Print 52 comment(s) - last by jay401.. on Feb 2 at 9:22 AM

The holiday season treated very well

Both online and B&M retail sales plunged over the holiday season.  Layoffs abounded and there was no definite sign of an end in sight.  However, amid all these financial woes, a few lone stars did brighten the picture for the retail market.

One of the brightest stars was online retailer Amazon, who continued to post strong growth.  It made good on its claims of a seemingly implausible "best ever" holiday season when it posted its quarterly earnings this Thursday. 

Amazon posted a $225M USD profit, a growth of over 9 percent from the same quarter a year before.  Revenue climbed a whopping 18 percent to $6.70B USD.  The revenue handsomely surpassed analyst predictions which called for a more paltry $6.44B USD.  Amazon's electronics division was one of the greatest successes, growing to $2.89B USD, up 31 percent from the previous year.

Jeff Bezos, founder and chief executive of Amazon, states, "We remain relentlessly focused on serving customers with low prices, great selection and free shipping offers, including Amazon Prime."

Mr. Bezos cited the strong demand for Amazon's eBook reader Kindle as one reason why Amazon profits rose when overall the online community sunk.  On February 9, 2009 Amazon will introduce a new version of the best-selling gadget at a New York news conference.

Innovative products aren't the most important factor in Amazon's success believe some analysts.  They say it benefits from customers with reduced budgets looking for bargains, with Amazon's prices often being lower than retail stores.  Describes Mark Mahaney, an analyst at Citigroup, "Amazon may be enjoying a Wal-Mart effect, with people trading down to Amazon to get better prices over the holiday.  Amazon must have dramatically taken market share (from other retailers)."

The lone trouble sign for Amazon was its operating margin, a measure of real earnings left after expenses such as employee wages, discount costs, and other operating costs.  Amazon saw this margin sink from 4.79 percent the year before to 4.09 percent.  This was partly due to heavy discounting.  While it’s good that this raised sales, it’s a bit of a concern for Amazon when it looks at its bottom line. 

Amazon also had the misfortune of losing a key suit which allowed the state of New York to charge tax on its sales and possibly destroying the previous legal precedent of nexus protections.  As more states adopt such provisions, Amazon may see its revenue after taxes take an even bigger hit.

Many challenges await this year for Amazon, however, it certainly seems better prepared to handle them than most retailers given its strong performance over the holiday season.

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Taxes, my 2 cents, Kindle 2
By Bateluer on 1/30/2009 9:51:48 AM , Rating: 2
As much as I hate to see it, Internet sales tax will soon be the norm every where. As people increasingly buy their goods online, the government will need/want to tax online sales to maintain their revenue stream.

Still, I've ordered almost as much from Amazon as I've ordered from Newegg and only had minor issues.

I'm seriously considering buying a Kindle 2 when Amazon launches it, provided it meets my requirements and is reasonably priced.

RE: Taxes, my 2 cents, Kindle 2
By theapparition on 1/30/2009 10:29:01 AM , Rating: 5
Internet tax is already the norm. Meaning, you owe tax on every purchase you make online unless you live in a sales-tax free state.

It's just that you are supposed to pay the use tax directly to your state, usually through a state income tax return. The merchant is not obligated to collect it unless they have a physical presence (and hence tax ID) in that state.

Just because you didn't pay tax at time of purchase doesn't mean it's not due. However, I agree with you, that very soon, automatic collection of taxes will soon happen. It's inevitable.

RE: Taxes, my 2 cents, Kindle 2
By TomZ on 1/30/2009 10:49:12 AM , Rating: 3
I'll best if you did a survey, most people don't know they are supposed to pay sales tax for online purchases. And of the people that know, I'll best that most simply don't pay it. That only leaves a tiny fraction IMO that actually pay sales tax on online purchases.

RE: Taxes, my 2 cents, Kindle 2
By theapparition on 1/30/2009 12:27:04 PM , Rating: 2
You are absolutely correct Tom. Most don't know this. That is why I'm so vocal on the matter. Call it a pet-pieve of mine.

I hear over and over about not paying taxes for online or catalog purchases. Even the media jumps on the tax-free bandwagon. Local radio stations advertise coming across state lines to a neighbooring state with "tax free shoping".

