Is Amazon's Growth Slowing?
Amazon is a massive company that’s sacrificed margins for years in exchange for greater growth. That’s been a very successful strategy as it’s grown to handle roughly one-half of the U.S. e-commerce industry. But there have been signs that growth could be nearing a point where they are no longer able to expand cost-effectively. Here are the three clues that stand out the most.
- One day shipping wasn’t as helpful as Amazon thought it would be. In fact, it was actually harmful, causing fulfillment costs last quarter to rise 23%, while global shipping costs were up 46%. All of that wasn’t due to one-day shipping, but clearly some was and it shows this was not a path to profitable growth for Amazon.
- Amazon Web Services, the cloud computing arm of Amazon, has been a cash cow for Amazon for some time, and it still was in the past quarter, but there were signs that operating margins are being squeezed, and that market share is under pressure. While Amazon’s market share fell slightly, rivals Microsoft and Google both saw share growth.
- Amazon.com isn’t the destination it used to be. Consumers are increasingly saying they like shopping at other online sites, and those shopping six or more times a month at Amazon fell from 80% two years ago to just 40% this year.
Each of these things by themselves could mean nothing, but together they add up to signs of trouble for Amazon. Analysts haven’t said anything yet, but only because slowing growth at Amazon isn’t a popular opinion.
