Black Ink Continues to Elude Amazon

25 July 2002

Despite a twenty-one percent leap in sales, the planet’s largest etailer has yet to discover its (profit) source.

Unveiling its second quarter results early Wednesday, the Seattle-headquartered online retailer reported a loss of $94 million (€94.76m; £59.99m) or 25 cents a share – a substantial improvement on the same period in 2001 when the shortfall was $168m (47 cents a share).

On a proforma basis, excluding various costs, the result narrowed to a net loss of just $4m (one cent a share) equating to a $26m operating profit. While by US GAAP (generally accepted accounting practice) criteria, operating profit equated to $1 million.

Operating efficiency has been improved by cost-cutting: laying off over one thousand staff and shuttering distribution centres. Amazon has also achieved success with its new discount strategy, cutting prices on books above $15 and offering free shipping on orders above a certain value.

Other factors contributing to the move toward black ink are retail partnerships with the like of Toys R Us, Circuit City and Target; also its own burgeoning Marketplace section which enables individuals and small businesses to trade used goods.

The fastest sales growth – plus 70% to $218m – came from Amazon’s overseas units in the UK, Germany, France and Japan.

Data sourced from: Financial Times; additional content by WARC staff