RE: Taxes, my 2 cents, Kindle 2
By Blight AC on 1/30/2009 1:41:16 PM , Rating: 2
I had been paying the ~$20 get-out-of-jail-free at the end of each year, since all my purchases were under $1000 each. Course, now it doesn't matter because the online retailers I use charge for taxes anyhow.

However, I think the biggest people at fault for the online tax-free ignorance are the professional tax preparers for not making their customers aware.

RE: Taxes, my 2 cents, Kindle 2
By Oregonian2 on 1/31/2009 2:33:48 AM , Rating: 2
If the interstate purchase was made from a seller in a state w/o sales taxes, does the buyer still have to pay the sales tax for it in their home-state? Even if they were visiting (say on vacation) in person and bought stuff from the hotel gift store? I suspect so, but see below as to why I ask.

Reason I ask is that there used to be a major national seller of photographic stuff (no longer there I think, they got bought out by a chain store and "dissolved" into them). Huge many-paged ads in the back of Pop Photography every month (not as big as B&H's now, but big). Anyway, they advertised "No sales tax! We're in Oregon, a state with no sales tax". Now, to me it didn't matter, I'd buy from them in their retail store with no taxes, but I'm curious if there was any actual legal benefit to others or was it just creative marketting. :-)

RE: Taxes, my 2 cents, Kindle 2
By consumerwhore on 1/30/2009 1:27:14 PM , Rating: 2
And just in case some people are reading this and wonder: "I didn't know" is not a defense against the IRS. Never has, never will be.

RE: Taxes, my 2 cents, Kindle 2
By KC7SWH on 1/30/2009 6:42:08 PM , Rating: 5
Since when does the IRS collect STATE sales tax???

RE: Taxes, my 2 cents, Kindle 2
By bhieb on 1/30/2009 11:22:43 AM , Rating: 2
Don't know why you got rated down, as this is true. In most sales tax states you still owe the tax. It is never the vendor that owes the tax just the buyer, the vendor is just obligated to collect it for the state if they have a physical facility there.

I don't see why people get so bent out of shape about this, why is it that online vendors should have this automatic advantage over local B&M's. As a consumer I want to pay less sure, but it is foolish to think not paying tax on your amazon bill will accomplish that.

Assuming that the State needs X dollars to fund it's budget, they are gonna get that X from taxes. Either they raise property or other taxes or they get it from sales tax. Just because you didn't by they 60" at the local store, does not mean you "saved" anything as they will find another way to tax you to get the X dollars they need.

The only thing the current situation does is hurt local b&m's period end of story.

RE: Taxes, my 2 cents, Kindle 2
By bobcpg on 1/30/2009 12:19:41 PM , Rating: 2
why is it that online vendors should have this automatic advantage over local B&M's.

Why should I have to pay for shipping for a product by a company that is not allowed to B&M in my state.

Perhaps this will change some bad laws.

RE: Taxes, my 2 cents, Kindle 2
By bhieb on 1/30/2009 12:23:58 PM , Rating: 2
My point is you pay either way. Assuming the state only makes money via taxes, and they have an X dollar budget to fill. They will fill it via taxes, sales or otherwise. So to assume you are "saving" anything is a misnomer.

RE: Taxes, my 2 cents, Kindle 2
By Jimbo1234 on 1/30/2009 1:59:25 PM , Rating: 2
Assuming the state only makes money via taxes

That IS the only way states "make money." They do not sell anything.

By theapparition on 1/30/2009 12:29:47 PM , Rating: 2
Can you give me an example of a company that is "not allowed" to B&M in your state?

It's one thing when a company doesn't have a physical presence. It's quite another when your state tells them it's illegal to do so.

I'd love to hear an occurance of this for a relevant business.

RE: Taxes, my 2 cents, Kindle 2
By Blight AC on 1/30/2009 1:29:51 PM , Rating: 2
Well, it may hurt the local Brick and Mortar stores, but the fact is, even paying taxes and sometimes shipping, I'm still usually getting a far better price then the MSRP most stuff is sold for at a B&M.

I bought my 56" on Amazon for approx. $1600, and it came out to just over $1800 with taxes and free shipping. I couldn't find it locally for anywhere under $2100, and that was before taxes were added.

