To the surprise of no-one, Amazon’s first-quarter results, announced yesterday, saw the ecommerce colossus post greatly enhanced revenues, but the company has also revealed unprecedented spending plans to support its operation amid the pandemic.
Amazon announced revenues of $75.4bn for the first three months of 2020, a year-on-year rise of 26% that saw the company take more than $33m an hour. In other circumstances, this would have left shareholders whooping, but Amazon founder and CEO Jeff Bezos also announced spending plans that would be utterly unheard of in other circumstances.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” he said.
“Under normal circumstances, in this coming Q2, we’d expect to make some $4bn or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4bn, and perhaps a bit more, on Covid-related expenses getting products to customers and keeping employees safe.”
These, he said would enable the company to step up cleaning of its facilities; restructure its processes to improve social distancing support; provide more personal protective equipment to staff and cover increases to hourly wages introduced in March.
Bezos also said that Amazon would be spending “hundreds of millions” to develop its own testing facilities for the coronavirus.
Why a $4bn results shock will be good news for Amazon investors
While the outlay was unlikely to be expected by many shareholders watching the results announcement, it is unlikely to prove to be merely the cost of doing business during the coronavirus for Amazon.
While the company is anticipating an operating loss of $1.5bn in Q2 as a result of its eye-watering expenditure, doing so will enable it to sure-up its already strong presence in the ecommerce market, during a time when online shopping is seeing dramatic growth.
Signifyd’s Covid-19 Weekly Pulse Report has already shown a 42% rise in ecommerce sales, across all verticals, with many new-to-online shoppers beginning to embrace ecommerce. If, as analysts predict, this group continues to use ecommerce beyond the coronavirus, Amazon will be well-placed to capture much of this evolved market.
And for Paul Kirkland, director of retail and hospitality at Fujitsu, the company’s success is a testament to how well it is pivoting to these changing times.
“Amazon’s results are testament to the incredible resilience of its ecommerce and delivery models. While physical stores have faced customer limits as a result of social distancing and, in some cases, been forced to close altogether, Amazon has thrived by filling the gap traditional retailers left behind,” he said.
“And the key to Amazon’s success is its flexibility. At the beginning of this year, Amazon had firmly set its sights on the high street and was building up to take the physical stores by storm through by opening its cashier-less Amazon Go stores in the US. But, with lockdown orders now keeping people indoors, Amazon has pivoted its focus back to eCommerce and bolstered its resources for home deliveries at a time when consumers need it the most.
“The fact that consumers are looking to Amazon at the very beginning of their buying journey for inspiration demonstrates just how loyal its customers have become. And, if it’s possible, that growing brand loyalty may mean Amazon emerges from this pandemic even stronger than before.”