Pureplay
Amazon’s Sales Soar as Profits Drop
- 2nd February
- Neha Kale 289
Amazon’s investment into technology and content has been slow to pay off, as the retailer reports a swift drop in profits despite rising sales for 2011.
Amazon’s sales might have ballooned in 2011, but the e-tailer wasn’t so lucky when it came to profits. Heavy investment into technology and content has taken a serious toll on sales margins, with the company reporting a 58% plunge in quarterly profits earlier in the week. Much of this result is due to the e-tailer’s focus on its family of Kindle e-readers and Fire tablets, which are playing a key part into its push into the digital publishing and t-commerce arena.
For the year ending December 31, Amazon reported net sales of $US48.08 billion, up 40.6% from the previous year with global net sales totalling $US21.37 billion. Although customers were quick to embrace the Kindle Fire, with unit sales for the tablet jumping 177% during the nine-week holiday period, the outlay involved in the rollout saw profits dive from $US416 million in Q4 2010 to $US177 million in 2011.
However, the e-tailer remains firmly committed to its digital content business, despite admitting that it might show a loss in operating income for the first quarter of the year.
“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” said Jeff Bezos, Amazon’s Founder and CEO. “Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.”
