Forget the tech backlash – Amazon has just had a record holiday season!
If you only read headlines, you might have felt like it was all doom and gloom for the tech sector in the last part of 2018. But don’t be fooled – underlying business remains as strong as ever. The most recent proof of this comes from ecommerce giant Amazon, which has just had a record-breaking holiday season. For investors worried about the company’s ability to increase sales, or sign up new members to its wildly successful Amazon Prime membership scheme, this is welcome news indeed!
Over the last five days of 2018, Amazon’s share price soared
Source: Yahoo Finance
Plenty of observers were concerned about consumer sentiment going into the holidays – but by December of last year, their warnings were already looking hollow. Despite a government shutdown in the US, the continued trade war with China, the shadow of Brexit on the horizon, and stock market worries, consumption has remained in rude health. And Amazon, perhaps more than any other big name, has reaped the rewards.
The company said that “tens of millions of people worldwide” signed up to its Prime service over the holidays. That’s important: Prime is a growth engine for Amazon, as customers who sign up find themselves drawn into Amazon’s incredibly sticky ecosystem, buying more thanks to the free shipping, and experimenting with Amazon Video and Music. It’s also important because, just months ago, some analysts were questioning whether Prime had much more space to grow. In the US alone, over a billion items were shipped to Prime customers.
Growth over the period seems to have been well distributed. Amazon said it shipped “millions more” of its own devices (Echo speakers and the like) than it did in 2017. This bodes well for a company that is developing its own entertainment platforms, and sees its connected devices as the way into customers front rooms. Despite that, many third parties fared well: as much as 50% of Amazon’s total sales over the period came from small and medium-sized businesses. With other companies, like Mastercard, also seeing strong figures over the holidays one thing is clear: whatever’s happening in the market, consumer-facing businesses are cleaning up.
Dominion holds Amazon in its Global Trends Ecommerce Fund.
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