Tesla (NASDAQ: TSLA) popularised the electric car, turning a niche product into a mark of distinction and "green" credentials for consumers. Will Amazon.com (NASDAQ: AMZN) do the same for retailers?

On Tuesday, Amazon's blog featured something of a surprising announcement. Hidden deep within "a sprawling industrial complex in Michigan," Amazon technicians working in cooperation with electric start-up Rivian are hard at work developing "the next generation of Amazon delivery vans -- electric-powered vehicles that will hit the roads beginning in 2021."  

Amazon has a strong incentive to make this project a success, as it works to wring costs out of its business model by eschewing third-party delivery services such as FedEx (NYSE: FDX) and UPS (NYSE: UPS), and delivering its packages to consumers itself. Sure, Amazon is playing up a secondary goal, promising that "100,000 electric delivery vans will save millions of metric tons of carbon per year." But the real goal here is to remove every expense it can, drive prices lower, and squeeze every possible penny of profit out of its 5.1% operating profit margin.

Hold up a sec. Go back. Did I just say "100,000 electric delivery vans?"

Indeed I did. And that's arguably even the bigger story here. Bigger than Amazon's costs. Bigger than its "green" credentials. When Amazon gets its electric delivery van fleet fully deployed a few years from now, it will have more delivery vans in service than FedEx Express has in service (84,700 according to Statista). It will have nearly as many vans as UPS has "cars, vans, tractors, and motorcycles" -- 123,000 according to UPS.  

Amazon's becoming a major player in delivery -- and it's all beginning in Michigan.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How Amazon.com plans to add electric vehicles to its delivery fleet appeared first on The Motley Fool Australia.

Amazon.com (NASDAQ: AMZN) will report earnings Thursday, Oct. 24, at an interesting time for the company and the stock. Though Amazon has been a tremendous winner for investors over the years, the stock has been quite the laggard over the past year or so. While the market is currently very close to a record high, Amazon is over 10% lower than its all-time high all the way back in the late summer of 2018.

Since the stock is reflecting investor concerns, I'll be homing in on a few hot topics in the upcoming report. Amazon is now a sprawling conglomerate encompassing many businesses beyond just its core e-commerce business, so here are the most important aspects I'll be watching.

AWS growth rate and margin

A large part of the reason to own Amazon's stock isn't its e-commerce business, but rather Amazon Web Services (AWS), which made up about two-thirds of Amazon's operating income last quarter. Though AWS makes up only around 13% of Amazon's revenue, its high profitability, sticky recurring-revenue business model, and high profitability make it arguably the company's most valuable segment.

Last quarter, AWS reported 37% growth, which is terrific by itself, but it did mark a significant deceleration from the 49% growth in the year-ago quarter. In addition, operating margin fell from 26.9% to 25.3% year over year. The segment will be coming up against tough comps from the year-ago quarter, in which AWS grew 46% and had an all-time high operating margin of 31.1%.

One shouldn't immediately react to the headline operating margin, however, without listening to Amazon's commentary. Last quarter, management explained that it had invested heavily in AWS, adding significant personnel to its marketing team, and also grew AWS's technical personnel at twice the rate of the overall company. These investments ate into the margin, but Amazon's investments usually pay off in the long run. Therefore, investors should pay attention to management's commentary on AWS's operating margins and investments in addition to the headline numbers.

North American retail acceleration

While AWS had been decelerating, Amazon's more mature North American retail business accelerated last quarter. The company's new one-day shipping initiative helped, and it was recently supplemented by Amazon's decision to add items as low as $1 to its Prime free shipping service.

These new customer-friendly benefits spurred the North American segment to accelerate to 20% growth, up from the prior quarter's 17%. The reacceleration came from both the online stores segment, which accelerated from 12% to 16% growth, and third-party sellers, whose growth accelerated from 23% to 25%.

Investors should watch to see whether that acceleration can continue, or at least if these growth rates can maintain their high levels.

Third-party controversies

Speaking of third-party sales, Amazon's third-party platform has been under fire recently. In August, an in-depth article in The Wall Street Journal (subscription required) highlighted the proliferation of faulty and/or counterfeit products that come from third-party vendors on Amazon's platform.

If this point comes up on the call, I'll be listening for whether the company is taking steps to police its massive platform. And of course, investors should monitor whether negative publicity affected third-party sales growth.

Shipping With Amazon

Finally, I'll also be watching for any commentary around Shipping With Amazon, the company's new initiative to ship third-party goods through Amazon's logistics system. Some believe this new service could pose a threat to FedEx (NYSE: FDX) and UPS (NYSE: UPS). FedEx itself reported quite negative results in its recent earnings release, though there is some debate over how much of the shortfall, if any, can be attributed to Amazon's nascent program, or FedEx's recent decision to cut ties with the e-commerce giant.

Amazon has also begun delivering an increasing percentage of its own packages. According to Rakuten, Amazon has gone from shipping 15% of its packages in early 2017 to around 50% today. On the upcoming release, I'll be watching for any more information regarding how many customers Amazon has picked up for Shipping With Amazon, and also what percentage of packages Amazon is shipping through its own logistics infrastructure.

Taking more shipping in-house should have a positive effect on Amazon's North American margin, but shipping costs accelerated to 36% growth last quarter, ahead of North American sales growth. A lot of that had to do with the one-day shipping initiative, however. Either way, investors should zero in on whether management can break down the puts and takes between the one-day shipping headwinds and vertical integration tailwinds with regard to its shipping costs.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Amazon's cloud computing and shipping progress will be key to Q3 earnings appeared first on The Motley Fool Australia.