Amazon.com, like Google, defies economic worries
Jeff Bezos can safely unclench his legs. Amazon.com reported first-quarter earnings of $143 million, up 29 percent from the same quarter last year, on sales of $4.14 billion, up 37 percent. Wall Street dithered over the forecast, sending shares down in after-hours trading, but the underlying reality is this: Amazon.com, already large, is growing at a prodigious rate at a time in its life when most expected it to slow down. And the growth had little to do with digital sales or Web services. No, people are simply buying more online, more often. CFO Tom Szkutak said the company saw no signs of a recession in U.S. shoppers' buying behavior. How can that be, as other companies complain of economic woes?
Like Google, which also claimed to see no dark clouds on the business horizon, Amazon.com made a good, long-term bet. The ongoing shift to e-commerce obscures any short-term business-cycle bumps.
Also, Amazon.com's customers tend to be wealthy, and in America's bifurcated economy, the well-to-do are feeling the pinch less than the poor. (Wal-Mart shoppers choose between gas and groceries; Amazon.com shoppers choose between Starbucks and steak.)
There are other reasons, such as the winner-take-all nature of the Web. Google may have created a theoretical level playing field for online stores. Who needs to go to a one-stop shop when you can just search for what you want to buy? But the reality is that search is a tedious way to buy things online, and going to one store is convenient. That one store, for most people, is Amazon.com, and no one else has come along with a site worth changing that habit for.
The thing that's helping Amazon.com the most, I think, is simply the adoption of broadband. Fast Web connections make it quicker to buy something online than to drive to a store. And the longer someone has been an Internet user, the more likely they are to shop online. For the Facebook generation, it's second nature. Until broadband hits saturation in the U.S. and other markets, Amazon.com will have a powerful growth engine behind it. Bezos may like to talk about all the innovative things Amazon is doing, but the truth is, he can now afford to coast.