Did Someone Forget To Tell Amazon About The Recession?

Written by Evan Schuman
April 25th, 2008

We’ve been seeing a bizarre trend this national recession. It seems to be hitting hard the companies that expected to be hit, the ones that cut back spending in anticipation of the downturn. Lo and behold, after cutting back on customer service and marketing programs, they see revenues fall. Did they correctly predict the sales drop or did they unintentionally cause the sales drop?

This question comes to mind when looking at some recent earnings reports. Wal-Mart’s been faring well, but it points to increased grocery and other low-cost items, suggesting that they may be taking sales away from higher priced grocery rivals. That might be a recession sign.

But this week’s Amazon figures raise questions about such analysis. On April 23, Amazon reported a quarterly profit boost of 29 percent (to $143 million) based on quarterly sales growth of—wait for it—37 percent.

You can’t argue that Amazon’s book sales (which climbed some 28 percent to $2.54 billion) or its electronics items (which soared 56 percent to $1.48 billion) are either essentials or that they’re merely taking sales away from others.

Is it possible that someone forgot to tell Amazon about the recession? Or is this "recession" a wonderful example of mind-over-matter?

The housing market slump is real. No question about that. But even Home Depot, which bills itself as the world’s largest home improvement retailer, saw a revenue boost in its most recent quarter, albeit an anemic 1.5 percent hike.

The second largest home improvement player, Lowe’s, was slightly worse, seeing a quarterly revenue decline of about one-third of a percent.

But will that soon pick up, as consumers unable to buy a new home decide instead to start fixing the old one?

With the kind of numbers that Amazon is racking up, this recession doesn’t appear to be nearly as widespread as many have suggested.


One Comment | Read Did Someone Forget To Tell Amazon About The Recession?

  1. Paula Rosenblum Says:

    Our data supports this notion completely. Our soon-to-be-published benchmark report, “The Customer-Centric Store 2008” tells a fairly similar tale (based on a respondent pool of more than 125 retailers).

    Retailers who were doing well are continuing to invest and do NOT see the economy as a key business driver. Retailers that were on the bubble….well, we’ve been saying the country (and this survey pool is about 70% US, I think) is over-retailed for years. Results are not really all that surprising (even though they are sad). I keep calling it a “thinning of the herd”.

    As always, Retail Winners have a very different mind-set than their competitors. They don’t just sell more merchandise, they think differently.


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