Free delivery hits Amazon results

DESPITE a Christmas season that brought more online shopping than ever, Amazon.com missed Wall Street targets for its fourth quarter with a net profit of $346.7m (£183.8m).

The result was a dramatic improvement on this time last year, when net profit was $73.2 million.

Revenues were $2.54bn, rising 31%, but those came at the expense of margins due to free delivery and discounting.

Those were helped by a weak dollar and the company says that excluding the benefits from changes in foreign exchange rates, sales rose 26%.

With concern over marginsgrowing, the focus is on the company's new programme, Amazon Prime, under which members will pay $79 annually for unlimited, express two-day free delivery with no minimum purchase requirement.

The company admitted it will hurt margins.

'Make no mistake about it, we expect Amazon Prime to be expensive for the company in the short term,' chief financial officer Tom Szkutak said. 'It is perhaps the most expensive thing we have done.

'However, over the long term we believe that Amazon Prime will drive incremental demand just as super-saver shipping has done.'