RE: Taxes, my 2 cents, Kindle 2
By bhieb on 1/30/2009 1:49:39 PM , Rating: 2
Agreed, I'm not saying that online is still not better. Rather why should they be given a 7-10% head start?

RE: Taxes, my 2 cents, Kindle 2
By Oregonian2 on 1/31/2009 2:37:13 AM , Rating: 2
Well, local B&M stores have a head start too, the obvious advantages (if the net prices were anywhere close to the same, which would one buy from -- B&M's would win 98+ percent of the time, IMO).

RE: Taxes, my 2 cents, Kindle 2
By Jimbo1234 on 1/30/2009 2:03:44 PM , Rating: 2
$1600, and it came out to just over $1800 with taxes and free shipping.

So you paid over 12.5% tax? Which state charges that outrageous rate? None of them.

You're getting screwed somewhere.

RE: Taxes, my 2 cents, Kindle 2
By Blight AC on 2/2/2009 8:51:14 AM , Rating: 2
I don't remember the exact totals, but it was probably high 1600's (like $1689) and low 1800s. Actually... I find it kinda funny that you did the math on that... I was making it as simplistic as possible just to make a point.

Wait what?
By krotchy on 1/30/2009 9:54:59 AM , Rating: 3
Wait wait wait, you mean combining good customer service, an easy to navigate website and good prices can make you a profit?

No wonder Circuit City went out of business. Inept sales staff who wont negotiate unusually high prices unless you buy way way overpriced Firedog services is almost the same thing though right?

RE: Wait what?
By kattanna on 1/30/2009 11:51:35 AM , Rating: 2
you also forgot they seem to simply have EVERYTHING.

i actually use amazon to first search to see if a thing im interested even exists, and in what forms. better then any google search for a product.

RE: Wait what?
By Parhel on 1/30/2009 1:10:39 PM , Rating: 2
Inept sales staff who wont negotiate unusually high prices unless you buy way way overpriced Firedog services

For what it's worth, I was able to talk Circuit City down quite a bit on a few items. Also, at my local stores their staff was always a notch above the competition, right up to the end.

RE: Wait what?
By Motoman on 1/30/2009 2:19:07 PM , Rating: 2
Here's another reason why shopping online is vastly better than a B&M - online vendors *remember you* and appreciate your business.

When I buy stuff from Newegg, or wherever, they are maintaing records of everything I bought in my user account. Then, when I have a little request or a complaint or whatever, they instantly realize that I spend LARGE amounts of money with them, and then I get VIP treatment.

On the other hand, Best Buy doesn't know who you are, and doesn't're treated the same no matter how much you shop there. Which also means that you're treated like crap no matter how much you shop there, because their customer service sucks anyway. But my point is that regardless of how much you shop at B&Ms, they will never pay as much attention to you as an online vendor.

RE: Wait what?
By Parhel on 1/30/2009 2:41:06 PM , Rating: 2
At my old job, I was in charge of all IT purchases. I built all of the company's PCs and servers from parts purchased from Newegg. Software, printers, laptops, phone equipment, you name it, all bought from Newegg. It was a small business, and rather than open a new account I just used my existing one and paid with the company card.

Between that, and all of other purchases I've spent close to $100K on that account. You're absolutely right - they treat me really well. You wouldn't get that with a B&M.

RE: Wait what?
By TomZ on 1/30/2009 5:09:52 PM , Rating: 2
when I have a little request or a complaint or whatever, they instantly realize that I spend LARGE amounts of money with them, and then I get VIP treatment
I think Newegg gives everyone VIP treatment. I just started buying from them last year, so I haven't really spent a lot with them yet, but the customer service I've received has been awesome so far.

I think that Newegg is one of the few companies that "get it." Online retailers are all selling the same things at approximately the same prices. So in many cases, the customer service is the main thing that differentiates one online vendor from another.

On the other hand, I've stopped buying from completely because of their rude and ineffective customer service. They clearly don't care one way or another if they solve your problem or not.

RE: Wait what?
By Motoman on 1/30/2009 8:41:00 PM , Rating: 2
Well, yes, Newegg does have good CS as a rule - but I was just using them as an example.

