The secret to Amazon's success
The secret to Amazon's success is having a "future-focused" strategy, and the retailer's first quarter results underscore just how successful that strategy has been.
Amazon CEO Jeff Bezos revealed the strategy recently as the company reported record profits of $1.6 billion for the first quarter ended March 31, sending shares of its stock soaring to an all-time high. Overall Q1 sales at Amazon rose 43% to $51 billion, up from $35.7 billion a year earlier.
Bezos, speaking at a Forum on Leadership panel (a must-watch interview for every retail and CPG leader), said that focusing on the present is no way to run a business. He attributed his company's success to having a future-focused mindset — one that he works to instill in his direct reports and senior leadership.
"They need to be able to look around corners," Bezos said, adding that he is not focused on day to day operations. He is focused on thinking about what's coming ahead, three or five years from now.
And in fact, Amazon's future-focused cloud computing business, Amazon Web Services, and its advertising division are both now driving financial milestones for the company. Just this year, Amazon has hit new thresholds for its stock price, paying subscribers, cloud computing sales and profit.
Bezos revealed in a shareholder letter last week that there are now more than 100 million subscribers for Prime. Amazon Web Services now has a $20 billion annual revenue run rate, Bezos wrote in the same letter.
The company is planning to help offset the rising costs of investments like original programming by raising the price of Amazon Prime. The price of the subscription offering will go from $99 to $119 per year starting next month.
"The Prime program continues to drive great strength to our top line,” Brian Olsavsky, Amazon’s chief financial officer, said in an earnings call with analysts. But, he said, the company is seeing "rises in cost" for providing Prime services, which include shipping perks and video streaming.
Shares of Amazon spiked as much as 7 percent to a record $1,619 in after-hours trading Friday.
“Amazon continues the trend of investment-fueled revenue expansion,” Charlie O’Shea, lead retail analyst for Moody’s, wrote in a note to clients. Cash flow “remains formidable, buttressed by $25 billion in cash and short-term investments, providing ample cushion as the company continues to invest across its many platforms.”
Earlier in the week, the retailer announced it would extend its Amazon Key service to cars. The program, initially available to Prime members in 37 cities, is the latest effort by the Seattle-based company to make it easier for customers to receive online orders.