Amazon sales show high consumer confidence
Shoppers unfazed by tumbling market, economic troubles
NEW YORK— Amazon.com Inc. reported a record-breaking holiday season as shoppers loaded their online baskets with items from the Echo speaker to Calvin Klein clothes, suggesting consumer optimism isn’t being deterred by a tumbling stock market.
The world’s biggest online retailer said “tens of millions of people worldwide” signed up for its Prime service, which offers free two-day shipping on millions of items as well as video and music streaming. In the U.S. alone, more than 1 billion items were shipped for free using Prime, Amazon said in a statement Wednesday.
The U.S. was already headed into a blowout Christmas shopping spree, as Americans are benefiting from higher employment and wages, fuelling higher household cash flow.
Consumers seemed to be merry despite an S&P 500 Index that has tumbled, a government shutdown that’s entering its fifth day and ongoing trade tensions with China.
People bought “millions more” of Amazon’s own devices compared with last year, including the new Echo Dot speaker and the Fire TV Stick, the Seattlebased company said.
At the same time, Amazon said more than 50 per cent of items sold in its stores came from small and mediumsized businesses.
Among the most popular items under the Christmas tree were the L.O.L. Surprise! Glam Glitter Series doll, Bose Corp. wireless headphones and clothes from Carhartt Inc.
Other popular brands bought through Amazon’s Prime Wardrobe service, which allows Prime consumers to fill a box with selected items and return anything that they don’t want, included PVH Corp.’s Calvin Klein, and Hanesbrands Inc.’s Champion.
Amazon started the shopping frenzy out strong, with November’s Cyber Monday already pegged as the company’s biggest shopping day in history. Along with the Christmas sales report, the picture seems much brighter than Amazon had initially projected in its latest earnings results.
In October, Amazon’s revenue and profit forecast for the holiday quarter fell short of analysts’ estimates, as investors worried about Amazon’s increased pace of spending.
While Amazon has expanded into almost every area of retail, from pharmaceuticals to groceries, its more profitable units are cloud computing and advertising.
Still, Amazon, which dominates e-commerce in the U.S., has relied on the growth of its Prime members, who pay $119 a year for the service.
Recent estimates put subscribers at just under 100 mil- lion in the U.S. Amazon didn’t give any new numbers for Prime subscribers in its statement Wednesday, but said millions of unique items in the U.S. shipped with Prime.
With the S&P teetering on a bear market after a volatile fourth quarter and the worst December in more than a decade, Baird analyst Colin Sebastian lists Amazon as one of the three best picks for investors in the event of a market rebound. Amazon shares were up 2.8 per cent, to $1,381 in New York Wednesday morning.
They have gained about 19 per cent this year, compared with an 11 per cent decline on the S&P.
If Amazon’s Echo speaker was one of its bestsellers, it appears to also have been a victim of its own success.
Powered by Alexa, the voiceactivated software, the smart devices appeared overwhelmed by an onslaught of new users on Christmas, according to reports from the U.K.
Owners asking Alexa to play music, turn on the tree lights or recite turkey recipes were often met with the highly unsatisfactory response of:
“Sorry, I’m having trouble understanding you right now,” the Guardian reported.
A week before Christmas, several of Amazon’s online stores in North America and Europe sold out of various models of Alexa-powered devices, hinting at the surge in demand.