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Amazon and the ongoing carnage in e-commerce

Assif Shameen
Assif Shameen5/12/2022 04:56 PM GMT+08  • 10 min read
Amazon and the ongoing carnage in e-commerce
For nearly a decade now, the key growth driver for Amazon has not been its core e-commerce segment but its cloud infrastructure business / Bloomberg
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Just five years ago, e-commerce powerhouse Amazon.com was one of the most feared companies in the world. In June 2017, when it was leaked to be buying the Whole Foods Market grocery chain, retailing stocks plunged, with some grocery retailers down as much as over 20% in the aftermath. Every time a reporter or an analyst speculated on a new segment that Amazon was looking to enter next, stocks in that sector would be massively sold off. In six years between March 2015 and middle of last year Amazon stock was up over ten-fold. Although the company was barely profitable and its stock was seen as overvalued, Amazon could do no wrong in the eyes of investors.

These days, it seems the e-commerce icon isn’t getting much right. Over the past year, Amazon has been a laggard among big tech stocks. On April 28, Amazon reported a loss of US$3.8 billion ($5.3 billion) — its first quarterly loss in seven years. The e-commerce giant lost US$2 billion during the quarter in costs due to excess capacity, another US$2 billion due to operational inefficiencies and surplus labour and US$2 billion more from higher inflation. Investors hammered its shares. Amazon stock tumbled 24% in April alone — its worst month since the 2008 global financial crisis. This month, Amazon shares are down another 15.4%.

In the January-March quarter, Amazon’s revenues grew a paltry 7% compared to the 44% growth in the year-ago period, in line with similar low growth at social media giant Facebook owner Meta Platform, 9% revenue growth for iPhone maker Apple, 18% revenue growth for software behemoth Microsoft and 23% sales surge for search engine Google’s parent Alphabet Inc. Once the fastest growing of the big tech players, Amazon now has the slowest growth among its peers.

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