retail news in context, analysis with attitude

by Kevin Coupe

People may have a recessionary mindset, but that does not seem to be affecting Amazon.com, which yesterday said that its second quarter sales were up 51 percent to $9.91 billion - its strongest quarterly sales growth in a decade.

And while profit dropped eight percent during the quarter to $191 million, analysts didn’t seem to mind; the general feeling seems to be that Amazon is being smart by cutting margins as it looks to grow market share.

The Financial Times assessed the situation this way: “The sales, which beat the most positive Wall Street forecasts, underlined a shift to online shopping that reflects consumers seeking low prices and convenience and the more central role the internet is taking in their lives.”

And the Seattle Times writes that “Wall Street appeared to see the extra expenditures as a sign that Amazon is bullish about the future, despite a sputtering U.S. economy.”

Analyst Colin Sebastian, who follows Amazon for Robert W. Baird & Co. in San Francisco, tells the Times, "If they weren't investing all this money in distribution capacity and technology, they would have more business than they could handle. E-commerce growth in general is very healthy. People are spending more money online."

Beyond the growth in e-commerce sales, it is worth noting that much of Amazon’s growth has come from its Kindle e-reader - a product that was introduced less than four years ago. Last May, Amazon said that it had sold more e-books for Kindle than it had print books during the previous year.

This is a terrific and Eye-Opening lesson for any marketer - that the biggest threat to your business may not exist today. It isn’t on your radar screen, and yet has the potential of being a disruptive influence that could entirely change the competitive landscape.

Remember the end of Return of the Jedi? The Rebel Alliance forces are trying to destroy the new Death Star before its construction is complete, only to find out - almost too late - that it is completely operational.

You gotta do business like the competition is building a Death Star. (Though Jeff Bezos may not be comfortable with being cast as Emperor Palpatine.)
KC's View: