Shoppers spent £13bn on Amazon in the last three months

Online retailer Amazon has reported record sales for Q4, up 22% on last year. That's a lot of little brown packages. So that's where all the high street's custom went...

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
International sales, including the UK, accounted for $9.09bn (£5.7bn) of that pot, putting paid to any rumours that consumers were avoiding Amazon over the tax furore.
 
Amazon has also seen a huge spike in operating income, which is up 56% to hit $405m (£257m), compared with $260m (£165m) in the fourth quarter of 2011.
 
However, net profit has actually shrunk, as the world’s largest retailer’s expansion (building 20 new distribution centres, and Kindle manufacture, in the main) raided Amazon’s pockets, taking net income for the three months to the end of December to $97m (£61.5m), down from $177m for the same period in 2011. That's a pretty miniscule profit margin, around 1%. No wonder bricks and mortar retailers can't compete...
 
As a result, Amazon’s results missed Wall Street’s forecasts by some margin. Even the $21.3bn it made in revenue missed forecasts by about $1bn. Nevertheless, the market’s faith in Amazon remains unshaken and its share price shot up by 10% to $288 (£182) in after-hours trading.
 
Amazon’s success in the last quarter has been boosted by substantial growth in third party selling through its distribution centres. The new(ish) Kindle Fire HD has also proved a money-spinner, and CEO Jeff Bezos has made it clear that Amazon will be focussing on selling even more eBooks over the coming year. After all, they take up no space in Amazon’s warehouse, and use no petrol to deliver, generating almost pure profit for the firm.
 
‘After five years, ebooks is a multibillion dollar category for us and growing fast – up approximately 70% last year,’ he says. ‘In contrast, our physical book sales experienced the lowest December growth rate [in 17 years], up just 5%."
 
Over the past year, Amazon’s share price has shot up by 50% and the firm is sitting on quite the cash pile: some $8bn in total (it raised $3bn in its bond offering just three months ago). This doesn’t help the retailer’s case over the issue of alleged tax avoidance. The French and American governments are currently pursuing Amazon for millions in unpaid taxes, and the UK could follow suit too, if Cameron puts his policy where his mouth is.
 
Indeed, given that disappointing Christmas sales drove music store HMV, camera shop Jessops and the UK arm of video rental chain Blockbuster into administration, Amazon’s £13bn sales windfall does leave a bad taste in the mouth. But then, all’s fair in love and retail…

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today