Amazon’s record holiday shows consumers’ spending appetite

Bloomberg

Amazon.com Inc reported a record-breaking holiday season as shoppers loaded their online baskets with items from Echo speakers to Calvin Klein clothes, suggesting consumer optimism isn’t being deterred by a tumbling stock market.
The internet retailer said “tens of millions of people worldwide” signed up for its Prime service, which offers free two-day shipping on millions of items as well as video and music streaming. In the US alone, more than 1 billion items were shipped for free using Prime, Amazon said.
The US was already headed into a blow-out Christmas shopping spree, as Americans are benefiting from higher employment and wages, fuelling higher household cash flow. Consumers seemed to be merry despite a S&P 500 Index that has tumbled, a government shutdown that’s entering its fifth day and ongoing trade tensions with China.
Amazon wasn’t the only one benefiting from an insatiable consumer appetite. Mastercard Inc. and Visa Inc. rebounded after four days of declines. Brick-and-mortar retailers also gained. Nike Inc, Macy’s Inc, Kohl’s Corp and PVH Corp were all higher mid-morning in New York.
People bought “millions more” of Amazon’s own devices compared with last year, including the new Echo Dot speaker and the Fire TV Stick, the Seattle-based company said. At the same time, Amazon said more than 50 percent of items sold in its stores came from small and medium-sized businesses.
Among the most popular items under the Christmas tree were the L.O.L. Surprise! Glam Glitter Series doll, Bose Corp wireless headphones and clothes from Carhartt Inc. Other popular brands bought through Amazon’s Prime Wardrobe service, which allows consumers to fill a box with selected items and return anything that they don’t want, included PVH Corp’s Calvin Klein, and Hanesbrands Inc’s Champion.
Amazon started the shopping frenzy out strong, with November’s Cyber Monday already pegged as the company’s biggest shopping day in history. Along with the Christmas sales report, the picture seems much brighter than Amazon had initially projected in its latest earnings results. In October, Amazon’s revenue and profit forecast for the holiday quarter fell short of analysts’ estimates, as investors worried about Amazon’s increased pace of spending.
While Amazon has expanded into almost every area of retail, from pharmaceuticals to groceries, its more profitable units are cloud computing and advertising. Still, Amazon, which dominates e-commerce in the US, has relied on the growth of its Prime members, who pay $119 a year for the service. Recent estimates put subscribers at just under 100 million in the US. Amazon didn’t give any new numbers for Prime subscribers in its statement, but said millions of unique items in the US shipped with Prime.
That kind of volume presents a challenge for logistics services like FedEx Corp. and United Parcel Service Inc. In 2013, a larger than expected surge in last-minute online shopping caught UPS off guard and forced it and Amazon and other retailers to offer refunds to customers who didn’t receive their orders on time for Christmas.