All of Amazon’s operating income in 2017 came from Amazon Web Services:
While the numbers from Amazon’s e-commerce operations were impressive, the cash cow remains Amazon Web Services. Consider:
- Amazon’s North America e-commerce business delivered fourth quarter operating income of $1.69 billion on revenue of $37.3 billion.
- International e-commerce sales were $18.04 billion with a operating loss of $919 million.
- AWS had operating income of $1.35 billion for the fourth quarter with sales of $5.11 billion.
- For the year, Amazon’s international e-commerce operating losses eclipsed the company’s North American operating profit. AWS had 2017 operating income of $4.33 billion on sales of $17.46 billion.
In other words, on an annual basis all of Amazon’s operating income derives from AWS.
or in other other words Amazon is a web services company that maintains an online retail site as a benevolent organization. That’s the reason I don’t think that Amazon will ultimately prevail in the retail space. The most likely candidate for that is Walmart.
I have already purchased stuff from Walmart’s online sales service, and it was stuff that amazingly was NOT available on Amazon.
It’s the international component that’s dragging Amazon’s retail down. They’re trying to get into India and China, and are struggling.
Regardless, even if Walmart ‘wins’ against Amazon here, it will still be by copying Amazon. Walmart closing its actual stores leaves holes in the places where they were.
Online is presently a niche constituting about 8% of retail. I expect that to be the case for some time. I don’t believe I’ll live to see a time when Walmart closes most or all of its stores.
Walmart is presently operating profitably in retail; Amazon is not. I see Walmart as “imitating” Amazon only in the sense that it’s strengthening its online presence. Ultimately, Walmart will demolish Amazon via BOPIS (one of the reasons Amazon bought Whole Foods) and Amazon will either imitate Walmart or get out of retail entirely.
In one year, Amazon went from 27 million to 37 million in net sales for the 4th quarter in North America and turned a profit. Walmart went from 81 to 83 million. I don’t see that as evidence that Walmart is about to demolish Amazon. Maybe they will. I don’t know.
I meant billions rather than millions.
I don’t know where you’re getting your information. All of Amazon’s operating revenue in 2017 came from AWS.
Online retailing may only be 8 or 9 percent, but it’s growing every year. It will be interesting to see where the ceiling is.
We recently tried Walmart’s grocery shopping service – you order what you need online and schedule a pickup time. You pull up to a special parking area and they bring everything out and load it in your car. It worked pretty well though I prefer to pick my own produce. Pretty labor intensive though – according to the people running it at that location it is still in the trial phase.
It may be shocking but practically all of the increase in online sales is from mobile. I’m not quite sure how to interpret that. Either people are buying everything using their phones or what people are buying more of they’re buying using their phones.
I do think there’s a ceiling and I also think that online and retail are in fact complementary. If all of the brick and mortar stores closed, total sales would go down.
Disclosure, I’m neither a bull or bear on Amazon.
I am interested to find out what Walmart’s revenue growth rate was when it had revenue of 55 billion per Quarter(!). It is astonishing the top line figures are still growing 30-40% given the size of Amazon and the laws of large numbers.
Also, Bezos hinted he thinks Amazon will have “platform dominance” in the market of “intelligent assistants” / IOT / home automation with Alexa. Based on the anecdotal reports from CES, much of the tech industry is betting on Alexa and in tech having people bet on you is more important than having a superior product. Having “platform dominance” is the key to printing money as other tech titans and Amazons experience has shown.
Still, a PE of 100+ is very expensive for such a large company.