Amazon Provides Economic Light in Dark Days
Amazon had a great fourth quarter as reported today in the WSJ. Sales were up 18% and profits rose 9%. Those numbers are pretty strong when things are going well but in today’s economy these are outrageous results.
Here’s a few more numbers to drool over. Earnings of $225 million for the quarter ended Dec 31st. This is compared to earnings of $207 million for the same period a year earlier. What’s that you ask a company that’s experiencing growth year over year in this environment? Yup, that’s right. Oh and the $6.7 billion (with a “b”) revenue number for the quarter is very impressive indeed.
The online monster said that discounting hurt their profits but it’s one of those things that yes, they could have made more but they still did very well. Not getting greedy in these times makes good sense. What will it mean for prices though when times get better? Will Amazon be the perpetual “price leader” and not demand higher prices that pay for their ability to serve their customers like they do? I guess that’s something to worry about another day. Right now, they are busy counting their money.
The article talks about how they are further locking in customers with offers like their $79 “Prime” shipping service that provides unlimited 2 day shipping. The stay at home mom, Jessica Redden that was quoted for this article said it all.
I was on Amazon everyday over the holidays. We did do price comparison among the big box stores that were local to us, and found time and time again that Amazon had the best price. I don’t feel like I need to venture to any other site.
Hard to find a more compelling review, wouldn’t you say? As a result of this kind of loyalty there may be some dark days ahead for traditional retailers and online retailers alike. eBay continues to fade with a 7% decrease in same store sales reported by those who used their service for the holiday. Another advantage that Amazon received was the ability to restock so easily. Since no one else was ordering product Amazon was able to sweep in and get better rates.
Hey, when you build a better mousetrap you deserve to reap the rewards. You gotta hand it to the folks at Amazon for their superior model and execution. In fact, when I started to write this article I was going to take the angle that Amazon was turning into the new Wal-Mart by putting the little guy out of business but that’s just not true. It enables more than anything else. The big guys, however, in the traditional offline and online retail space are at risk though. Since they are limited in their offerings to a particular niche (electronics, home furnishings, books, music etc) or even a combination of some of these areas they cannot be ALL things like Amazon.
Firm grasp of the obvious by looking at this? Maybe but the proof for a model is in the performance in a down market as well as an up market. Amazon is proving to be able to handle both. It will be interesting how this year shapes up because it appears as if we are going into an economy like we have never seen. Will Amazon continue to thrive? Your thoughts?