Amazon attracts more customers despite e-commerce decline
Internet retailer Amazon is bucking the trend which has seen e-commerce spending decline for the first time ever, by attracting more customers to its site. The company beat market expectations to increase its revenue by 18% in the fourth quarter of 2008 – despite figures from e-commerce analyst comScore which indicated that online spending in Q4 had seen an unprecedented fall.
Amazon CEO Jeff Bezos said it is using competitive pricing and an expanding range of new services and products to produce the better-than-expected results.
Most of the Q4 revenue increase was accounted for by customers outside the US, with international sales going up by 31%. Although shopping less, overseas customers are spending more of their shrinking budget online.
Amazon’s net income rose to US$0.52 a share on revenue of US$6.7b, compared with analysts’ expectations of US$0.39 a share on US$6.4bn in sales.
Amazon said its newly launched electronic book reader, the Kindle, had been selling well.
In North America, Amazon’s overall sales rose 18%, and across the company’s UK, German, Japanese, French, and Chinese sites, revenues were up 19%.
Amazon now has more than 88 million active accounts worldwide, a 16% increase, and its total number of shoppers was up by 28%.
Amazon said it had used price cuts to attract customers. “It was a very competitive pricing environment,” CFO Tom Szkutak said in a conference call. “One of the reasons you see the growth we provided is because of the pricing.”
However Jeffrey Lindsay, an analyst at Bernstein Research, said the internet retailer had not slashed prices by as much as some analysts had suspected during Q4. He said that Amazon had covered more products with cheap shipping and signed up more people for its Amazon Prime programme that provides free shipping for customers who pay a US$79 annual fee.
Amazon’s results contrast with those of competitor eBay, which saw a 2.5% decline in traffic on its site in Q4 compared to the same period in 2007, according to ComScore (SCOR). Amazon visitors increased 9.8% year on year in Q4.
Some analysts predicted a note of caution on the good news at Amazon, stating that The full impact of the recession on its business might not be felt until later in 2009.