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Publication Date: August 03, 2015
On January 28, 2016, Amazon announced record 2015 operating profits of $2.2 billion on $107 billion of sales, and the markets responded with cautious optimism. For years, founder and CEO Jeffrey Bezos had prioritized growth and investment in new business areas over profits, but pressure from analysts was mounting as growth was slowing and profits were failing to materialize. In 2014, Amazon had recorded a net loss of $241 million on revenues of $89 billion, in stark contrast to China’s leading Internet player Alibaba, which reported $3.9 billion of net income on revenue of $12.3 billion. While Alibaba was a third-party marketplace with no distribution or inventory holding, Amazon’s business model was more diverse. Amazon was primarily an online retail department store, offering a wide range of product categories, but it also maintained a significant third-party marketplace where it offered shipping, customer service, payment processing, and return services to independent retailers. Amazon also offered software and cloud storage services, online video streaming, and its own line of electronic hardware (mobile, e-reader, and smart television products). In addition, Amazon published books, hosted its own app store, funded video content development, and operated Amazon Prime, an annual membership program with a wide range of benefits. Indeed, Amazon’s activities overlapped with those of Apple, Google, eBay, Alibaba, and many other companies. Amazon provided little information on the profitability of its lines of business, many of which were believed to be unprofitable. Which businesses would drive Amazon’s future growth? Would the investments Amazon was making in market share eventually translate into profits? Or would another major competitor or business model replace Amazon? On a visit to the United States in June 2015, Jack Ma, chairman of Alibaba, stated, “We’re not coming here to compete.” Could Amazon or its investors afford to believe him?
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Research & References of Amazon.com, 2018|A&C Accounting And Tax Services