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Calm before the Black Friday storm? Amazon shares slump ahead of Christmas scramble

Black Friday might be a big cash cow for Amazon, but the rising cost of doing business appears to be hurting – the value of shares were down 3% on Friday following a slower sales forecast.

A report in Reuters attributes this drop in investor enthusiasm to costs associated with keeping to the one-day delivery promise for all Prime customers in the United States.

That’s arguably less of a big deal to Prime subscribers here in the UK, who can enjoy one-day deliveries on most items already, although in areas where road access is limited, new services like Prime Air drone deliveries will undoubtedly be a big hit.

Prime Air has been in the pipeline for years now – a test delivery was successfully made in Cambridge, England in 2016, and a new drone design was unveiled at Amazon’s re:Mars conference back in June. Due for launch later this year, Prime Air will initially only deliver to a select few places, and is thought to be a U.S. only service at first.

Related: Best Black Friday and Cyber Monday deals

As well as Prime Air, Amazon has spent money on growing its network of warehouses and delivery centres for road-based deliveries in the States, and has committed to Shipment Zero, a carbon-neutral pledge which aims to see 50% of all Amazon deliveries generate net zero emissions by 2030.

Other reasons for the gloomy sales forecast include less revenue than expected from AWS (Amazon Web Services), the company’s lucrative cloud hosting arm.

Amazon may also be a victim of its own success – the Echo Dot speakers were by far the biggest-selling items globally last Black Friday, with ‘millions more’ Amazon smart speakers shifted than in 2017, according to founder and CEO Jeff Bezos.

The shopping behemoth also enjoyed a record-breaking Prime Day this year as well, with over 100 million items sold. Again, its own Echo Dot and the Alexa-assisted Amazon Fire TV Stick were among the most popular items.

The problem is, there are only so many homes, and so many rooms in those homes. If you sell millions of perfectly good smart speakers and streaming sticks one year, those same customers aren’t likely to need a new one the next.

The same goes with other high-value items – if you were lucky enough to bag yourself a Black Friday TV deal, and that shiny new 4K Ultra HD TV you got in 2018 should last you four, five, maybe even ten years, before you need an upgrade. Either way, you might not shell out for another one this Black Friday.

That said, with deals on laptops, phones, Nintendo Switch bundles and others expected, Amazon may be even more generous with its discounts this year if it plans to offset investment in faster deliveries for bargain-hungry buyers.

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