Amazon More Than Doubles Quarterly Profits

Amazon

We are going to need some new terminology for dominance in a business sector. Amazon, already the undisputed king of E-commerce, now commands 43 cents of every dollar spent online.

Wall Street Journal:

The online retailer on Thursday surprised investors by more than doubling its quarterly profit to $1.6 billion—just under its record of $1.9 billion from the holiday quarter—as revenue surged about 43%.
The revenue growth was Amazon’s best mark since the third quarter of 2011, pushing the total to about $51 billion. The company credited the better-than-expected results to its highflying cloud-services division and strong growth in the company’s burgeoning advertising business.
Amazon’s swelling profitability doesn’t appear to be an anomaly—it expects operating income to more than double to as high as $1.9 billion in the second quarter—though Chief Financial Officer Brian Olsavsky cautioned he may not always have such good news.
“We certainly will always have periods of higher investment, and through the year we expect investments to increase, particularly video content spend…and we’ll continue to hire,” Mr. Olsavsky said.

With other tech giants under increasing regulatory scrutiny, most notably Facebook founder Mark Zuckerberg’s recent two-day testifying saga before Congress, many speculate what attention law makers might turn towards the retail behemoth.

Those moves highlight Amazon’s rapid ascent from its roots as an online bookseller to a modern-day conglomerate that offers a competitive line of tablets and voice-activated devices, runs a dominant cloud-services business and sells groceries from the neighborhood store. As it expands into new business areas globally and furthers its reach into consumers’ lives—from its Hollywood studios to its recent experimentation into health care and financial services—it is drawing questions about its growing clout.

Most visibly, President Donald Trump in recent weeks lashed out at Amazon’s business practices and economic impact, raising questions whether his comments will spur lawmakers to take a harsher look at Amazon’s dominance. Other tech giants, including Alphabet and Facebook, are facing regulatory scrutiny over their companies’ vast reach and access to personal data.

Still, policy experts say that targeting Amazon on anticompetition grounds would be difficult, requiring overturning principles that have guided regulation for decades.

In the meantime, Amazon shows no signs of slowing down.

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46 thoughts on “Amazon More Than Doubles Quarterly Profits

  1. I say Amazon should probably take a hard look at it’s warehouse practices, and maybe sink some of those profits into, you know, letting the workers have enough time to take a leak.

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    • Oh yes. I could not agree more.

      I’m actually hoping that now that their profits are booming so much and so regularly, they’ll start falling under more Walmart-level scrutiny. (Walmart seems to have actually improved, in many ways probably not all it should, under said scrutiny.) I felt like for a long time Amazon was just flying under most people’s radar because internet, or something. (Despite the amazing reporting being done on the topic.) Hopefully that will change.

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      • Wal-Mart is dying. I will get around to writing up a long post on it (I’m a transport/logistics guy by trade so I assume people may not be interested in such things like I am) at some point but their logistics system that made them the behemoth they are now, is now the same things that is strangling them to death without any way to fix it, far more than just E-commerce eating into their sales.

        Having said that, it is interesting that the language and criticisms of Amazon seem to be coming from the exact same playbook used against Wal-Mart, almost verbatim.

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        • Well it’s the exact same problem with being willing to mistreat their (non-IT) workers in the exact same ways, so it’s not surprising that the playbook would be similar now that people have gotten around to noticing it.

          I’d think at least some of the environmental arguments differ, but I honestly don’t pay as much attention to those.

          Personally I’ve been creaking away at the employee-mistreatment similarity for years, so it’s kind of nice to see people other than myself taking it up.

          And I’d like to read that post because it’s an area I don’t know a lot about (besides having minimum humane expectations), I know there are other transport/logistics folks from different areas of the biz who read this site so they’d probably be interested from opposite angles than I am.

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          • There a point I will make when it comes to Wal-Mart/Amazon and the narrative that was on the first and is now being applied to the later. And Lets stipulate any mistreatment of any worker should be dealt with swiftly. (Full disclosure, I briefly worked at Wal-Mart in 99-2000 a job I enjoyed so much I joined the military to get out of there, and I’ve peripherally been involved, and at one point interviewed with, Amazon in 2013 when they were doing some mass logistical hiring. I turned the offer down due to not wanting to move and live where the employment would have been. FWIW)

            Now that we got that out of the way. Wal-Mart and Amazon share two core sins to some folks that make them a target: They are nearly monopolizing their sectors with immense profits, and they are non-union employers. Where you fall on those two issues usually affects your view of the overall company. So the biggest companies also become the touchpoints for a lot of issues, like income disparity (CEO to worker pay, etc) workers rights, collective bargaining, union vs non-union, employee healthcare, the list goes on and on. So all the advocates for all those issues naturally turn their attention to the biggest target. If you are a union advocate, every instance of worker mistreatment will get attention at the non-union company. If you are advocating for income equality, CEO to average salary ratio gets highlighted. And so on. Saying all that, drag Amazon, Wal-Mart, and anyone else who mistreats their workers, and prosecute them where applicable if they violate OSHA and other regulations and rightly so. But we should also be discerning in when some have an agenda to promote. Warehouse work, which I’ve done at a high paced level, is never easy; its hard, hard work at a fast pace with deadlines and pressure. The workers should be compensated accordingly and given as safe as possible an environment to do so in. But it can always be described as various shades of “unfair” and unpleasant cause it is.

