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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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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).

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