Internet retailer Amazon offers "Earth's Biggest Selection", a mammoth range of products which now goes far beyond its original base in books and music to include anything from automobile parts to groceries and from clothing to household furniture. An increasing number of these products, especially in the fashion and personal care sectors, are now own-label rather than third party brands. The business is firmly established as the #1 internet retailer worldwide (though it faces increasingly strong competition from Chinese rivals Alibaba and Tencent, operating primarily in Asia). No other company has done so much to establish the reliability and functionality of e-commerce. But Amazon also historically suffered from low profit margins, and rival companies tended to outpace it in earnings growth. That laggard performance appeared to change after 2007, helped along by the launch of the Kindle electronic reader, which revolutionised Amazon's business model in the same way that the iPod altered Apple. Huge subsequent investments in infrastructure and technology prompted another slump in profitability in the 2010s. However, the evolution of the Kindle device and its various offshoots, including the Echo home speaker, the Alexa AI virtual assistant and the rapid evolution of the Prime membership club has seen the emergence of a new role for Amazon as an entertainment broadcaster and creator. It has also diversified aggressively, not least through a deal in 2017 to acquire bricks and mortar organic grocery retailer Whole Foods Market for almost $14bn. At the same time, the group expanded its technological infrastructure to become the global leader in cloud storage (through its AWS or Amazon Web Services division). Just as significantly, it made a commitment to increase its profits, not just its revenues. As a result, after a comparatively slow start it has become a diversified technology giant on a par with rivals as such as Apple, Google and Facebook as well as a financial powerhouse. The resulting effect on its stock price elevated founder and CEO Jeff Bezos to the position of the world's richest man. (He also owns the Washington Post newspaper). Performance has continued to rocket. Amazon's revenues rose by almost a third in 2018, by another fifth in 2019, and then by a staggering 38% in 2020 to $386.1bn. Net income almost doubled in the latter year to $21.3bn. The AWS cloud storage division alone accounted for more than half of operating income but only 12% of group revenues. The group disclosed that physical store sales - primarily Whole Foods - fell by 8% as a result of pandemic closures to $16.2bn. Amazon is also now one of the world's biggest advertisers by expenditure as well as the #3 in digital ad revenues after Google and Facebook.
Capsule checked 5th February 2021
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Adbrands Daily Update 3rd Feb 2021: Amazon posted spectacular results for the final quarter of 2020, lifting revenues for the full year by an astonishing 38% - a combined total over $100bn - to $386.1bn. Net income almost doubled to $21.3bn. Growth was spread evenly across the group's three main operating segments, but in fact cloud division Amazon Web Services - an engine of much of the group's pre-pandemic growth - actually lagged behind the two ecommerce divisions with a revenues uplift of just 30%, compared to 38% in North America sales and services and 40% in international markets. As a result, Jeff Bezos seized the opportunity to announce a transition in leadership later this year. He will move to the role of executive chairman in Q3, to be succeeded as CEO by Andy Jassy, currently head of the AWS business. "Amazon is what it is because of invention," he said. " We do crazy things together and then make them normal... If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you're actually seeing are the long-run cumulative results of invention. Right now I see Amazon at its most inventive ever, making it an optimal time for this transition."
Adbrands Daily Update 18th Nov 2020: As has been anticipated for at least the past two years, Amazon officially entered the prescription retail business this week with the launch of Amazon Pharmacy in the US. This new service is built on the platform provided by online pharmacist PillPack, acquired by Amazon two years ago. Amazon Pharmacy will offer Prime subscribers savings of up to 80% on generic and 40% on brand name medications. Customers will still need a prescription from their physicians, as with any standard pharmacy, and a wide range of common medications are being dispensed. However, Amazon won't sell opioids or any other drugs that are a higher risk for theft. The launch prompted a sharp fall in the share price of traditional pharmacies.
Adbrands Daily Update 2nd Nov 2020: "The Show Must Go On". Quite a different style of campaign here for Amazon from UK agency Lucky Generals. In recent years, Amazon and the Generals have tended to go for jolly singalong spots for the holiday season; but this year's could in truth be for almost any advertiser, the Amazon branding is so low key. However, it acknowledges more directly than most of the other seasonal ads to-date the sort of Thanksgiving and Christmas we will be forced to endure this year. French-born but US-based ballerina Tais Vinolo stars. It's a heart-warming story, told with sensitivity and style, designed not so much to sell a particular product (even portable spotlights) but to put a fuzzy halo around the Amazon brand.
Adbrands Daily Update 10th Sep 2020: Amazon named Ukonwa Ojo as chief marketing officer of its entertainment division, comprising Amazon Studios and the Prime Video service. It's a bold and intriguing choice: Ojo has spent most of her career in the packaged goods industry, most recently beauty. She joins from Estee Lauder's MAC Cosmetics where she was CMO; before that she led marketing for Coty's consumer beauty business. Previous roles include stints at Unilever, Reckitt Benckiser and General Mills.
Adbrands Daily Update 29th Jun 2020: Amazon has agreed to acquire US self-driving car developer Zoox to boost its autonomous delivery program. The deal is reported to be worth around $1.2bn, well below the $3.2bn valuation of Zoox in its last round of fund-raising. The tech company has been working on a self-driving electric taxi, which could now be adapted to deliver packages for Amazon.
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