An article published on January 30, 2009 in Wall Street
Journal reported Amazon.com Inc.'s profit rose 9% and sales surged 18% in the fourth quarter as the
Internet giant used its pricing muscle to lure shoppers.
Chief Executive Jeff Bezos's goal of establishing Amazon as the Internet's
biggest store, with aggressive discounting, free shipping offers and a
relentless expansion into new product categories, is paying dividends just as
most retailers are struggling and scaling back.
Mr. Bezos said its not clear how much Amazon stands to benefit from the
closings of traditional retailers. "It is difficult to say what if any
short term impact you might see from that," Mr. Bezos said on a conference
call. "In the long term, fortunately the markets that we operate in are
very large markets and there is room for lots of winners."
The Seattle-based company reported earnings of $225 million, or 52 cents a
share, for the quarter ended Dec. 31, compared with a profit of $207 million,
or 48 cents a share, a year earlier. Revenue reached $6.7 billion.
Amazon Chief Financial Officer Tom Szkutak said discounting during the
"very competitive quarter" hurt the company's gross profit margins,
but "one of the reasons that you see the growth that you do is because of
the value we are providing."
Amazon's prices and convenience have turned people such as 31-year-old
Winchester, Va., resident Jessica Redden into regulars. Over the holidays,
"I was on Amazon every day," says the stay-at-home mother of five,
who spent about $600 on the site over Christmas on items including an iPod and
DVDs. "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," she says,
for products ranging from diapers to toys.
Amazon approached the holidays by offering a wider array of goods, even
though it faces lower profit margins when it expands into new types of
products. Over the last year, Amazon has added stores for digital music,
out-of-print CDs, and even accessories for motorcycles and ATVs.
"Amazon is growing at a good two to three times the pace of everyone
else," says Scot Wingo, Channel Adviser's chief executive.
Overall e-commerce spending declined in the fourth quarter amid the recession,
but Amazon's share of the market rose to about 10% from 6% in 2005, while
eBay's main commerce site declined to 17% from 22% in 2005, according to
Susquehanna Financial Group.
Source: Fowler, Geoffrey A., “Amazon’s Sales Surge, Bucking Retail Slump” Wall Street Journal, January 30, 2009.