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An Amazon Update: Where They Were, Where They Are

An Amazon Update: Where They Were, Where They Are

By Scott Costa, Publisher, tED magazine

It’s been a while since I wrote something about Amazon.  I wrote this story on the future of e-commerce back on May 19.  Now, I figure it’s time to check in and see what has been happening, and what is about to happen.

Let’s start with what is about to happen.  Amazon will announce it’s third quarter earnings on October 27.  The early forecasts say the online giant will announce revenue for the quarter to be in the $31-$33.5 billion range.  In 3Q 2015, Amazon’s revenue was $25.4 billion.  That’s between a $5.6-$8.1 billion dollar revenue increase.  Amazon stock was valued at $555.77 in October of 2015.  As of this writing, it’s selling for $822 a share.  In the third quarter of 2015, Amazon was valued at $256 billion.  Today the value is in the $377 billion range.  And don’t forget, at least one highly regarded venture capitalist believes Amazon will be worth $3 trillion in 2026.

Meanwhile, we also need to focus on Amazon Business, the B2B offering that Amazon launched 16 months ago.  As of last May, Amazon Business alone did $1 billion in revenue, and is expected to continue to grow.  In fact, Amazon Business Vice-President Prentis Wilson testified at the Staples-Office Depot merger hearing that he believes the B2B market is currently a “land grab” for Amazon to gain a significant share of the market over the next two years.  Wilson was testifying at the merger hearing because Office Depot and Staples wanted to prove that Amazon Business would be a significant competitor and the merger would not create a monopoly.  The way Wilson is talking, Amazon Business is more interested in competing with Grainger and selling MRO products than competing with Office Depot and selling pens.

Speaking of Grainger, it just released its earnings report, and CEO DG Macpherson used words like “challenging” when talking about the economy, and lowered earnings expectations for the rest of the year.  It will be interesting to see if Amazon Business has the same outlook.

Amazon CEO Jeff Bezos has always talked about a lack of concern for quarterly earnings.  In 2014, he compared a 10% quarterly loss to a 10% quarterly gain by saying he didn’t get 10% more dumb just because he had a negative report.  “We would all love all of our numbers to be smooth lines up and to the right.,” Bezos explained. “Those numbers are output numbers. Most of the work we put into a particular quarter happened years ago.”

Of course, history shows Bezos is also not too concerned about losing money.  In that same 2014 interview, Bezos proudly announced, “I’ve made billions of dollars of failures at Amazon.  Literally billions of dollars.  You might remember Pets.com or Kosmo.  They don’t matter.  What really matters is companies that don’t continue to experiment, companies that don’t embrace failure, they are forced to make a ‘Hail Mary’ bet at the end of their corporate existence.”

Of course, those billions of dollars in losses are starting to turn into massive gains.  In an interview earlier this year, Bezos said he learned from his successes and used those strategies to continue to grow.  “We build this lemonade stand 20 years ago, and this lemonade stand became very profitable,” he said. “But we also decided to use those skills and assets that we acquired over time to build a hamburger stand and a hot dog stand, so we are investing in new initiatives.”

A report last week by ChannelAdvisor, and cited by MSN, shows 36% of all e-commerce transactions happen through Amazon.com.  Amazon is a part of more than 1 out of every 3 transactions done through e-commerce around the world.  That’s a pretty significant number.  Bezos says that is because he is focused on the customer of the future. “What are are the things you know will be true 10 years from now?” Bezos adds. “The customer needs. If you find the right ones, you can maintain stability and it will be paying dividends 10 years from now because it won’t go out of style.”

The Amazon 3Q results will be out late in the afternoon on October 27.  We will be keeping an eye on them to see if the online giant hits it’s revenue projection and how Amazon Business is performing.

 

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