Amazon is losing momentum after exponential growth

Amazon has released its financial results for the first quarter of 2022, January through March, and they are mediocre. Indeed, the e-commerce giant posted its first quarterly loss since 2015.

Post-pandemic return to normal life impacts e-commerce

Overall, the company reported a net loss of $3.8 billion for the quarter, compared to a net profit of $8.1 billion for the same period last year. While Amazon’s revenue is still up 7%, this figure is clearly low; it’s the company’s slowest rise in two decades. In 2021, for example, this increase was 44%.

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Operating profit, meanwhile, was $3.7 billion, compared to $8.9 billion in the first quarter of 2021.” The pandemic and the ensuing war in Ukraine have led to unusual growth and challenges. Now that we are no longer looking for physical capacity or staff, our teams are focused on improving productivity and cost efficiency across our fulfillment network. We know how to do it and we’ve done it before. This may take some time, especially as we face continued inflationary and supply chain pressures, but we are seeing encouraging progress on a number of aspects of the customer experience, including speed of delivery performance, as we now approach levels that we haven’t seen since the months immediately leading up to the pandemic in early 2020 said Amazon CEO Andy Jassy.

In addition to price inflation, the company is also affected by consumers’ return to normal life. Amazon has benefited greatly from the Covid-19 pandemic, but as people return to shopping in brick-and-mortar stores, the e-commerce sector is losing momentum. As a result, March 2022 was the first month since the start of the pandemic that online sales fell from a year earlier, according to Mastercard SpendingPulse, which also tracks transactions on the Mastercard payment network than survey-based estimates for cash and checks. .

To make up for the losses, Amazon increased the price of its Prime subscription in the United States from $119 to $139 per year, and also introduced a ” surcharge for fuel and inflation which is an average of 5% of the fulfillment fee it charges merchants who use its services.

A computer open to the Amazon site.

The e-commerce sector is losing momentum as consumers gradually return to brick-and-mortar stores to shop. Photography :
Marks Thomas / Unsplash

Big announcements for Amazon

However, Amazon can still rely on its cloud division, Amazon Web Services (AWS), whose first-quarter revenue is up about 37% to $18.4 billion. AWS remains the world’s largest cloud provider for Microsoft and Google. The advertising division also posted encouraging results with first quarter revenue of $7.87 billion, up 23% from the prior year.

The first quarter of 2022 also saw a lot of new releases and announcements for Amazon, as Andy Jassy clarified in his statement. Indeed, the company has announced the launch of Buy with Prime, a service that will allow merchants to exploit all of the logistics infrastructure set up by Amazon for its Prime service, and has also completed its acquisition of MGM Studios. This allows it to significantly expand the Amazon Prime Video catalog and become an even more credible competitor against the giants like Netflix or Disney+.

In addition, the company has signed astronomical contracts with Arianespace, Blue Origin and United Launch Alliance for a total of 83 launches as part of its Kuiper project, which will compete with Elon Musk’s constellation of satellites, Starlink.

Amazon’s second quarter isn’t looking any better

Amazon’s predictions for the second quarter of 2022 aren’t exactly promising. The company expects growth to fall even further, between a $1 billion loss and a $3 billion profit. In the same period of 2021, it posted an operating profit of $7.7 billion.

Amazon has also announced that the famous Prime Day, which often helps boost profits, will be held in July and not in June as usual. The two-day event could potentially hurt year-over-year comparisons for second-quarter revenue while boosting third-quarter results, he notes. CNBC

The e-commerce giant is also facing a massive movement of unions on the part of its employees, notably with a New York warehouse opting to join a major US union, and a second to close this week. should decide. If the company opposes the unionization of its employees, it appears that it has no choice but to be discreet in the face of their demands.

Finally, its stake in electric vehicle company Rivian also contributed to lower profits: While the manufacturer had a remarkable IPO in 2021, its shares lost more than half their value during the quarter, Amazon recorded a loss of $7.6 billion. his investment.

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