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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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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.

"I want people to see my movies in the best formats possible. For [Paramount] to deny people who have Blu-ray sucks!" -- Movie Director Michael Bay
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