Amazon – speed of ascent, breadth of reach, height of power

Amazon’s Q2 numbers were released earlier this week.  Sales were spectacularly up, and revenues down as a result of product/service investment – a new DC every three weeks or so, and a tablet project that might lock in the advantages of Kindle to a broader, app-and-online public.

Here’s a table from the always useful Business Insider.

This is an extraordinary picture.  With no physical stores anywhere, Amazon’s global sales are now over 35% as great as Tesco – which has over 5,380 stores worldwide, and is the third largest retailer on earth.

Let’s throw in some milestones:

2006:  Tower Records closes.  Amazon sales: $10bn

2008:  Woolworth (UK) closes.  Amazon sales: $19bn

2011:  Borders liquidation complete.  Amazon sales: $40bn

After a slowdown in the wake of the autumn 2008 financial crisis, nothing has stopped Amazon’s growth, but the company post-Lehman is very different to old Amazon.  The Kindle was reliably available to the US public from the spring of 2008, and was progressively sold thereafter for use in over one hundred countries.

Of equal importance was the launch of the Kindle Store (US and UK only), which serves to lock the Kindle user into their Amazon relationship.  Amazon is now selling more Kindle books than print books, and the Kindle device accounted for almost one half of the total global volume of eReaders sold in 2010.

Amazon’s explosive growth – doubling sales over the past three years – has been allied to the point at which it moved from being “simply” an online store, to becoming a company that develops, sells and supports must-have hardware and software products.  Prior to 2008, it was selling the same third party products, from Bertelsmann, Toshiba or Mattel, that a B&M store might carry.  Now it has joined Apple as a tech-and-content company, but one that also aspires to sell a greater breadth of categories than Wal-Mart.

Of course, this is a sales graph, not an earnings graph, and profits have been considerably bumpier than sales.  However, I think the red line could equally stand for “Power”, and – in a week when Amazon announced its entry into the Indian market (and assuming net income growth can keep pace) – I cannot see the point at which the Power line’s steep ascent falters.


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