Amazon begins to narrow its losses

Amazon reports a smaller than expected loss for Q3 — could business to consumer e-commerce be a profitable business after all?

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By  David Ingham Published  November 15, 2000

Amazon, the world's largest 'e-tailer', may finally be on the road to profitability. At least that was the reaction of Gartner Group to the company’s lower than expected loss in the third quarter of FY 2000.

Amazon reported losses of $68 million on $638 million of turnover. This compared favourably with a loss of $79 million on $356 million of turnover in Q3, 1999.

“Amazon cut inventory costs and improved gross margins by reducing the number of split shipments to customers, thereby saving substantial handling and shipping charges,” wrote Gartner analysts Charles Abrams, Kevin Murphy and Geri Spieler in a research note. “In addition, Amazon’s expertise in forecasting consumer demand has led to a shortening of delivery time in new titles, which adds to customer satisfaction and repeat purchases.”

Amazon also appears to be bringing its pricing more in line with bricks & mortar retailers, the analysts noted. They believe that consumers are increasingly shopping online for reasons other than low prices. “Research shows that convenience motivates online shoppers more than price,” the analysts argue.

On the back of the results, Gartner is poised for a strong performance in the all important Christmas shopping season. “As we enter our sixth holiday season, we are better prepared operationally than ever to deliver for customers, while at the same time we expect to improve our operating margin for the fourth consecutive quarter,” said Warren Jenson, Amazon’s chief financial officer.

Eventual profitability, Gartner Group says, is now a possibility by the first quarter of 2002.

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