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            • FWIW my objections mostly have to do with lower-level “managers” making almost no money and with no real power or job security being pressured and threatened into misdoings that the company tries to deny, in order for the company to have their cake and eat it too.

              And based on both news reporting and stories I’ve heard one on one.

              So it’s more personal tilting at windmills than anything – having spent most of my life as a lower-level manager who has at times been pressured in those ways, at times not, I don’t see it as a union or non-union problem… at least not mostly. I’ve never worked union in this country, but the person who put the most pressure on me to misbehave in order to cover her own misdeeds was from a union background. (And the people currently up my chain of command, who would never DREAM of this, are mostly non-union background.)

              I concede that the level of coverage may well have to do with the union vs. non-union thing (and I know I am not only pro-union, though not rabidly so, but 2nd generation in that my parents were both union officers)… but part of that may be that the perceived injustice is greater to an outsider if they don’t feel like the employees have a clear path to recourse (pursuing justice, legal or otherwise, is not at all easy in non-union settings, as I also have reason to know). I’m not sure employees have a much clearer path to recourse in many union settings – I think it often just looks that way – but as I said, never worked union in this country, so I’m mostly speculating there based on Canadian and/or secondhand info.

              Honestly I think it has more to do with size than anything. I mean, I can rant about Amazon or Walmart and it’s non-obvious who my personal sources are. Were I to rant about some 20 person company in my town, I’d probably get someone in trouble who doesn’t deserve it…

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              • Comments was invented for windmill tilting, so tilt away. I have been accused of being anti-union but I am not, I am anti what many unions in America have become, but that is another topic for another day.

                Your statement here has real validity:

                FWIW my objections mostly have to do with lower-level “managers” making almost no money and with no real power or job security are pressured and threatened into misdoings that the company tries to deny, in order for the company to have their cake and eat it too”.

                Especially in a larger company, lower level manager is an awful place to be in. There is of course something to be said for starting out and working your way up, but it is a legitimate criticism that too often they are rode to death (mostly figuratively) for the convience and
                cost effectiveness of a company. My first civilian job after the service is a perfect example: I took it knowing it was poor situation but needed to start somewhere (I was there relatively briefly until a much better job came along which I took) but as a salaried manager at a national company, I was making less money than the most of the 200+ people I was supervising, and the more senior guys made almost twice as much. Incredibly high pace at that job, as the new guy working weekends and odd hours as need, and constant pressure to perform. This is not a complaint, frankly I’m one of those twisted people that thrive in a pressure environment, and while not enjoyable I leveraged it into a much better job at one of the larger transportation companies in short order. To your point, its easy to see how such an situation can be leveraged and abused for wrongdoing, especially with a young or straight out of college kid that isn’t savy to the darker parts of business to avoid.

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              • The harsh truth is the market prefers Amazon to book stores. Amazon didn’t make anyone not go to a bookstore, they offered an alternative and the bookstores did not adjust. Those that did are still around offering things Amazon cannot, thus people still go. Like we discussed with record stores last weekend, those that adapt are still here. Are we going to blame ITunes for killing CD’s? Long-distance calling used to be big business in this country. Remember when webpage design was going to be the next big thing in careers? Things change. It is misplaced to blame Amazon for closing businesses. And there is another thing to consider with Amazon; A lot of small business get a lot of reach working through Amazon. And since we started with bookstores, a lot of authors have direct access to the market and even self-publish under the Amazon umbrella of products.

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                • There are still enough webdevs making 6 figures that I’m not sure “Remember when webpage design was going to be the next big thing in careers? ” actually refers to something that was *wrong*, exactly. It just …. didn’t turn out quite how people envisioned. (Most of the high end content designers and somehow-related-to-a-website-somewhere coders I know, not all, actually got their start as teen webpage designers, as did a non-zero amount of librarians and other information professionals…. which is consonant with your ‘adapt’ point, of course.)

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                    • These are just a few of the people I’m thinking of, but my 3rd on-the-books job, in… *counts on fingers* summer of 1996 was as a “Community Connection Facilitator” which involved a fair amount of “you, you there, read a book and start making webpages for tiny companies in our community” (and was gov’t sponsored, b/c Canada, where socialism means supporting small business by hiring teenagers to work for 3rd parties who work for communities, and then having the federal government do the training and write the paychecks …) – among other things like teaching 3rd graders how the internet worked.

