Skip to Content

Amazon just gets bigger and bigger

2 February 2009

Amazon has just announced an increase in sales of 18% to $6.7 billion (£4.6bn) in the last quarter. Its net income rose 9% to $225 million (£155m), above analysts' expectations, and it was a truly amazing result in relation to the sharp downturn shown by virtually every other retailer.

The company's 'media' sales from its US business are now $5.35 billion (£3.68bn)for the year, making it for the first time larger than the leading offline US booksellers Barnes and Noble by hundreds of millions of dollars.

So, how does Amazon use its power? Its credo of delivering great service at a great price has won it millions of customers across the globe. It's hard to remember what it was like when the only way you could find an out-of-the-way book was to search it out in a large bookshop and, if that failed, to get them to order it for you - a rather laborious process in those days, although potentially much faster now.

Amazon drives a hard bargain with publishers. Its dispute with Headline in the UK over its demand for improved terms simmers on (News Review 10 November). There were rumours in the UK of Amazon driving its employees hard, and of temporary Christmas staff who got sick being punished. The business is very driven and the culture doesn't have much time for those who can't keep up. The company receives nearly one million orders a day from around the world and has successfully expanded its range out of books and music to make itself into the biggest global online retailer.

There don't seem to be detailed figures available yet, but it looks as if book-buyers switched to Amazon in even greater numbers this Christmas. Other factors may have played their part but there was really one simple reason for this - it was possible to buy just one book and get free delivery. Given the company's income from delivery charges, this must have delivered a massive hit to their overall margins, but the big increase in volume made it worth it.

The Kindle has always been the killer application and there are signs that Amazon may be about to announce Kindle 2 ... slightly strangely given that it has still not launched the existing device outside the US. Comfortingly, CEO Jeff Bezos says: 'We see that when people buy a Kindle, they actually continue to buy the same number of physical books going forward as they did before they owned a Kindle. And then incrementally, they buy about 1.6 to 1.7 electronic books, Kindle books, for every physical book that they buy.'

Now that there are 225,000 titles available from for download onto the Kindle, the moment may be right to launch it worldwide with a huge catalogue available - although to offer the same versions outside the US would run roughshod over considerations of territorial rights.

Whichever way you look at it, Amazon is in an unassailable and hugely powerful position. Let's hope it doesn't use this power to act in ways that would be detrimental to the book business which has been the foundation of its success.