Big profits for Amazon in Q1

Amazon’s growth continues to surprise, with Q1 net sales up 28% on the same period as last year. Their net sales totalled $29.2bn, and operating income hit $1.1bn, an increase of $225 million. In addition, net income was $513 million compared to a net loss of $57 million for Q1 2015.

The online giant has been concentrating on building critical mass and expending its business but seems to be changing its focus on generating profits and share earnings for its investors, who have had to hold out for this for years.

Industry commentators have taken note too. David Jinks of e-delivery company ParcelHero, said, “For Amazon’s long-suffering investors, it was always been the promise of ‘jam tomorrow’ that kept them holding on, through the considerable expense of building a radical new supply chain. At the end of 2014 Amazon had earned a cumulative net profit of just $1.9 billion in its entire twenty year history as a public company, despite more than $400 billion in sales during that time.  That’s because it ploughed the money back into developing its service. Fortunately, many investors kept faith and that’s paying off for them in Amazon’s recent results.’”

He added: “The secret behind these profits is Amazon’s Prime members, who shop 50% more frequently with the company than non-members and spend an average of $1,500 a year, as opposed to $625 a year for non-members. Its Prime Now and Pantry deliveries are tempting more Prime members all the time; with the promise in the UK that Morrisons will be able to supply nearly immediate groceries to compliment the Prime Now service for goods. To facilitate this it was necessary for Amazon to build the infrastructure to bypass traditional delivery companies such Royal Mail.”

ParcelHero issued a report last year in which it said that Amazon stood to “save $3bn globally and £122m in the UK alone by cutting down on the use of external delivery companies”.

Jinks said today he believes that, “Amazon’s ultimate goal is to become the conduit through which all aspects of e-commerce and logistics flow”, adding that “by revolutionising its global supply chain and cutting out the middleman it’s on its way.”