SEATTLE – Amazon.com founder Jeff Bezos has a legendary belly laugh, and his company has gotten very good at delivering gifts in time for Christmas. But he’s no Santa Claus.
Last year, the company’s mantra was “deliver at any cost.” It held true on both accounts – more than 99 percent of its orders were delivered in time for Christmas, and it lost $323 million in the fourth quarter doing it.
This holiday shopping season, having proven it can deliver on time, Amazon.com must now prove it can do it efficiently.
“This year is just as much about delivery on time, but we’re saying ‘deliver with grace and style’ instead of ‘deliver at any cost,’ ” said Jeff Wilke, Amazon.com’s senior vice president of operations.
Wall Street will be watching Amazon.com to see if it can keep its troubled but improving finances firmly on a path toward profitability. But most analysts aren’t worried about whether Americans will return to the Internet this year after many online retailers – Amazon not included – failed to have gifts under the tree by Christmas morning.
“From the studies I’ve seen, we’re expecting a huge jump in the number of first-time online buyers, and up to 95 percent of returning buyers from last year,” said Tom Wyman, electronic commerce analyst at J.P. Morgan. “They could conceivably have revenues hit the $1 billion mark for the quarter, and I even think there could be some upside beyond that.”
Last year, Amazon.com made $676 million in the fourth quarter. This year, Wyman said increased efficiency, newly popular products and simply more Internet users will help the company’s results.
Also helping Amazon.com is its reduction in overall discounts. Bestselling books, once up to 50 percent off, are now 20 to 40 percent off, while everyday books that once enjoyed discounts up to 30 percent are now discounted in the 10 percent range.
Yet another bright spot is Amazon.com’s recent agreement to run an online toy store with toysrus.com, the Web arm of toy retailer Toys ‘R’ Us. Amazon.com will be in charge of ordering and shipping, while Toys ‘R’ Us – hit with a class-action lawsuit by unhappy shoppers after delivery problems last Christmas – is handling inventory and will absorb any overstock costs.
Amazon.com overstocked last holiday season and was forced to take a $39 million charge.
“It still feels the same, but just bigger,” said Amazon toys general manager Harrison Miller of the newly merged online toy stores. “Our fundamental challenge is a logistical one, but this merger really plays to both our strengths.”
In addition, while Amazon continues to build new distribution centers in Europe and Japan, Wilke said the company has gotten the kinks out of its five U.S. distribution centers – some of which were being built during last year’s holiday rush.
“Some of us were packing boxes and wearing hardhats because it was a construction zone,” Wilke said.
Wilke said he and his staff started working toward improving efficiency in the spring and trained warehouse staff during the summer to make Christmastime operations run smoother.
However, the company’s Seattle headquarters staff will continue to make annual pilgrimages to distribution centers to help pack boxes – Bezos, Wilke and other executives included.
However, Wilke said the employee trips would be kept to just a few days.
“It really should be manageable this time around,” he said.
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