Increased Expenses at Amazon.com and Holiday Season Sales Estimations

Added by Monique Robinson on October 21, 2010

Amazon Inc announced that costs for business expansion will be growing at a fast clip during the holidays, fact which caused its shares to go down by 3.8 per cent.

Amazon’s expansion consists in fulfillment centers that will be added around the globe, as the company plans to spend more on technology in order to support its web-service and retail businesses.

Tom Szkutak, chief financial officer of Amazon.com stated that costs for the expansion will continue in Q4 as well. Company expenses rose considerably lately also due to the TV ads for the Kindle reader, which is now competing with Apple’s iPad.

Amazon estimated that the operating income during the holiday shopping season could be between $360m and $560m. These are positive estimations that could actually lower Amazon’s decline from 24 per cent to 18 per cent.

Part of Amazon’s strategy which might turn out to be effective was offering free trials of the shipping program based on discounts called Amazon Prime that has a $79 annual fee for free shipping.

Amazon’s intention was to attract higher numbers of repeat customers before the cold season. Amazon has been fighting to beat competitor’s pricing, just as Wal-Mart did, fact that helped its sales only to cut into profit margins.