Another month has gone by, and things seem to be returning to normal. Some call it December in April, as the volume of activity and sales on Amazon in the last two months is more than anyone could have imagined. But not everything is rosy – the situation is very complicated for a company of Amazon’s size.
Amazon has published a quarterly performance report, showing a 26.4% growth in income and announcing that it is about to spend all profits on Covid related investments and activities that will allow getting back to normal as fast as possible while maintaining staff safety.
1.Amazon publishes its first-quarter performance report with lots of interesting information. A worthy read:
We are used to seeing Amazon deal with peak seasons. But they are usually predictable occasions like Prime Day, Black Friday, etc. Amazon prepares for these in advance. But there was no way to prepare for the pandemic, so Amazon had to react on the go:
Providing protection and facilitating social distancing for employees
Recruiting 175000 new employees
Stopping nonessential items from entering warehouses and managing supply and demand
And much more
So how did this affect results?
The profit for the stock is slightly lower than expected and amounts to $5.01
Sales grew by 26.4, compared to the first quarter of the last year, and are now at $75.5B
Operating income is down 10% and is now $4B
AMAZON.COM, INC. Supplemental Financial Information and Business Metrics (in millions, except employee data)
You can see the significant growth year by year in AWS, subscriptions – streaming, music, audiobooks, games, and third-party sellers (selling, shipping & storing commissions) and the significant difference between online and physical stores.
Demand may have been high, but the profit on necessary items that Amazon prioritized due to the situation is not necessarily large. This caused higher stock costs than usual, while fulfillment costs were significantly higher than net sales. The highest ratio Amazon had in the last three years.
In the previous quarter, Amazon invested more than 600M in pandemic-related activities: employee protection, testing, etc, and they plan to invest more in the next quarter for staff and warehouses to return to full action.
Amazon is planning to spend all the profits in Q1 and Q2 to meet expectations and return to complete activity.
2. Changes for sellers
According to Amazon’s financial reports, more than half of the products sold during this period were from third-party sellers. Despite that there were a few changes in the last month and a half that made it difficult for sellers to function:
–Price Gouging by a significant number of sellers who took advantage of the situation and inflated prices. Amazon began automatically flagging and suspending suspiciously costly items. This actually happened to me, and my client’s items were flagged. We had to reduce fair prices that were not changed for the pandemic and were priced identically on Amazon and other websites. It was an incredibly frustrating situation, and customer service could do little to help.
-Activating a new video call service for third-party sellers to ascertain their identity and reduce fraud cases.
-Starting June 5th, Amazon will suspend its Shipping services from delivering items sold on Amazon directly from the seller to customer.
3. Changes on the platform due to the situation:
Several things that stand out primarily because of Amazon’s usual ability to use every event or date to encourage sales and increase the size of the basket:
-Almost no advertising surrounding mother’s day (May 10th). There was a lot of activity around this date with a catalog of gifts and an extensive campaign in previous years.
-Removing Upselling from the platform. The famous “Customer Who bought this item also bought..” is absent from most products.
-” Delivery temporarily sold out” on Amazon Fresh Market
4. Amazon slashes commissions on its Affiliates program.
Starting April 21st, Amazon has reduced commissions for several categories of the Affiliates program. For example, Home Improvements was reduced from 8% to 3%, and Grocery from 5% to 1%. The affiliation program provides income for many businesses and influencers. The reduction in commission caused a lot of discontent online.
5. Prime Day 2020 has been delayed till at least August due to the pandemic. This is a key sales day for Amazon. The delay will affect Hardware sales and it is estimated Amazon will remain with an inventory of 5m devices and lose 100m from the delay.
6. Amazon UK launches Ultra-fast grocery delivery, which connects the grocery delivery program Amazon Fresh with the world’s largest customer club – Amazon Prime.
The service aims to provide 40% of UK homes with delivery in under 3 hours until the end of this year.
7. Alexa – Do I have Covid?
If you own an Alexa device, you can try asking if you have Covid, and it will guide you to check symptoms to find out whether you are sick or not.
Thank you to everyone who made it this far and Thanks Edge by Ascential for publishing the most interesting things about Amazon for each month.
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