Amazon Breaks ThroughWritten by Rob Spiegel
Surprise, surprise. Amazon did it. They made a profit. In late 2000, CEO Jeff Bezos promised he would deliver earnings by fourth quarter of 2001. Well, reporting is in and he delivered, against all street predictions. Amazon reported net profit of $5 million with an operating profit of $59 million. That's real money. Overall sales hit $1.1 billion, giving company its first billion-dollar quarter. Amazon still carries $2.2 billion in debt, but who's counting. Fact is, Amazon made Internet model work on a large and significant level.Amazon delivered its profits old fashioned way, by increasing sales and cutting down expenses. The company revamping its distribution in order to ship 35 percent more products without additional workers. For forth quarter, sales rose 15 percent while fulfillment costs shrank 22 million. Amazon also consolidated its shipping to save costs. Perhaps most important change came as Amazon decided to focus on its core expertise, books, music and video sales, a niche that has delivered profitability to company for many quarters. That doesn't mean Amazon isn't interested in selling toys, household goods or electronics. But during 2001, Amazon shifted much of that business to partnerships it forged with brick retailers such as Toys 'R' Us and Target. Amazon, it seems, is one smartest Internet retailers. The company has learned a bit about offline retailing operations. They created efficiencies in their warehousing, fulfillment and shipping while focusing on a niche. This is a lesson for K-Mart, mammoth retailer that filed for bankruptcy protection on very day Amazon reported its first profit. If you add Amazon's breakthrough to good news that came from 2001 Internet holiday season, you can expect venture community will take a new look at ecommerce this year, especially when economy begins to pick up speed. If spring of 2000 was end of first big Internet surge, spring of 2002 may beginning of ecommerce phase two. Actually, it will be more like Internet phase three, as Internet did have a small mid-1990s commercial surge dominated by porn and get-rich-quick purveyors.
| | The Silver Twinkle in Holiday 2001Written by Rob Spiegel
After a devastating year for dot coms, some good news has finally emerged. A year of downbeat new releases has concluded with a very promising up note, brining cheer to Net retailers. Call it whatever cliché you like, silver lining around black cloud, or twinkle in Santa's eye, but online retail sites have much to celebrate from 2001 holiday sales season.As noted in an early eBiz column, season started with a promising lift over Thanksgiving weekend, which is traditional launch of Christmas gift buying. But unlike year before, good news continued all though season. And online cheer came at a time when offline retailers were fighting for their share of a downbeat seasonal market. Encouraging statistics were released by Goldman Sachs, Harris Interactive and Nielsen/NetRatings in their group "eSpending" report of online spending and traffic. The gist is that U.S. consumers spent $13.8 billion online, up 15 percent from 2000 holiday season. The Jupiter Media Metrix Holiday 2001 E-commerce Series delivered some very encouraging news, showing that traffic at online sites was up 50 percent from a year earlier, and up 95 percent from 1999. Not surprisingly, traffic and sales peaked during first two weeks of December, a week or two earlier than peak for offline retailers. In each of weeks ended December 7 and December 14, online spenders exceeded $2.5 billion in purchases. "With holiday-buying season behind us, we're left with one inescapable truth: Internet has become an integral part of holiday shopping," said Charles Buchwalter, VP media research at Jupiter Media Metrix. "Unlike 2000, when online shopping started strong but then fell off, online shopping this year started strong and ended even stronger." As well as raw numbers of shoppers, Internet also claimed a good percentage of American consumers. On any given week of November and December number of shoppers exceeded 10 percent of U.S. population. During most weeks shoppers constituted more than 15 percent of Americans, and on week of December a full 20 percent of U.S. population purchased goods over Internet.
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