Online retailer Amazon recently released impressive financial statements for the first quarter of 2016. Amazon posted a net income of $513 million on a revenue of $29.1 billion, which increased by 28%. Amazon is currently showing amazing strength it its sales and profitability, the best in the past four years.
The core retail business operations of Amazon in North America are expanding at double the pace of the growth of the entire US e-commerce industry. A question that buzzes a lot is whether there is something that can slow down this company. There are five possible things that can impede Amazon’s growth.
First is alleviation in the expansion of its Prime $99 membership program, which is currently the most significant feature in the company’s basket. The frequency and amount spent by Prime members is much more that non-Prime members. Amazon has now added an option to pay monthly for this membership in an effort to attract new demographic groups. In 2015, the total number of paid members increased by staggering 51%.
Second factor can be the possibility of Amazon failing in India, though it is giving a tough competition to the nine-year-old Flipkart for the top position.
Amazon underperformed in China, the biggest market in Asia. If Amazon has to succeed globally, it has to conquer India and China, which in fact will not be quiet easy due to federal restrictions.
Amazon’s cloud computing unit, AWS has previously faced strict pricing rivalry from competitors and the soon-to-be $10 billion business might have to face it again.
The fourth factor is Apple, Google and Microsoft all trying to foray into the AI-powered personal assistant technology that was first introduced by Amazon in the form of Alexa that was accessible on the Amazon Echo.
The last factor is the not-so-friendly working environment of the company, with several news regarding the collapsing and deaths of warehouse workers as well reports about some of Amazon workers in distress.
“Amazon finally put its critics to flight with a 28% growth in revenues in its first quarter of 2016. Revenues totaled $29.1 billion, compared to $22.7 billion in the same quarter the year before, according to Amazon’s CFO Brian Olsavsky, who released the company’s first quarter earnings report on April 28,” according to a news report published by Informationweek.
In addition, Olsavsky said Amazon’s effort to create Prime customers, who get free delivery and other privileges for $99 a year, was picking up steam overseas. “We’re adding Prime subscribers at a high clip,” he commented to May during the call. International subscribers, in particular, are now signing up at a faster rate, he said.
According to a report in Recode by Jason Del Rey, “Amazon is on its longest profitability streak in four years. And it’s doing so while its core retail business in North America is still growing more than twice as fast as the U.S. e-commerce industry on the whole. Translation: It is eating up a ton of market share and increasingly looking pretty much unstoppable along the way.”
Amazon only launched in India in 2013, but it is already challenging homegrown competitor Flipkart, which is nine years old, as the top destination for online shopping. Jeff Bezos has promised to invest billions into the company’s operations in India to make sure it succeeds in what will someday be one of the world’s biggest e-commerce markets.
A report published in Thestar informed, “Amazon.com Inc’s shares jumped in early trading on April 29, a day after the company reported profit and revenue that swept away analysts’ estimates along with doubts about the online retailer’s investment spree.”
“While it’s tempting to try to pull out each component of AMZN’s strong 1Q (and generally recent) performance, we think it’s the combination of many factors – the ‘AMZN Flywheel’, Prime, a growing distribution footprint, getting closer to customers, 3P (third party), AWS . the list goes on.”