Things are certainly not terrible for Amazon as they did manage to record a 27% growth in sales compared to the previous year reaching $113.1 Billion with profits rising 48% to $7.8 Billion. The drop in share price was likely caused by the missed expectation of Wall Street that analysts had set at $115 Billion for Q2. Growth also slowed compared to that seen in Q1 which was up at 44%.
Amazon has been a little more conservative with Q3 expectations and has penciled in a growth estimate of no more than 16%. They have also set the expectation that Q3 will have a lower profit range compared to the previous year.
Amazon Feels The 2020 Effect
2020 the year of the Covid-19 pandemic is still having its impact felt over a year later and even in businesses the size of Amazon. The downside of comparisons year on year means that they don’t take into account anomalies which is certainly what 2020 was for eCommerce.
Thanks to lockdowns all over the world 2020 was a great year for eCommerce as people were stuck at home and many resorted to online shopping. As things have now opened back up, people are spending less time online and less time shopping.
This can be most clearly seen when comparing the North American market. In the US net sales climbed by 43% in Q2 of last year as lockdowns first took their toll. A year later, sales were still rising strongly, but by 22% – almost half the pace on the previous year.
Amazon is also going to struggle to maintain these percentages going forward just due to the scale of the numbers they are dealing with.
“Amazon is increasingly bumping up against the law of large numbers – particularly in US retail. When you’re only selling $1,000 (£716) of product a year, boosting sales by 40% is easy. When your annualized sales reach $400bn (£286bn), finding an extra $160bn (£114bn) of sales is pretty difficult.”Nicholas Hyett, Equity Analyst, Hargreaves Lansdown.
Whilst the Amazon share price has now dropped just over 9% in the last 5 days which it is estimated has lost former CEO and Chairman Jeff Bezos approximately $13.5 Billion the outlook is far from bad for Amazon.
The growth rate for 2020 was unsustainable and some expectations are going to need to be managed for the rest of 2021.
Connect With Us And Other Small Business Owners
Please head over to our Facebook Group for Small Business Sellers and interact with other small business owners.
Subscribe to Our Newsletter
Business Insights for Your Online Business Presented with a Dash of Humor
We do not share your information and you can unsubscribe anytime.