Other online vendors do the same. And then you get them to go the extra mile for you. I've had conversations like "Well, you know, this LCD monitor only has 3 stuck pixels on it, and our policy is to accept it for a return only if there's 8 or more stuck pixels. But I can see that you're a very good customer of ours, and we appreciate your business - so I'm going to go ahead and issue you an RMA number."

If you tried to get sway on such a policy at Best Buy, you'd be lucky if the worst thing that happened was the CS person giving you the finger and laughing.

RE: Wait what?
By Oregonian2 on 1/31/2009 2:48:54 AM , Rating: 2
My treatment from my local Costco is ultra VIP compared to NewEgg (where I buy things, in addition to Amazon as well).

I once went back to a Costco to see if they could reprint a receipt for me for a carpet steam cleaner I bought from them ($250 or so) around a year previously. I was hoping it was still in warranty because it had a problem, but I couldn't find the receipt. Their help counter person just told me to bring it down to the store and they'd refund my money (turned out to be a little over a year and out of warranty -- they did have the record and could reprint a receipt). I did so, and they refunded me in full, in cash. Although I didn't have to, I promptly went through the store and bought a new one for the money (around the same price). Note that I didn't ask for a refund, AFAIK their great refund policy is only for a month -- but they volunteered in telling me to bring it in. I love that store and buy there as much as I can (went there today, as it turns out). And that's just one story, they've been great to me other times as well (and with the 2% refund program, they pay ME to shop there -- more refund than the membership fee).

The only online store I like as much as Costco's B&M store is (can take it back to the store, etc).

By jay401 on 1/30/2009 10:26:20 AM , Rating: 2
And apparently the first thing they did was ratchet the prices right back up. An HDTV i was keeping my eye on went down to around $830 the week of Christmas and is now back up over $1100. No thanks! Not for an HDTV that's over a year old product-line-wise, and not when I know you're willing to sell it for $830!

See this is what you lose with online shopping over B&M: The ability to negotiate pricing. Not that most people today bother to negotiate at B&Ms, just that they at least have the option to do so. With an online store, the price is the price and you are at the mercy of their timing and decision to run a sale when they want to and on which items they want to.

Maybe if Amazon started up a "email/fax us a competing offer and we'll match it" policy, they would be more interested for big-box items that aren't on sale at a given time.

RE: yeah
By Spectator on 1/30/2009 10:45:07 AM , Rating: 2
On the HDTV.

It could also be that manufacturer had discount. and now Amazon cant get that price anymore.

But i Agree with the logic. Some fooker was happy to sell it for 830 making a profit. and now they want 1100.

Just shows how much profit is in it; either way. just wait some for Ressesion prices? :)

RE: yeah
By TomZ on 1/30/2009 10:46:57 AM , Rating: 2
The online equivalent of being able to negiotiate prices is being able to shop at 20 stores within 1 minute and compare prices.

I can only rarely find better prices at B&M - almost always I can find a far better deal online.

Amazon's had some good pricing on things I've checked of late, so it doesn't surprise me that their sales are up.

RE: yeah
By Nfarce on 1/30/2009 11:56:37 AM , Rating: 2
Wild price fluctuations on TVs at Amazon have been par for the course as long as I've been shopping there. Also, you need to keep in mind that sometimes that price includes shipping, and other times, it does not. I've seen the same Panny Viera plasma go from $1049 with "free" shipping to $899 with $119 shipping (!).

That said, on such a large ticket item, I just don't trust the shipping supply chain involved in getting it to my door. Oh I'm sure it will get there, but only God knows how well it was handled in the chain. I'd rather pay another hundred or even a little more and buy directly from a B&M, not to mention the ease of return and instant replacement availability. I am the same way about LCDs for my PCs - most e-tailers have a seriously lame dead pixel return policy that B&Ms don't adhere to. I consider the increased price insurance.

RE: yeah
By superflex on 1/30/2009 1:01:31 PM , Rating: 2
I've bought 3 HDTV (42" panny, 37" aquos and 26" aquos) from Newegg. The 26" was a freebie since the local B&Ms wanted over $450 more for the 42" and 37"
Never had a problem with shipping. All was free.
Hopefully, my purchases helped put CC in the tank. They truly sucked.

