Amazon is Ready…are You?

I was actually shocked when I read that Amazon did not meet the expected forecast set by analyst for the upcoming 2014 pre-holiday holiday quarter. Amazon’s forecast on their first phone, the fire smart phone, was not a success either. In reality, there was not a demand for the phone and that is what cost them $170 million dollars in inventory charges. There were several attempts to push the phone out to customers and those were based on the firefly functionality (which could detect movies, music, etc) and giving a year membership for amazon prime. On the international level, it was not successful either due to the fact that there were new online taxes enforced in such countries like Japan, a technology icon.

Behind the scenes, one of the major reasons that Amazon reported losses for the third quarter is because they were actually getting ready for the holidays. In other words, they are spending the money to acquire the resources necessary to be ready for the 2014 holidays. Because of course, we all want our holiday gifts to be in stock and arrive on time. A great portion of that spending is heading out to their new labor force which consists of 80,000 seasonal workers in the United States alone. That happens to be 10,000 more workers hired in comparison to last year.

Because the holidays typically revolve around technology and the latest games available, Amazon introduced five new kindle tablets. In my opinion, more importantly, they planned and recently acquired Twitch, a live video game streaming site that accounts for over 40% of the video streaming traffic world. I think this is huge because it opens up the doors to the kindle tablet platform. Once an update goes through, Amazon is a great contender to relieve Netflix from its number one position for video streaming.

It obviously looks like Amazon is ready to take on this upcoming 2014 holiday season. It’s really interesting to see how forecasts are looked at from different angles. On one hand, we have analysts who said that Amazon would sell a certain number of dollars and when it doesn’t, Amazon could lose some market share. However, when we look at it from the Amazon business perspective, they spent the money to make sure this holiday season is very successful for, them and us, the consumer.

For us Chicagoans, Amazon is going to be very close to home because Amazon could be bringing a warehouse to Illinois by 2017. That’s going to be huge for those who already consider Amazon to be their best friend when it comes to making purchases.


What do you guys think about Amazon’s forecasting techniques?

Does the fact that they reported significant loses mean anything to you and how you shop?

Does Amazon happen to be your go to place for past holiday seasons?

What’s your take on their new streaming services purchase?


11 thoughts on “Amazon is Ready…are You?

  1. Wow, I’m shocked mostly because I have never even heard of Amazon’s Fire Smartphone, and I use amazon frequently. If they are not experiencing results that they predicting, they should look at different ways of forecasting. I would think forecasting would be much easier for an online company because they could forecast based on preorders and page views and more.

  2. Nice post! I think that Amazon usually has great forecasts because of how efficient they are and able to source products quickly from other sellers if needed. I think they really missed with the Fire Phone by keeping the specifications lower than the competition and adding in unnecessary functionality that most consumers do not need or already have. There are plenty of apps that can scan playing music to tell you what the song is and even TV shows and movies. In addition, keeping the phone exclusive to AT&T was a mistake as well because Amazon effectively limited the possible customers to about 1/4th of the smart phone market. They should have learned a lesson from the Facebook phone which was also an exclusive and without any real benefits over the competition. I personally like Amazon and shop there often so it is sad that they missed so greatly but I am sure they will bounce back during the holidays.

  3. I am a frequent shopper on Amazon. I have a Prime membership and make most of my online purchases through Amazon. The fact they reported losses will not stop me from shopping there, what will potentially stop me is the addition of a Illinois facility. Having the facility in Illinois means we now have to pay taxes on purchases on Amazon, this added cost may make other websites more competitive and I may move some of my purchases to the other websites. I think the purchase of Twitch was an intriguing move because I am i interested to see how they incorporate their Amazon services to the video game streaming site. Maybe they will have a link on the page you are watching that directs you to the video game. I think that would be a cool feature.

  4. I think statistics and figures definitely overpower speculation, in this case. While I admire Amazon’s efforts and can see as a consumer they are attempting to keep up with the trends, their low forecast for this holiday season seem to overshadow that. Netflix has been dominating the video streaming industry, and while other competitors such as HBO have made an appearance, in no way have they dipped into the market of Netflix. I predict Amazon to have a significant holiday season, however not through their latest additions of kindles and smartphones.

  5. HI. Edwin. Your posting also surprise me. I always feel like Amazon is a big company, their profit must be very good. In my opinion, if they cannot catch up their forecast, there must be two reason, one is because their sale volume is really bad. The other reason is because their forecast way is wrong. They have to change the way. For the first reason, they have to think about other marketing and management strategies to fix out the problem so that increase the sales revenue. They can do some special event on seasonal period. For example, beach stuff on sale at summer season. That will absolutely increase the buying inclination of people

  6. This post was a great read. I was really surprised to find out that Amazon’s forecasting technique was not as accurate as they expected. I would assume that a company with as much money and power as Amazon would have some of the best analysts in the country perfecting their forecasting techniques. I don’t think that Amazon taking a loss in the third quarter will affect the way I shop with them. This is due to the convenience and excellent pricing Amazon provides. They were actually using the “lost money” to invest in the right resources to be ready for the holidays. That means I can have confidence that if I order a product from Amazon, it will get to me before the holidays. Also, I use Amazon throughout the whole year, not just during the holidays. Additionally, Amazon’s streaming capability is very impressive and might become better than Netflix. It’s amazing that Amazon is providing video and music streaming. Finally, I am really excited that Amazon could be bringing a warehouse to Illinois. This would make the ordering process even more efficient for us.

  7. This is a great topic! Amazon is one of the largest online retailers and it’s a fact that as a company they haven’t been profiting for a good while. So it brings me to a question of why a company would invest in a competitive market of cellphones. I think Amazon should invest more to their actual shopping experience like their personalization systems rather than creating new tech products. After all, Amazon generates approximately 37% of their revenue from product recommendations. However, investing in cellphones and new tech products just creates more costs especially when competing with Apple and Android. I believe the demand for the use of BIG DATA analyzing is increasing and especially for E-Commerce businesses it plays a huge factor on their revenue. If online retailers like Amazon keep pushing to enhance their existing data relationships for their product recommendation and try to create new data relationships would help meet their financial goals more effectively.

  8. I remember the fuss over Amazon’s phone and completely forgot about it until now. It’s sad that it didn’t work out for them as planned, but it was something that they should have expected, since the market is nearly dominated by iphone and android devices. I believe that this is just a tiny step back for Amazon considering how strong the company has become over the past fives years or so. Amazon is a creative, extremely organized and reliable company. I see nothing but a bright future for them.

  9. Interesting post Edwin! I don’t think because Amazon reported losses this will stop me from shopping. There’s no better place to shop during the Holidays than Amazon, I’ll avoid the chaotic malls at any expense. Something I found extremely fascinating about your post was learning about the Fire smart phone, I never knew that Amazon had produced their own phone.

  10. It doesn’t surprise me that Amazon’s firephone did not do well for the simple fact that Android and Apple dominate the smart phone market. I love amazon and the services they provide. It seems like the are trying to expand to many different markets, but are struggling to become a powerhouses in those new markets. I definitely see Amazon as one of my last minute shops, as they have literally everything and provide fast shipping. Nice article!

  11. Amazon has long reported losses for their quarters and even had a material loss (I think) in 2011 year-end. They tend to sacrifice the short term profits for the long term growth. Obviously, this has served them well. Their current costs, I think, stem from being in so many different markets (groceries to original video content), however they are wildly successful, reliable, and loyal to their consumers. They have been my go to place for any of my shopping needs, and while it is sad their stock price takes a hit every so often, I think they have positioned themselves very well for the future.

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