Recently, Amazon released its financial results for the second quarter of 2022. Financial report disclosure: Amazon ’s Q2 revenue was $121.234 billion, a year-on-year increase of 7%, slightly lower than the 7.3% in the first quarter, the slowest growth rate for Amazon in the past two decades, but still higher than the market’s expected $119.09 billion. .
Amazon posted a net loss of $ 2.028 billion in the second quarter, extending the loss in the first quarter. Amazon attributes this to a failed investment in US electric car company Rivian. It is reported that Amazon's investment in Rivian lost $3.9 billion after Rivian's stock price plunged 49% in the second quarter. As of now, Amazon's total investment in Rivian has lost $11.5 billion.
For the challenges facing this quarter's performance, Amazon said that the main factors are the following :
1. With the advent of the post-epidemic era, the e-commerce online shopping boom brought about by the epidemic is fading;
2. Due to the repeated epidemics and the unstable influence of the global political and economic situation, the global supply chain problem continues;
3. Under the pressure of high inflation, fuel and energy costs continued to rise, and consumer discretionary spending slowed down;
4. The pandemic-driven overexpansion has left Amazon with too many employees and excess warehouse capacity.
However, Amazon President Andy Jasey also said in the report: "Despite persistent inflationary pressures on fuel, energy and transportation costs, we made progress on the manageable costs mentioned last quarter, especially improving productivity of our delivery network.”
On the other hand, according to AMZ123 , as of the end of the second quarter, Amazon's direct employees had decreased by 99,000 , and the current number of employees was 1.52 million.
Amazon's chief financial officer Olsavsky said that due to slowing growth and overstaffed warehouses, Amazon implemented layoffs in its distribution and warehouse network. And given inflation and macroeconomic uncertainty, Amazon is considering slowing hiring.
And AMZ123 also learned that since 2022, in addition to large-scale layoffs, Amazon has also frequently updated a number of policies:
1. Reduce excess facilities and sublease excess warehouses
●All Amazon non-grocery stores are closed, including 68 bookstores, Amazon 4-star stores and pop-up stores;
●Cancel warehouse expansion plans, sublease at least 10 million square feet of warehouse space, and delay construction of new facilities.
2. Transfer inflation pressure and reduce operating costs
●For sellers: FBA fees will increase across the board, and fuel and inflation surcharges will be added to the US and European stations;
●To buyers: European courier and streaming service Prime's fees have increased by up to 43% per year.
From Amazon's second-quarter financial report, the effect of this series of cost reduction and efficiency enhancement measures has already appeared. Looking ahead to the third quarter, Amazon expects revenue of $125 billion to $130 billion, an increase of 13% to 17% compared to the third quarter of 2021, or higher than market expectations of $126.4 billion. And it also estimates that the third quarter net profit will be between 0-3.5 billion US dollars. Given the macro pressures Amazon is currently facing, it will still be a daunting task for Amazon to get its core retail business up to a level that investors are comfortable with.
But overall, this quarter's earnings report is showing signs of progressing in the right direction.
In addition, in Amazon executives’ responses to investors’ questions, the following two are also worthy of sellers’ attention:
● About the investment direction : Amazon said it estimates that about 40% of the funds will be used to increase storage capacity and improve transportation efficiency this year.
● About "Buy with Prime" : Currently, this service is limited to sellers who have opened FBA (Amazon FBA Warehousing and Logistics). Amazon plans to gradually invite more sellers to participate this year.
Amazon said in the question that the third-party seller business is still growing very strongly and is an integral part of its business. It can be seen that the growth space left by the cross-border e-commerce industry for cross-border sellers still exists.
When the tide of traffic dividends recedes, in the face of falling profits and continuous losses , only those sellers who can understand the market environment according to their own conditions, adjust their strategies and stick to them can succeed .
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