Amazon Looks to Profit From Moves
Could the worst of times be the best of times for online retailers? With the nation in an economic and psychological funk, the companies that sell their wares over the Internet think they may finally have their act together enough, at least to notch their first profits.
The bellwether for all e-tailers, Amazon.com, is sticking to its forecast of a fourth-quarter operating profit, even amid the threat of further terrorism, anthrax spores gumming up the postal service and a shareholder lawsuit against the company over past practices.
"While we can offer no guarantees, were committed to reaching our objective of reaching pro forma profitability in the fourth quarter," Amazon CEO Jeff Bezos told analysts in last weeks earnings call.
Bezos bravery might be chalked up to whistling past the graveyard, as brick-and-mortar merchants prepare for the worst holiday retail scene in a decade. But his forecast gained support from analysts who see shoppers turning increasingly to online sites and shopping earlier this year.
An eCommerce Intentions survey by credit card issuer NextCard, which does considerable business with Amazon, found that nearly one-third of shoppers would begin their online holiday buying before November, and that Amazon will attract nearly half 46 percent of all online shoppers.
"We expect that Amazon.com will capture the lions share of online holiday spending, although eBay, BarnesandNoble.com and the major discounters should also chalk up significant sales," said Scott Lascelles, NextCards group vice president of loyalty marketing.
The majority 54 percent of online shoppers expect to spend up to 20 percent of their overall holiday budget online, according to NextCard.
Amazon is reducing prices even as profit margins and sales are on the decline. The company hopes improved efficiency, new agreements with brick-and-mortar merchants Circuit City Stores and Target, and a growing market in used goods will help.
If Amazon fails to hit its fourth-quarter goal, shareholders are unlikely to prove sympathetic.
Shareholder lawsuits accuse the company of misleading investors about the strength of its business, in part by holding millions of dollars in accounts payable "months longer than is commercially reasonable." Amazon officials said the suits are without merit.