RE: yeah
By theapparition on 1/30/2009 1:05:46 PM , Rating: 2
How do you think those TV's get to your local B&M's. Yep, they are shipped.

That's why companies (at least the good ones) spend so much money on packaging engineers and all the styrofoam and packing peanuts. It's designed to survive rough handling.

RE: yeah
By Jimbo1234 on 1/30/2009 2:06:53 PM , Rating: 2
Yeah, I got about $200 off Best Buy's sale price on my TV a couple years ago. I just told them I was going to get it at Circuit City and started walking. It wasn't even a matter of price matching.

So much for that now. At least we still have "American" in town, so I can still haggle at the B&M.

By bighairycamel on 1/30/2009 9:55:19 AM , Rating: 4
At least someone is making some money.

Lately, I've found myself using Amazon A LOT. They have freakin everything! I bought a surplus Mosin Nagant rifle, looked up accessories on Amazon and everything imaginable is on there; from scrope mounts, to new stocks.

Also, they're the only MP3 store I use.

RE: Good
By therealnickdanger on 1/30/2009 10:36:14 AM , Rating: 3
Also, they're the only MP3 store I use.

True that! 256K, well-encoded MP3s with no DRM. I can't get enough of Amazon's daily "albums under $5".

RE: Good
By Oregonian2 on 1/31/2009 2:52:04 AM , Rating: 2
Funny thing is that a lot of stores are making money, even a lot of those laying off people in droves. Just that they're making less money than they did before (where Amazon's is going up).

By Proxes on 1/30/2009 10:21:25 AM , Rating: 2
I ordered a few things from amazon this Christmas season, so I guess I helped them. One thing I noticed that kinda pissed me off is when you change the shipping method the tax changes.

If they charge you tax based on the cost of shipping and the item isn't that illegal or something?

RE: Taxes
By MadMan007 on 1/30/2009 10:52:17 AM , Rating: 2
No it's perfectly normal, shipping is a 'service' and is taxed for that reason. I also seriously doubt Amazon would do something illegal, or charge their customers more than they have to in taxes, don't you?

RE: Taxes
By Lazarus Dark on 1/31/2009 9:39:57 AM , Rating: 2
Yes, but doesn't the shipping company already include taxes in their price? So aren't you usually getting charged tax on shipping twice?

RE: Taxes
By TomZ on 1/30/2009 11:12:40 AM , Rating: 2
If they charge you tax based on the cost of shipping and the item isn't that illegal or something?
I live in Michigan, and the shipping is taxable here. I'll bet lots of other states have also defined it that way.

By Choppedliver on 1/30/2009 11:13:25 AM , Rating: 2
How many purchases do I make in a year? I mean on anything but groceries? A LOT. Thats what I figured out when prime came along. I save gas, money, and time having it delivered.

Im busy. Prime rocks. One flat fee, and I get all my stuff non-food delivered to my door, for cheaper than the store, and it saves me time. My time is worth a lot to me. Amazon is my first choice for most things. Oh, and the price is too high? Great, someone has it used! bingo. Cant get that at any BM store. The option to buy it new, or buy it used.

RE: Prime
By TomZ on 1/30/2009 11:47:28 AM , Rating: 2
I would guess I pay a shipping fee for <5% of my online purchases - including those I make at Amazon. Even when I do pay for shipping on something, it's like $5 typically.

So for me, I never understood the value proposition with Amazon Prime. Basically you're paying $79/year for nothing.

RE: Prime
By fearrun on 1/31/2009 12:09:42 AM , Rating: 2
I used a similar approximation for the minimal shipping cost, which came out to a little over a dozen shipments a year to break even with the cost of Amazon Prime.

Though my primary reason for joining was the upgrade to two day shipping. UPS seems to be the primary method for shipping lately. I was greatly disappointed when had switched to an exclusive deal with UPS.

UPS service to my home is abysmal. While observing online tracking I have seen many of my packages sit at the nearest distribution facility for days, if it is not time for delivery. UPS makes absolutely no effort to deliver before the due date. I am also literally, on most days, the last stop on the shipping route. Some of my deliveries have arrived well after 7PM.