                      It was a fun job. It’s really quite amusing to me that almost everyone I know who had that job went on to really love their grown up job; some of them founded internet design startups around 1999/2000 that are still going concerns today, some of them have 4 different jobs at once, at least 3/4 of which they find very satisfying, some of them are like me with low pay but intangible benefits out the wazoo, etc. It was a good gang of people. And I think the amount of day-to-day autonomy we were afforded, for a bunch of 16-20 year olds, was really quite astounding. If anything had to do with the excellent outcomes of the group as a whole, I’d pin the autonomy in first place (though perhaps being the sort of person who was jazzed about teaching 3rd graders one day and sitting alone in a room all day handcoding HTML the next also had something to do with it).

                      I wonder sometimes who that cohort of people is now, the ones with a bright shiny job that will end up doing all kinds of other things that are related but are pretty different in 20 years. App designers? Community organizers? I have no clue…. which is a bit odd considering I supervise people in that age group every day… but my kids all go be lawyers and filmmakers and school directors and things, they’re not so much scrambling for employment the way people my age were when I was in college…

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                      • Similar conversations I submit gamers. A lot of tech people today started their passion for tech from gaming. They are having summer classes at the community colleges for various ages that sell out on game design. Many wont make a living at it, but coding, graphic design, even writing such as story line, there is so much involved it can easily sprout to many areas.

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                        • Yeah, maybe? I find that one a hard one to seize on, not so much because I disagree, because you could easily argue it about people my age too…. (I’m 41). I mean, I was a gamer before I was a web page maker. Something a lot (but not all) of the people I know who were web page designers were as well.

                          I’m wondering what the thing is I don’t see, if that makes any sense. The “whoa! who knew!!”

                          I’d say from 10 years ago, that cohort of people would, in my mind, actually be “people in other countries that HP and other companies outsourced jobs to…” but not so much today. (As an aside I would’ve thought I would’ve thought of that. But no, I didn’t, at the time, though I should’ve.)

                          Maybe the VR-coding kids? That’s about to blow up…. (though my opinions about that might be influenced by the 30-some squealing elementary school kids trying out our VR rig here at work right now).

                          Hmn.

                          (I guess to me “gamers” are a perennial source of creative, adaptive people, dating back to before there even were computers…. rather than a flash in the pan employment that then became rootstock for other things…. but I might be a bit biased pro-gaming :D.)

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                  • And to be clear, I far prefer a physical, in my hand book to electronic. Part of it is when I’m reading for content, especially in an academic setting, I just read way to fast electronically. I don’t know if its just me or the brain knows its different and runs at a different speed, but I don’t retain and comprehend nearly as well on electronic mediums.

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          • I’ll ask you then, is it worth writing up the rise and fall of Wal-Mart? Not original, many people have done it. The Wal-Mart logistical model was literally the one in the textbooks taking transportation management courses. But now it is an infrastructure that is built exactly opposite to what they need, and is tying their hands behind their back when they need to be able to fight the Amazons of the world. I wonder the wider appeal of it beyond boxkickers and loggies? And I welcome any conversation, anytime.

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            • Realize you aren’t asking me, but just a note on originality in general: it’s been done, but not *from your perspective*. Few things are new under the sun, but people’s views on things from where they actually sit are usually fairly much their own, and thus interesting.

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            • I definitely think it’s an interesting conversation. EVERYONE understands WalMart and Amazon and we’re in the midst of a hugh economic shift in the United States. I will say though, I think WalMart is making some smart moves by shifting to eFulfillment and also with some of their product offerings. Too little too late? I don’t know. My company is trying to grab our share of eFulfillent as well.

              I will also say, we are bleeding employees off to Amazon, but we hear the same stories that they treat their workers terribly.

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              • Their eFilfillment plans is what I was referring to their logistics being set up all wrong, but we can get into the weeds on the details of backhaul, linehaul, empty trailers and such quickly there.

                The bleeding is real. And not just managers, Wal-Mart for decades was the standard in Drivers, it was very hard to get in and they took a lot of pride in having the best fleet guys. And they are losing that group through retirements, attrition, and many are not liking the current direction. You cant replace a 1,2, or 3 million mile driver and maintain that safety and performance record.

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        • I’m a real estate/finance/healthcare/capital markets person that would like to see more substantive business-related stuff as opposed to the “private equity killed Toys R Us” garbage that pollutes my feed whenever the political sphere attempts to understand my world.

          Fire away.

