts expect these investments to benefit Amazon in the long term.

“We remain positive in [Amazon] long-term, and we believe the supply chain problems and high shipping costs are temporary, not structural, “said James Lee, an analyst at Mizuho Securities, in a note to clients on Friday.

—CNN Business’ Clare Duffy contributed to this article.

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