retail news in context, analysis with attitude

The New York Times this morning reports that Amazon yesterday announced greater than expected losses for the third quarter, and suggested that the fourth quarter is also going to have its problems.

Or, as the New York Times put it, "The chickens are not coming home to roost at Amazon just yet, but they are checking the flight schedule to Seattle."

Amazon said that its Q3 net loss was $437 million, compared to a $41 million loss during the same period a year ago. Net sales for the period were actually up 20 percent, to $20.58 billion from $17.09 billion a year ago, though they were not up as much as analysts expected.

Forbes writes that "in its so-called 'investment mode,' Amazon has created television set-top streaming boxes, invested $100 million in original online video programing last quarter and launched its first smartphone, which has been a flop. The company announced during its presentation that it took a $170 million write-down “primarily related to Fire Phone inventory valuation and supplier commitment costs.” The Fire Phone, which was announced in the spring has been hampered by weak sales, forcing the company to slash prices from $199 to 99 cents with a two-year contract with AT&T."

And, the story goes on, "As the online retailer entered the holiday quarter, it also forecasted weaker-than-expected net sales to be between $27.3 billion and $30.3 billion. That represents between 7% to 18% growth over the fourth quarter of 2013 and is below the average estimate of $30.89 billion from analysts polled by Yahoo. The Bezos-led company also said that is expected an operating loss of $430 million to $570 million next quarter, compared to a loss of $510 million in the last three months of 2013."

The New York Times reported it this way:

"Amazon’s story for several years has been that it is growing furiously, investing heavily and postponing profits until the halcyon days just around the corner when it will sell all things to all people all the time. That took the company stock on a wild ride, pushing it up to $400 a share early this year.

"But Wall Street has been questioning those assumptions in recent months, and those questions forcefully surfaced again after the earnings report. The stock fell 10.7 percent to $279.75, shaving about $15 billion off the company’s valuation. The results also indicated that the company’s take-no-prisoners attitude toward its suppliers might be catching up with it."

The Times goes on to report that "Amazon’s chief financial officer, Thomas J. Szkutak, said in a conference call with analysts after the earnings were released that a shift to renting textbooks rather than buying them and a strong 2013 quarter were responsible for the drop."

But one analyst was less sanguine: “This was a violent deceleration in growth,” he said.
KC's View:
First of all, let's be clear about something. Amazon's sales grew 20 percent in the third quarter, and are expected to grow seven percent in the fourth.

Is there any retailer - any retailer - that would not be willing to sign up for that right now?
I have been and continue to be a believer that Amazon needs to continue investing in new technologies if it is going to remain in front of its competitors, but it seems sort of clear to me that to some degree, things are coming off the rails. Fire Phone, for example - there never was in my mind a clear rationale established for why consumers needed this phone to exist. (It wasn't like the phone was meeting a need we didn't know we had. We just didn't have the need.) The Hachette controversy is just indicative of a larger problem that Amazon is beginning to have with suppliers, which is affecting product availability on Subscribe and Save, which is one of the company's strongest programs.

Hubris at the top? Probably. Fixable? Certainly.

Hey, even Steve Jobs at Apple went off the rails once. Jeff Bezos is one of the smartest guys on the planet, but somehow he seems to have forgotten the mantra about Amazon existing to make it easier for people to buy stuff. Or maybe, unavoidably, it's been lost in the crush of new projects, initiatives and plans.

I'm not worried about Amazon. It isn't going away anytime soon.

But maybe they ought to start listening to customers a little bit more. That'd be a good start.

Back in the late nineties, because I was an early adopter, Amazon actually sent me a coffee mug with its logo on it, as a way of saying "thank you" for being a customer. I'm not saying they need to send out more coffee cups, but maybe they need to find a little but of that old humility.

Just a thought.