Fed-Ex has always delivered shipments to me ASAP, sometimes even a day or two early.

So I see the real benefit being the upgrade in reduced shipping time, especially with the inexpensive $3.99 per item for next day shipping. It works out really well for those large or heavy items. Most other online retailers the cost to go from free shipping to a fixed amount of time becomes prohibitively expensive.

RE: Prime
By Oregonian2 on 1/31/2009 2:56:20 AM , Rating: 2
Christmas before last I bought a TV wall mount for a new 58" plasma we got then (old TV went to TV heaven just at the right time). Need the mount (last minute decision as to what I needed) pronto (2-day shipping). The mount is something like 50~60 pounds and Amazon's price was way better than anywhere else. Two day shipping was almost exactly the same price as Prime. So "Prime" was free for a year. It can happen.

NY tax
By Wierdo on 1/30/2009 11:25:54 AM , Rating: 2
My understanding is that Amazon's forced to pay NY some sales tax because they have some advertising done there.

Why doesn't Amazon simply do what Newegg did and just pull their ads out of that area? They certainly don't need it much as they are quite well-known everywhere through already, and their NY customers would probably not be as interested in buying from them if the tax advantage vs brick and mortar shopping is gone.

If companies decide to follow this route, then it may force NY to re-consider their stance on the issue - unless, of course, most or all states follow their example soon.

RE: NY tax
By Nfarce on 1/30/2009 11:43:57 AM , Rating: 2
I haven't heard about that. Now what I did hear about was posted at DT just the other day: Amazon was forced to pay sales tax in NY because they were selling to people in that state through some affiliates based in NY.

RE: NY tax
By trisct on 1/30/2009 1:11:43 PM , Rating: 2
That's right - its their affiliate sales program that dips them in the tax problem. That's what helps them have virtually everything imaginable, but this is one drawback.

They can't guarantee that none of the stuff on their site doesn't come from a physical place in NY, so NY is taxing the lot. Not exactly fair, but Amazon had it the other way around for a long time.

Stay tuned for the same thing applied to Ebay, coming soon.

Online retailers
By Screwballl on 1/30/2009 2:07:39 PM , Rating: 2
If you look at the sales from major retailers that reported in, the most popular and well used online sales sites had increased sales over the holidays, when many physical stores reported lower sales, places like Amazon and Newegg reported higher sales and more profits than previous years...

No big surprise as more people are shopping online, and UPS/FedEx increases its work forces as online sales increase and stores (except grocery stores) watch their sales drop.

RE: Online retailers
By Oregonian2 on 1/31/2009 2:58:35 AM , Rating: 2
Adding to that, at least in my area, we had record bad weather in December. Had more snow than since 1950 or so. I'm sure a lot of December sales went online for that reason, at least here.

By jay401 on 2/2/2009 9:22:51 AM , Rating: 3
Soon all we'll be left with for big-box items will be Best Buy and the pay-to-play stores like Costco. Ugh.
I miss CompUSA as crappy as they were at times, and I miss Circuit City. This sucks. Maybe Fry's Electronics will grow their footprint when the economy recovers and open up shops on the East Coast. We need more competition, not less.

I live on Amazon
By Ytsejamer1 on 1/30/2009 12:46:01 PM , Rating: 2
I like most of you, always check Amazon for general pricing. I most times come back to them to make the purchase. The majority of my Christmas shopping goes through them as well.

Recently I've been a big fan of their Marketplace sellers...i've been buying DVDs for cheap. I picked up some of my favorite comic book movie blockbusters for around $5.00 a whack...for the collectors edition too. Not that it was all that, but Superman Returns 2 disc new is going for around $1.29 with only $3 to ship.

Amazon has their house in order and it's no surprise they've been doing well. Kudos to them.

By mmc4587 on 1/31/2009 9:17:04 AM , Rating: 2
According to the constitution, all interstate import/export tarrifs are illegal. One state cannot tax goods from another state.

I can't imagine how New York won this case, unless Amazon does infact have facilities in New York.

It doesn't matter whether you purchase an item online, or over the phone, only the state where the items are being purchased from has the right to impose a sales tax. New York should not have the right to tax an item purchased in any other state.

"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain
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