The more than 2 million active sellers on Amazon accounted for 44% of paid units sold on the marketplace in the first three months of the year – up about 400 basis points from last year. The company announced first-quarter earnings on Thursday, also disclosing that net sales were up 15% year-over-year to $22.72 billion – and excluding the effect of foreign exchange rates, net sales would have increased 22%.
However, Amazon experienced a net loss of $57 million in Q1, compared to net income of $108 million in first quarter 2014. Amazon Prime may have quite a bit to do with that, with the company’s financial executives mentioning numerous times throughout a post-earnings conference call that the company continued to invest in the Prime platform. Interestingly, they used the terminology, “feed the Prime platform.”
Amazon worldwide paid units grew 20% in Q1. The company had 278 million active customers – and excluding those who only had free orders in the preceding 12 months, the count was 260 million worldwide.
CFO Tom Szkutak was, as usual, loathe to provide details beyond the earnings report, as was incoming CFO Brian Olsavsky who joined him on the call. When asked by analysts for more information about Fulfillment Centers and Sortation Centers, Szkutak had little to say, merely reminding analysts that Amazon closed 2014 with 109 Fulfillment Centers.
Asked about its same-day delivery service called Prime Now, Szkutak said the service was in 7 cities, with more on the way. “The response has been great,” he said.
“We’re super excited to have the (Prime) platform and invest in it,” Amazon’s CFO said, saying that category expansion, new fulfillment centers, video content and original content, Prime Instant Video, devices, Prime Now were all intertwined with Prime. “They’re inextricably linked to our consumer business and Prime,” he said. (The term “intertwined” was used at least three times to refer to areas in which Amazon was investing for the Prime platform.)
Later in the call he said Amazon is making great investments for the long term, and that’s what was reflected in the operating results. The two executives had plenty to say when asked what was giving Amazon confidence that its investments would pay off. But some points readers might find particularly interesting:
- As it previously disclosed, growth rate for Prime membership in North America was up 50% in 2014 versus 2013 for the 10-year old program, and that was even after the price increase. “It gives you a feel for the work we put into Prime.”
- Amazon Prime has great retention, but those who stream video content retain at a higher rate.
- The video content that Amazon is spending on is helping because those Prime customers buy consumables, clothing, shoes, electronics, and media items.
Prime is growing dramatically globally, Szkutak said.
For the first time, Amazon broke out its AWS business – the cloud platform used by develops to host their services – including companies like Netflix. “Amazon Web Services is a $5 billion business and still growing fast – in fact it’s accelerating,” Amazon CEO Jeff Bezos said in the company’s press release. “Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.”
Wired put the AWS news into perspective in this piece. “Amazon can’t be too smug about its head start. The concern for Amazon is that its AWS margins, though high, are shrinking,” the publication said.
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