Amazon sold $61.09 billion worth of stuff last year, but they managed to lose $39 million doing it

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When Amazon announced it’s fourth quarter earnings, you’d think they were doing pretty good. The company made a profit of $97 million last quarter on sales of $21.27 billion, and the sales which are up by 22 percent from the same time last year. But if you look at the entire 2012, the bigger picture, Amazon sold $61.09 billion worth of stuff during the year and managed to accumulate a net loss of $39 million. That’s a ridiculous gap between what it sold and earned.

Gizmodo notes that one of the culprits is the company’s Kindle Fire HD. While it remains the best-selling item among customers, the device is a loss leader.

So is Amazon messing up big time here? Actually, they aren’t. In fact, they’re doing exactly what they do best. Even if each Kindle Fire HD is sold at a loss, it gets people to use Amazon services. Things like Amazon Prime, and just simply buying all their stuff from Amazon. It’s the ecosystem they’re pushing here, and even if that means a strange-looking balance sheet now, it should all pay off in the future. Or so the idea is. Only time will tell what happens.

[via Gizmodo, BusinessWire, image via Aurelijus Valeiša

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7 comments

  1. Mike

    @sgrams: Amazon Customer Service truly has come far from the early days, when the telephone number to contact Amazon wasn’t even published. Its Customer Service now is at an “A” or “B” level, and should be looked at as a standard.

  2. sgrams

    Just within the past two weeks: I ordered some coffee for my Mom, I was with her and she picked out what she wanted on their website and I ordered it on my credit card, when it was delivered she opened it and brewed one of the K-cups then realized it was decaf, she called me-I checked out the order receipt I received and sure enough we ordered the decaf, I called Amazon and was told the coffee is an item not returnable but I would be fully reimbursed and we could do what we wanted with the decaf! of course I ordered the correct item right away and I’ve been telling everyone I can how well Amazon treats their customers. Amazon not only paid for the coffee but shipping too, money can’t buy this type of advertising.

  3. Donna

    That balance sheet is after all paychecks, bonuses and draws are taken. Believe me, the real Amazon people lost nothing. They made plenty of money. But most importantly, (I have to remind myself of this) is that it kept people employed.

    Maybe I lost the theme of the article a bit, but actually my point is the balance sheet loss is after all bills, including paychecks is the finale number.
    So those phones did not really hurt. They helped and will undoubtedly do so in the future.

  4. Ashraf
    Mr. Boss

    One thing that must be realized that retailers always have an extremely low margin. They operate on the business model of high volume, low margin. Amazon may be online, but it is still a retailer. While last year was a but of an anomaly thanks to Kindles, Amazon typically has roughly 1% net profit margin. So selling billions of products but only making millions is the norm for Amazon. Plus Amazon is one of those companies that like to “invest in the future” and look for long term company viability over short term profits.

  5. Seamus McSeamus

    I don’t know how much we spend with Amazon, but it’s a good chunk of change each year. For paper towels and other bulk items it’s so convenient to have it delivered to your door.