retail news in context, analysis with attitude

Amazon yesterday reported a 25 percent increase in retail sales during its second quarter, to $38 billion, even as it also reported a 77 percent decline in Q2 income - a disparity that appeared to illustrate that even as it remains enormously attractive and accessible to consumers, it is willing to spend significant amounts of money in order to maintain a competitive advantage and grow its ecosystem.

Reuters reports that "investing in faster shipping and video has become a refrain of sorts for the company. While some expected Amazon's spending in these areas - stepped up since last year - to ease, the company is plowing ahead to reinforce its fast-shipping club Prime."

Indeed, "Subscription sales including Prime fees rose 51 percent in the second quarter to $2.2 billion," Reuters writes. There are estimates, the story says, "that more than 50 percent of U.S. households will have Prime membership by the end of 2017."

Net income was $197 million in the second quarter, compared with net income of $857 million.

Founder/CEO Jeff Bezos characterized the company's investment approach this way:

"Our teams remain heads-down and focused on customers. In the last few months, we launched Echo Show (our newest Echo device with a video screen), introduced calling and messaging via Alexa on all Echo devices, debuted Inside Edge on Prime Video (the first of 18 Indian Original Series), introduced Amazon Channels in both the U.K. and Germany, launched four new Fire tablets, expanded Amazon Fresh to Germany, launched Prime Now in Singapore, launched our 25th airplane with Prime Air, hired more than 30,000 new employees, opened three new Amazon Books stores, launched more than 400 significant AWS features and services, migrated more than 7,000 databases using AWS Database Migration Service, and held our third annual Prime Day -- signing up more Prime members than ever before. It's energizing to invent on behalf of customers, and we continue to see many high-quality opportunities to invest."
KC's View:
Make no mistake, there is a coterie of investors and analysts that thinks that it is crazy that as Amazon continues to grow it is not able to realize some efficiencies of scale that allow it to reduce costs, or at least reduce the growth rate of costs.

To be clear, Amazon is nothing if not consistent. Bezos always has said that if you want short-term returns, invest your money someplace else ... because Amazon intends to continue investing its money in all the things it believe sit needs to do in order to maintain a competitive e-advantage. In my view, that's never been as true as it is now ... Walmart/Jet would just love it if Amazon eased up on the gas a bit. But that's not gonna happen.

It was funny to see a Variety story yesterday about how "Amazon is moving into self-distributing its own movies, putting it on the path to becoming a full-fledged film studio." It is, the story said, both the producing studio and distributor behind Wonder Wheel, the new Woody Allen movie coming out in December; while it has bought and produced movies in the past, such as Manchester by the Sea, in the past it always has used outside distributing companies to get the movies into theaters.

I'm not entirely sure why Amazon needs to get into this end of the movie business, except that it probably wants to control as much of the process and the customer experience as it can. That costs money. Not a ton, in this case, but money. But that's what companies do if they have ambitions like Amazon's.