albert Chan
Amazon
Sector: E-commerce Countries of operation: Dedicated websites for around 20 countries including Germany, Japan, the UK and the US Key product categories: Apparel, food and general merchandise Annual Metrics [caption id="attachment_150394" align="aligncenter" width="700"]
Fiscal year ends on December 31 of the same calendar year*Trailing 12 months ended on March 31, 2022[/caption] Summary Founded in 1994 and headquartered in Seattle, Washington, Amazon.com is an international e-commerce retailer, marketplace and service provider. The company offers a variety of products and services through its websites and physical stores—including branded merchandise that it purchases for resale, content it produces and private-label products, as well as those sold by third parties on its platforms. The company operates in three segments: North America, International and Amazon Web Services (AWS). Amazon currently operates physical retail stores under four brands: Amazon Go cashierless convenience stores; Amazon Fresh grocery stores (some of which were previously branded “Amazon Go Grocery”); the Whole Foods Market chain; and its latest addition, Amazon Style, a brand of brick-and-mortar clothing stores. The company previously operated physical bookstores (branded “Amazon Books”) and electronics stores (branded “Amazon Pop Up” and “Amazon 4-star”), but announced on March 2, 2022, that these would close. For the first quarter of 2022 (ended March 31, 2022), Amazon had more than 1.63 million full- and part-time employees, excluding contractors and temporary personnel, up 28% year-over-year. For the quarter, the e-commerce giant posted $3.8 billion in losses. Operating income fell for the second consecutive quarter, to $3.7 billion, down 58% year over year. Company Analysis Coresight Research insight: Although Amazon performed strongly throughout the pandemic, questions remain over its sustained profitability and innovation. The upward pressure on labor costs appears to be across the board, from warehouse fulfillment to software engineering, as Amazon spends larger amounts to hire and retain talent from high-demand labor pools. In May 2022, the platform revealed plans to sublease a minimum of 10 million square feet of warehouse space and renegotiate leases for a comparable amount of fulfillment space to trim cost. Nevertheless, labor costs and supply-chain challenges, compounded by inflationary pressures, have been chipping away at the company’s profitability and cash flow since late last year. Such vulnerability has been evident since the last quarter of 2021, when excluding the $12 billion in investment gains from Rivian Automotive, Amazon’s net earnings were $2 billion. Over the past two years, Amazon’s capital expenditure has been focused on infrastructure—with around 40% on AWS and 30% on logistics networks and warehouse fulfillment. The company will taper the 30 percent earmarked for the geographic expansion of fulfilment capacity. To further bolster or supplement e-commerce revenue streams, the company needs to further diversify its operations and has continued to do so with additional investments in four areas: AWS, gaming, online advertising and physical stores. In January 2022, the company launched its first physical fashion store, Amazon Style. However, ongoing cost rises, coupled with disrupted supply chains and inflationary pressures, may undermine profitability and operational cash flow, hampering the company’s innovation and diversification.
| Tailwinds | Headwinds |
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- Expand Amazon Prime benefits to retain and attract subscribers after fee hikes.
- Increase library of available content, either from third parties or produced in house.
- Improve fulfillment productivity to keep up with demand.
- Expand brick-and-mortar retail.
- Forge a strong presence in the healthcare provider space through Amazon Care.
- Acquire online service providers to eliminate competition and support Amazon Prime.
- Expand the company’s product selection and private labels to improve price competitiveness.
- Improve delivery and performance times. The persistent impact of the pandemic delays Amazon’s goal of making one-day shipping the standard for Amazon Prime.
- Increase its brick-and-mortar grocery sales, including at Whole Foods and Amazon Fresh.
- Further bolster advertising services revenues by separating them from other revenues.
Source: Company reports[/caption]
Company Developments
| Date | Development |
| May 23, 2022 | Aims to sublet warehouses to trim cost |
| May 18, 2022 | New York state human rights watchdog accuses Amazon of pregnancy discrimination |
| April 1, 2022 | Workers at its Staten Island warehouse vote to unionize. |
| February 22, 2022 | Files lawsuits against alleged brokers of fake reviews, who it claims orchestrate the posting of incentivized and misleading product reviews. |
| February 16, 2022 | Announces global expansion of AWS local zones. |
| February 4, 2022 | Repurchases its shares for the first time in a decade. |
| July 5, 2021 | Jeff Bezos steps down as CEO, succeeded by AWS CEO Andy Jassy. Bezos remains Chairman of the Board. |
| May 26, 2021 | Announces that founder Jeff Bezos will step down as CEO on July 5, 2021, to be replaced by AWS CEO Andy Jassy. Bezos will retain his position as Chairman of the Board. |
| May 17, 2021 | It is reported that Amazon is in talks to buy MGM movie studios. |
| May 17, 2021 | Announces that its high-quality music streaming service, Amazon Music HD, will be available to all eligible Amazon Music Unlimited subscribers at no extra cost. |
| Mar 18, 2021 | Announces a ten-year agreement with the NFL to get exclusive rights to certain NFL games. |
| March 12, 2021 | Indicates that it plans to expand Amazon Care nationwide. Amazon Care is its telehealth and home-visit healthcare service for Amazon employees and dependents. |
| February 2, 2020 | Announces that Jeff Bezos will transition to the role of Executive Chair and Andy Jassy will take over as CEO beginning in its third quarter of 2021. |
| December 17, 2020 | Launches Amazon Payment Services in the MENA region to provide secure online payment experiences. |
| November 17, 2020 | Introduces an online pharmacy Amazon Pharmacy and a prescription service, PrimeRX. |
| October 15, 2020 | Reports that third-party sales on Prime Day 2020 reached over $3.5 billion. |
| September 28, 2020 | Confirms media rumors that Prime Day 2020 will be held on October 13–14. |
| September 21, 2020 | Announces its next-generation Fire TV Stick, Fire TV Stick Lite, and redesigned user experience. |
| September 18, 2020 | Acquires autonomous vehicles company Zoox. |
| September 15, 2020 | Announces new “luxury stores” shopping experience, selling premium products. |
| June 3, 2020 | Amazon Air expands aircraft fleet. |
| February 26, 2020 | Opens its first Amazon Go grocery store in Seattle, further expanding the online giant’s brick-and-mortar presence. |
| December 4, 2019 | AWS unleashes a flurry of announcements at the 2019 AWS re:Invent Conference. |
| November 26, 2019 | Opens a pop-up store on Chinese e-commerce platform Pinduoduo. |
| August 27, 2019 | Introduces Amazon Halo, a health and wellness brand and membership. |
| December 3, 2019 | AWS and Verizon team up to deliver 5G edge cloud computing. |
| October 8, 2019 | Launches Amazon.sg, offering all customers in Singapore more ways to shop and millions of products to choose from—on desktop and mobile. |
| September 30, 2019 | AWS announces AWS IQ, a marketplace that connects customers with Amazon-certified third-party freelancers for on-demand project work. |
| July 17, 2019 | Announces that Prime Day 2019 surpasses the combined sales of Black Friday and Cyber Monday. |
- Andrew Jassy—President and CEO
- Jeffrey Bezos—Chairman of the Board
- Jeffrey Blackburn—Senior Vice President, Business Development
- Brian Olsavsky—Senior VP, CFO
- David Clark —CEO Worldwide Consumer
Source: Company reports/S&P Capital IQ/Coresight Research