Amazon cuts delivery costs

Online retailer Amazon warned today of a sales slowdown in the run-up to Christmas as it turned the screw on high-street rivals in the UK by cutting delivery costs.

Online retailer Amazon warned today of a sales slowdown in the run-up to Christmas as it turned the screw on high-street rivals by cutting delivery costs.

Amazon is offering to deliver gifts and products for free if customers spend at least £15 (€22.10) on its UK website – down from £19 (€28) during the festive season last year.

The tactics will heap more pressure on high street booksellers such as Waterstone’s and UK chain Ottakar's, which agreed a takeover this autumn in an effort to increase their muscle to compete against their web-based competitors.

Both chains have struggled over the summer, with the largest fall at Waterstone’s, where sales were 8% lower during the three months to September 24.

Details emerged as Amazon posted 44% lower profits in the third quarter of $30m (€24.8m) across all its global operations after a legal settlement took its toll.

Net sales were 27% higher at $1.86bn (€1.5bn), mirroring the growth in its international division, which includes the UK, and saw sales rise 26% to $817m (€676.2m).

But the company said growth in the final quarter of this year could be as low as 13% – well below the 31% recorded in the same period of last year.

Ryan Regan, managing director of Amazon in the UK, said the competitive environment was challenging on this side of the Atlantic and lower delivery costs should ensure the company does not lose out if consumers decide to spend less in the run-up to Christmas.

“The motivation behind it is that we have found that customers are more loyal and are buying from us each year (with free shipping),” he said.

Sales in the UK and Ireland over Christmas should be supported by the opening of a third distribution centre in the UK to cope with demand for products such as electronics, toys, and home and garden furniture, he said.

Mr Regan added that big sellers this year could include Charlie And The Chocolate Factory on DVD and Roboraptor toys.

“We are very happy with our progress in the UK and we are expecting the fourth quarter to be our biggest holiday period ever across the whole group,” he said.

Amazon said sales during the third quarter were boosted by the popularity of Harry Potter And The Half-Blood Prince. With more than 1.6 million copies sold worldwide the novel is its largest new-product release.