Amazon's international division is poised for an annual profit as efforts to optimize logistics operations bear fruit after years of losses. The international unit, which serves customers outside North America, could achieve an operating profit of $1.6 billion this year and more than $5 billion next year, according to analysts in a Refinitiv survey. JPMorgan analysts even predict a profit of $4.3 billion in 2024.

The international division of Amazon recorded an operating loss of $2.7 billion last year. However, a strong start to 2024 led to a profit in the first quarter. The last annual profit of this unit was achieved during the pandemic, which resulted in a short-lived boom for e-commerce companies.

This growth is the result of Amazon's efforts to better organize warehouses and delivery operations in key overseas markets such as Germany and the United Kingdom, which led to faster delivery times and lower local operating costs.

‘It seems like they have figured it out,’ said Rick Watson, founder of RMW Commerce Consulting. ‘Even with the introduction of new countries, I don't think international profitability will turn negative again.’

Amazon started its first international businesses in 1998, but the overseas operations had difficulty remaining consistently profitable. Since the introduction of the current reporting structure in 2016, the international unit has accumulated cumulative annual operating losses of $18.8 billion.

Amazon has recently reorganized its North American logistics network to store goods closer to customers, reduce delivery costs and times, and increase order frequency. The domestic division reported an operating income of $14.9 billion last year.

The lessons from the US overhaul would be 'applied to our international operations,' said CEO Andy Jassy in May. The overseas segment will be 'a large, profitable business for us,' with improved performance in 'established' markets like the United Kingdom and emerging markets like Brazil.

Amazon's growing advertising business and increased automation of warehouses are also expected to help boost global e-commerce profits.

The company does not disclose the finances of its individual overseas markets, but has indicated that certain mature markets, including the United Kingdom, Japan, and some European countries, are profitable.

Amazon is under pressure from investors to increase transparency in the disclosure of its international accounts and foreign tax payments.

The company's ongoing efforts to shorten delivery times come into play in light of increasing competition from Chinese e-commerce rivals like Temu and Shein, which offer a variety of cheap goods for which customers are willing to accept longer delivery times. In June, Amazon announced plans for a direct-from-China discount section.

Jack Cox, Head of European Logistics at real estate group CBRE, pointed to a "linear relationship" between market share and delivery time. "We are seeing an increase in smaller [warehouses] in and around cities," he said. "Users are willing to pay higher rents in these locations to gain market share.

Although consumers in almost every country worldwide can shop online at Amazon, the company operates a physical logistics network of warehouses and distribution centers in a much smaller number of countries.

The introduction of physical operations in a new market typically meant that the country was "unprofitable for three to seven years," said Derek Lossing, a supply chain consultant who spent six years at Amazon. "You make a big commitment and then it weighs on the international profits.

According to supply chain consultancy MWPVL, Amazon is planning to open 49 new facilities worldwide. One-fifth of them are located in Germany, where the group announced in June that it will invest 10 billion euros in expanding its logistics network and cloud infrastructure.

The value of the company's international real estate and equipment has nearly tripled since 2019, rising from $9.6 billion five years ago to $24.4 billion in 2023, according to company reports.