Amazon tightens grip on e-retail market place

Amazon

Amazon appears to be confirming the strength of its business in e-retailing. The headline numbers in the latest results released on 1st February show that for the fourth quarter Amazon.com Inc saw net sales increase by 14% to US$170 bn compared with $149.2 bn in fourth quarter 2022. This represents an underlying year-on-year increase of 13% after foreign exchange fluctuations. The ‘International’ business, which had sales of $40.2bn over the quarter, increased at the same underlying rate as the North American business. The key AWS web-services business also increased sales by 13% to $24.2bn.

Profits were a different matter. In ‘North America’, operating income hit $6.5bn from a loss of $0.2bn in the fourth quarter of 2022. The ‘International’ business was still loss-making, being negative by $0.4bn. However, its losses moderated from the $2.2bn seen in same period of 2022. As usual it was the AWS business that made the serious money, with operating profits of $7.2m, up from $5,2bn in the fourth quarter 2022.

For the full year, net sales increased 12% to $574.8 bn in 2023 whilst operating income increased to $36.9 billion in 2023, compared with $12.2 billion in 2022. What has delivered the improvement in financial performance is the ability to reverse the losses at both the e-retail operations.

From a logistics perspective, Amazon asserts that what has made the most difference over the past year is the deployment of their localised fulfilment network. Andy Jassy CEO of Amazon referred to the improved profits almost in passing, saying that “while we made meaningful revenue, operating income, and free cash flow progress, what we’re most pleased with is the continued invention and customer experience improvements across our businesses”. Rather, it was the “regionalization of our U.S. fulfilment network led to our fastest-ever delivery speeds for Prime members while also lowering our cost to serve” that he said was leading to growth in the business.

It is that increase in sales which is possibly the most important aspect of these results for the year. Amazon’s internet retail volumes grew, and grew profitably, in an environment where internet retailing volumes elsewhere suffered. This suggests that Amazon has tightened its grip on the e-retail market place.

Author: Thomas Cullen

Source: Ti Insight


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