Amazon: A Lesson In E-Commerce Excellence

Amazon

Amazon.com Inc. trades on the NASDAQ under the ticker (AMZN). It is currently priced at around $1,165.40. For the year to date, the stock has appreciated by $400 from a price of $757. Amazon has a 52-week low of $747.70 and a 52-week high of $1,213.41. The price/earnings ratio is to 97.06 with a $3.92 earnings-per-share and a 1-year target estimate price of $1,258.16.

Amazon’s Performance in 2017: All this number-crunching is indicative of the success of the world’s premier e-commerce operation. From an analyst’s perspective, Amazon has shifted expectations across the board. Only once in 2017 did Amazon fall short of forecasts when the actual earnings came in at $0.40 and the estimated earnings were forecast at $1.42 (Q2 2017). The estimates for Q4 2017 are $1.85, and the next earnings date is slated for January 31, 2018 – February 5, 2018.

In terms of revenue and earnings, Amazon has consistently improved its revenue streams since 2014 when they were $88.99 billion. In 2015 revenues increased to $107.01 billion, and by 2016 they grew to $135.99 billion. Earnings were negative 3 years ago at $-241 million, improving to $596 million in 2015 and $2.37 billion by 2016.

On a rating scale of 1.0 (strong buy) – 5.0 (sell), the overwhelming consensus among Thomson Reuters analysts is a buy at a rating of 1.8. Ratings agencies and corporations have consistently given the nod to Amazon Inc. In 2017. Raymond James, Citigroup, Nomura, Moffet Nathanson, and Evercore ISI Group have given a thumbs-up to the company.

What Makes Amazon A Success Story?

The Amazon business model has resulted in this e-commerce company becoming the world’s premier online marketplace. With Amazon, all goods are sold directly, and anyone who purchases through Amazon’s online marketplace will pay a small markup, while inventories are maintained with Amazon’s network of warehouses.

Contrary to opinion, the prices you pay on Amazon are more than if you bought them direct through the retailer. Of course, various Amazon services such as Prime offer free shipping (with a paid membership). Amazon also has partner sites that allow items to be tacked on with in-warehouse items which are not stored in Amazon warehouses. However, Amazon generates commission from these partner sites.

A big part of the Amazon business model is its Prime membership, and the other components include Marketplace, and Amazon Web Services. Here’s where things get interesting with Amazon: it operates globally and is involved in processing billions of dollars’ worth of transactions every year. Many of these transactions are not in USD – they are in GBP, JPY, ZAR, NZD, AUD, CAD, INR, and scores of other currencies.

How FinTech Is Reshaping The Amazon Paradigm For Sellers

Amazon currently has a currency converter that charges sellers 4%, but it is possible to enjoy greater savings by utilising services that allow for the creation of a collection bank account abroad. These accounts can then receive payments in domestic currency and then transfer it back to the account at a percentage of the total cost. These companies include OFX and WorldFirst with foreign exchange markups from as low as 0.5% – 2% based on volume.

The success of Amazon has facilitated the development of peripheral money transfer industries allowing businesses and individuals to save additional funds on the purchases of goods, and services across borders. Amazon has facilitated a global village of interconnected buyers and sellers. To drive further growth, reduce costs and expedite transactions, there are now multiple FX services for Amazon sellers available. These services are geared towards increasing profitability for sellers so that they can keep more of every sale. It’s a win-win for everyone.

Jeff Broth

Jeff Broth, a business writer and personal finance advisor. Consulting for SMBs and entrepreneurs for over than 7 years.