“Ecommerce Briefs” is my occasional series on news and developments from online merchants. In this installment, I’ll decipher Amazon’s Q2 2017 financial results and its recently-announced returns policy for certain marketplace sellers. I’ll also address Walmart’s expansion of its successful in-store pickup program.
After all the recent news about Amazon’s successes and expansion — 2017 Prime Day and the planned acquisition of Whole Foods — the company’s second quarter financial results, for the period ending June 30, let a bit of air out of the balloon.
While revenue for the quarter was up 25 percent over the same period last year — higher than forecast — profit missed Wall Street’s expectations. Amazon’s increased expenses were responsible for the 51 percent decline in operating income, from $1.29 billion for Q2 2016 to $628 million in Q2 2017.
Fulfillment expenses, especially Fulfillment by Amazon, were up 33 percent for the quarter. Marketing expenses increased 44 percent. Technology and content (mostly video production) shot up 43 percent. General and administrative expenses surged by 51 percent.
After some initial skittishness, Wall Street again embraced Amazon’s strategy of robust spending to maintain revenue growth. The year-over-year share price is up roughly 30 percent, to nearly $1,000, at time of writing.
Amazon Web Services, the cloud-computing provider, was a bright spot, contributing an increasing percentage of revenue and profit because its gross margins are higher than other business segments. Amazon Web Services is the company’s main growth driver, growing 42 percent over the same quarter last year.
In its guidance for next quarter, Amazon is giving a very broad range, predicting operating income between a $400 million loss and a $300 million profit.
Last week Amazon announced a new returns policy that lets customers return products purchased from marketplace sellers who are not part of the FBA program — without contacting the sellers. The policy also includes a “returnless refunds” feature that makes certain products that are expensive to ship eligible for refunds without being returned by customers. This is an opt-in program for sellers; they do not have to adopt it. The…