Search engines and other e-retailers lose share as shoppers increasingly turn to Amazon for product searches, a Bloomreach survey finds.
The e-retailer says its net income declined 37% year over year.
Amazon.com Inc. posted a 22% year-over-year revenue gain in the first quarter, but said that net income declined 37% from the same period in last year. Amazon continued its fulfillment and technology spending push from last year, and says marketing expenses increased 32% year over year in Q1.
The increased spending comes as Amazon enriches its two-day Prime shipping program—whose $79 annual fee also include access to tens of thousands of streamed TV shows and films—and moves to offer its own original content to compete with the likes of Netflix Inc. Amazon last Friday posted pilots of 14 TV shows it is considering producing, made them available for anyone to view and asked viewers to vote for the ones they like.
“Amazon Studios is working on a new way to greenlight TV shows. The pilots are out in the open where everyone can have a say,” says Jeff Bezos, founder and CEO of Amazon.com. “I have my personal picks and so do members of the Amazon Studios team, but the exciting thing about our approach is that our opinions don’t matter. We hope Amazon Originals can become yet another way for us to create value for Prime members.”
During the earnings conference call Thursday, chief finacial officer Tom Szkutak said Prime spurs consumers to shop more across a variety of product categories, though he declined to give any figures supporting that. "We find that they do a lot more cross-shopping. Same thing with digital content. [Prime members] use the service, they might start with free content and then they will also continue to purchase paid content. So it’s a nice effect that we’re seeing, which is why we like Prime so much."
For the quarter ended March 31, Amazon, No. 1 in the 2012 Internet Retailer Top 500, reported:
- Net sales of $16.070 billion, a 21.9% increase from $13.185 billion in the same quarter last year. North American net sales totaled $9.391 billion, up 26.4% from $7.427 billion for the first quarter of 2012. North America accounted for 58.4% of sales in the first quarter of 2013.
- International net sales totaled $6.679 billion, up 16.0% from $5.758 billion in 2012. International accounted for 41.6% of sales in 2012.
- Worldwide sales of books, music and videos increased 7.3% to $5.058 billion from $4.710 billion, while electronics and other general merchandise increased 28.1% to $10.214 billion from $7.975 billion.
- Net income decreased year over year 36.9% to $82 million from $130 million.
- Operating income was $181 million, down 5.7% from $192 million year over year.
- Spending on marketing increased 31.7% to $632 million from $480 million in the first quarter of 2012. Marketing expenses accounted for3.9% of net sales.
- Spending on technology and content increased 46.3% to $1.383 billion from $945 million. Technology expenses accounted for 8.6% of net sales.
- Spending on fulfillment increased 38.7% to $1.796 billion from $1.295 billion. Fulfillment expenses accounted for 11.2% of net sales.
- General and administrative spending increased 23.0% year over year to $246 million from $200 million. General and administrative spending accounted for 1.5% of net sales.
The Q1 figures met Amazon’s guidance earlier this year that its first quarter sales would range from $15 billion to $16.6 billion. Amazon, in reporting its Q4 2012 figures, also said that its Q1 2013 operating income would range from a loss of $285 million to income of $65 million.
So far, states moving to collect sales taxes on e-retail purchases has brought no major harm to Amazon, says Colin Sebastian, an analyst for private equity firm Robert W. Baird & Co. "Accelerating North America segment growth suggests there was limited impact in Q1 from sales tax collection in large states, such as California and New York," he says.
Amazon again gave no details about how many Kindle devices it has sold. "If you take a look at our top 10 best-selling items worldwide in Q1, the top 10 are all either digital or Kindle related," Szkutak said during the call. "And I believe that that's the first time that we’ve seen [that]."
During the earnings conference call, Amazon declined to address rumors that it would expand its Amazon Fresh grocery and product delivery service from Seattle. "It’s been a test and we continue to monitor that test carefully," Szkutak said. "Customers love the experience. The challenge has always been in making sure we get the economics right."
Amazon also did not confirm or deny a report this week that it would debut a TV set-top box for streamed content.