Known more for a drive to build market share than to maximize profits, Amazon may now be signalling a shift in focus. Laura Stevens writes at The Wall Street Journal:
Amazon’s stronger margins likely reflect more discipline in spending and fewer promotions at the expense of profit, as well as a larger percentage of sales stemming from its third-party sellers, analysts said. Those sales are nearly pure profit margin because Amazon doesn’t have to buy and hold the product itself. It also gets paid for items that sellers ship in for Amazon to fulfill.
Amazon often has bucked retail trends by dominating online sales. It commanded an estimated 42% of total holiday online spending growth last year, according to Slice Intelligence, which analyzes customer receipts. Apple Inc. was second, accounting for 5% of holiday e-commerce growth.
Growth and investments have been Amazon’s priorities since it was a startup. In his first letter to shareholders in 1997, Chief Executive Jeff Bezos declared that his strategy for creating shareholder value prioritized customer and revenue growth “because we believe that scale is central to achieving the potential of our business model.”
But the Amazon’s streak of seven profitable quarters—with a big jump in the most recent period— may come under pressure as the company enters a heavier period of investment.
Last month, Amazon pledged to create 100,000 full-time jobs in the U.S. by mid-2018—a tip of the hat to President Donald Trump’s employment drive. That would require building many more warehouses, some of which have been planned or announced.
Moreover, the retail giant has started laying the groundwork for its own shipping business to add more delivery capacity for the holidays, with the grander ambition of one day hauling and delivering packages for itself, other retailers and consumers, according to people familiar with the matter.
Read more here.
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