For the first time since 2015, Amazon had to admit a quarterly loss. E-commerce sales are faltering, especially outside the United States, and the Seattle-based giant now also lowers expectations for the second quarter.
E-commerce sales drop
Amazon ended the quarter 3.8 billion dollars (3.5 billion euros) below zero. The big culprit is the recent investment in Rivian, an electric car producer, but the company also suffered an e-commerce sales drop of 3 % to 51.1 billion dollars (48 billion euros), a huge setback after double-digit growth during and before the corona crisis.
Outside of the US, there was even a 6 % decline. Growth in Amazon’s other business units (such as cloud computing and advertising) remained strong, so that total sales still rose by 7 %. Andy Jassy, Jeff Bezos’ successor as Amazon CEO, said that the pandemic and the war in Ukraine have brought unusual challenges, including higher costs, persistent inflation and supply chain pressures.
Inflation alone cost the company two billion dollars, Jassy stated. In the United States, the technology giant also raised staff wages in response to severe labour shortages and growing union struggles. Higher fuel prices have also made deliveries more expensive. Recently, Amazon therefore raised the prices of its services, both for consumers (through a more expensive Prime subscription) and for platform sellers (through a higher commission).
No improvement yet
The future does not exactly look too promising, as Amazon also predicts weaker sales in the second quarter. The company now expects 3 % to 7 % more sales and again expects a possible loss: the operating result would be between a loss of one billion dollars and a profit of three billion dollars.
Jassy is more optimistic, saying that his teams can now focus on improving productivity and cost efficiency. “We know how to do this and have done it before. It may take some time, especially as we work our way through ongoing inflation and supply chain pressures, but we are seeing encouraging progress on a number of dimensions of the customer experience.” In particular, the company is delivering again as quickly as it did before the corona pandemic, the CEO stressed.