Amazon.Com Sales Booming, But Losses Reach $124.5 Million

Just after the close of the stock market, Amazon.com, Inc. (Nasdaq: AMZN) announced its financial results for the fourth quarter of 1998, and for the 1998 fiscal year. From the timing of the release, it appears that the company wanted stockholders and industry analysts to take their time in evaluating the mixed news released on Tuesday.

And, rightfully so…

On the one hand, Amazon reported that net sales for the fourth quarter reached $252.9 million (US$), representing an increase of 283% over net sales of $66 million for the fourth quarter of 1997. Total net sales for fiscal 1998 were $610 million, a 313% increase over net sales of $147.8 million reported for fiscal 1997.

The company also reported that the cumulative number of customer accounts increased by more than 1.7 million during the fourth quarter, to over 6.2 million as of December 31, 1998, representing an increase of over 300% compared to 1.5 million customer accounts a year before.

Industry Focus

One of the most significant elements in Amazon’s announcement was that repeat customer orders represented more than 64% of orders placed on Amazon.com during the fourth quarter of 1998. This is good news both for Amazon, as well as for the e-commerce industry as a whole, because the high rate of repeat online shoppers indicates:

On a basic level, that a large number of new online shoppers are viewing the experience as positive and, therefore, coming back for more.

That online shoppers are displaying brand loyalty to specific stores like Amazon.com, which offers a combination of a wide selection, competitive pricing, transaction security and customer service.

Holiday Sales Results Announced

Amazon enjoyed a very merry e-Christmas, indeed. In defining its holiday season as starting on November 17 and lasting until December 31, these were the results:

More than 1 million new customers shopped with Amazon.com for the first time during the 1998 Holiday season.

Amazon.com shipped more than 7.5 million items — more than the company shipped during the entire year of 1997.

The company experienced peak shipping of more than $6 million in one day.

This year’s holiday sales quadrupled over the 1997 holiday sales.

What’s in Store for 1999?

According to Amazon.com founder and CEO Jeff Bezos, the company will be on the move again, this year, with a major expansion of its distribution infrastructure. “We must ensure that we can support all the sales that customers demand, with speedy access to a deep product inventory,” Bezos said.

As a next step in its expansion plan, Amazon.com obtained a highly mechanized distribution facility in Fernley, Nevada. According to the company, the Nevada location will reduce standard shipping times to key markets in the western U.S. by a full day. Additionally, the 322,560 square-foot facility will allow Amazon to significantly increase the number of books, CDs, and videos kept on hand for immediate shipment to customers.

The result is that customers in such places as Los Angeles, San Francisco, San Diego, Phoenix, and Houston will receive their orders much faster, thanks to greater availability, faster processing, and shorter delivery times. The distribution center is expected to begin operations during the first half of the year.

Resellers, Partnerships and Alliances

Amazon.com continued to expand its presence on the World Wide Web through its growing ties with other Web sites. The company’s Associates program, in which Web site operators receive referral fees for sales generated by their sites, has now added over 200,000 Associates.

The company also secured its presence on several high-traffic sites, including marketing arrangements with Microsoft and CBS SportsLine. Amazon.com became CBS SportsLine’s online retail partner for books, video, and music in a newly launched, co-branded store on the CBS SportsLine site. The company also signed an agreement making Amazon.com the Premier Music Merchant on Microsoft’s MSN Shopping Channel.

Other Amazon Tidbits

With the addition of music CDs, videos, and an ever-growing selection of book titles, Amazon.com reached a total of 4.7 million titles for sale during the fourth quarter of 1998.

1998 was a year of overseas expansion for Amazon, with the October launch of online stores based in the U.K. and Germany. The company reported that combined sales in Europe nearly quadrupled over the third quarter, establishing Amazon.co.uk and Amazon.de as the No. 1 online booksellers in their markets.

In addition to its book sales, Amazon announced that its music sales grew to $33.1 million, and although Amazon declined to state a specific dollar amount, the company described its video sales as “strong, following the [music] store’s opening on November 17.”