Amazon.com’s Q1 losses have improved.
There appears to be a glimmer of light in the world of dotcoms. Amazon is getting ever-nearer to its target of pro-forma profitability with its fifth consecutive quarterly improvement. Pro-forma losses declined from $99 million in Q1 of last year to $49 million this quarter and the company announced that it was right on track to make a profit in Q4. The net losses for the quarter, including $114 million of restructuring charges, total $234 million – still a significant decline from losses in Q1 2000 of $308 million.
Sales were up 22%, to $700 million, boosted by growth in electronics sales. Pretty good, considering the rather unexciting 2% increase in Amazon’s core areas of books, music and videos. The number of customers also rose impressively, with three million new customers bringing Amazon’s client base to 32 million, including six million overseas customers.
Amazon also announced the success of its services business. Alliances with companies such as Toys R Us and new partner Borders bookstores attracted an additional $42 million worth of sales last quarter, and the company expects to gain over $150 million in revenues over the course of the year. Amazon is now searching for new partnerships to expand its selection of offerings. Jeff Bezos, CEO, commented that there are some attractive categories out there that we’re not participating in at all.
It looks like the partnerships tactic will help Amazon gain a firmer footing. The gross profit margins are certainly attractive; 67% on average, compared to 23% across the rest of the business. But the company would be wise to be selective in its choice of partners: not all businesses would complement its current product range that well. Future alliances must benefit the business in the long run. The best strategy will probably be to follow the lines of the highly successful Toys R Us deal and partner with a major offline brand, leveraging its credibility and expertise as well as Amazon’s own.
