Amazon’s Big Holiday Season

Amazon may be moving from being the biggest ecommerce pony in the yard to becoming a retail stallion. In what can only be described as one of the most challenging holiday retail environments in memory, they not only reported an increase in revenues but an increase in profits as well.

According to a New York Times article, “Profit Rises at Amazon as Shoppers Seek Deals,” Amazon’s net profit rose 9% while their revenue climbed 18%. Their sales growth in non-book and non-music items was even more dramatic. Again, according to the New York Times, “…the sales of electronics and general merchandise in the fourth quarter grew to $2.89 billion, a 31 percent increase over a year earlier. The sale of media items grew just 9 percent in the same period.” That general merchandise category includes toys. 

In conjecturing on why the company performed so well, the article pointed to sales of “Kindle,” the electronic book reader, as well as people using the internet to find bargains. While I believe the former makes sense in terms of shoppers continuing fascination with gadgets, I am not sure the latter is the reason. If that was the case other ecommerce providers would have grown similarly and they did not.

I think Amazon has been able to do what Wal-Mart has done and that is speak to people’s desire to turn shopping from time taking entertainment to time saving functionality. In other words, when times are good, bricks and mortar shopping is everything from an adventure to just plain fun as shoppers delight in the joy of the time consuming hunt. When times are bad, bricks and mortar shopping becomes anxiety driven as shoppers want to get in and out of stores as fast as possible while focusing only what is on their shopping list.

As we move through these tumultuous times, it will be interesting to see who the new major players are going to be. Amazon may be the next real thing.