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        • Out of curiosity, what aspects of logistics do you work in? I did inside logistics for a big box dc (cutting trailers, load counts, etc.) then, when I needed sun, dispatching to Trans. manager for point to point specialized couriers, ending my career in the field as an account manager specializing in pharm. distribution. Got hit really hard when the economy crashed.

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        • Great. So Wal-mart hollows out small towns, then leaves, and the locals are left scrambling for things if they don’t want to go the e-commerce route.

          I figured something was up with wal-mart. The local one here (the only large supermarket) has had chronic restocking issues for a couple years – shelves will be empty of some things, or reduced to one or two box-damaged examples, for weeks on end. Also the local one seems to have stopped its practice of “randomly move departments around every six months to keep the rubes hunting for stuff in the hopes they find more stuff to buy” and I assume that’s because they can’t get or keep enough employees.

          Ah well. I guess we shoulda known it was a scorpion when we picked it up. It just sucks for people like me who live in small towns where some things will now either be an hour’s drive away or “order it off Amazon and hope it comes in time”

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            • In my area, Wal-mart had a couple of those “neighborhood market” things they brought into small towns, and then some months later, closed. In one of the towns the only other remaining grocery shut down shortly after the wal-mart branded place opened.

              It sucked for the people in that town, some were stuck driving a half-hour for more than what the dollar stores sell. (I have other issues with the dollar stores….)

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              • The same thing occurred here, and what upset people was the rural ones (Wal-Mart Expresses that have been ditched in favor of Neighborhood Markets) that were 30-45 minutes out of town where closed and they build new Neighborhood Markets in denser areas in town, in some cases very close to supercenters. Near my house we have a Neighborhood Market and a Supercenter within a few minutes of each other. They tried to permit a third store, (2nd Neighborhood Market) in the same area and they were denied on zoning grounds.
                So why are they doing that, especially where it seems to be redundant to store overlap? They have too.

                And it’s a signal that the company is taking on a more unified effort to win with grocery-store customers, as shoppers increasingly find newer destinations for food shopping, including the fast-growing dollar store category, as well as more plentiful online options.
                Dollar General, for example, has more than 12,000 stores with a small-store footprint that would be very difficult for Wal-Mart to replicate, points out Morningstar in a report analyzing Wal-Mart’s latest move. The closures will allow the Bentonville, Arkansas-based chain to put more resources into its e-commerce efforts, “especially on SKUs that the firm doesn’t sell in stores,” it says in its report.
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                “We continue to think that Wal-Mart’s small-format growth will be focused on 30,000- to 40,000-square-foot Neighborhood Market stores that offer a full assortment of groceries and pharmacy products,” the report says. “Growth of this format will allow Wal-Mart to better address competition from traditional grocers such as Kroger, Publix, Ahold, and Delhaize, which have been out-comping Wal-Mart in grocery for some time.”

                In that same area we are talking about there are 2 dollar generals, 2 family dollars, and more planned, plus several grocery stores. Their long term plan is to push back in the grocery sector seperatly form the Supercenters but also try to stem their customer bleed in household and low cost goods to the dollar stores. They are going to push the relatively profitable Neighborhod Markets, and start re-tooling the Supercenters into bulk shopping destinations and E-commerce pickup centers. IMO the first stragey will probably work ok, the second will be a disaster.

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                • Yeah, we have like five of the various dollar chains. I figured it was a feature of us being a lower SES area but it might be their strategy, too.

                  I have a dislike of dollar stores; my experience is you go to them needing one particular thing and they happen not to have that thing. Friends of mine who are not “focus shoppers” tend to love them because they can go and find random cheap crap. I don’t want random cheap crap, I want the specific things I NEED.

                  Also the local-to-me wal-mart has been phasing out national brands in favor of their own house brands, which makes me suspect they’re in trouble. Or that their consumers are. The wal-mart house brands are cheaper but the quality is so variable (a few things are good, a lot of things are not) that I’m leery to try them for anything new.

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                  • The switch to their in-house brands is directly relates to the logistical issues we were talking about earlier in the thread. Wal-Marts entire business model, or at least always has been, was making profit off inventory cost controls. The “money is in the margins” is the old adage on this stuff. To point here is a story that focuses on Grocery but applies in general. Wal-Mart is going to inhouse brands because the Lidl/Aldi’s of the world sell inhouse/discount exclusively and are eating them up. The theory is name-brands are more popular online, so the “margin” to make a profit in store is decreasing, thus the move to own brand. Plus they can control the acquititon process for their logistics and distribution better when they arent negotiating against anyone.

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  2. One more vote for a ‘why Walmart is doomed’ piece, as I perceive that take is against the conventional wisdom (and while the share price has taken a hit since a sell off near the beginning of the calendar year, it’s been more or less stable since then.

    (And as Sears has shown, even if doomed, it may take a half a century or more to become the walking retail dead)

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