Amazon Is Plummeting by 13% — and It’s Still Going Down. What’s Going on With the Retail Giant?

Things seem less than stellar for the retail giant Amazon, which was very successful when it posted earnings for the first quarter of 2022.

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Shares fell 12% in the early hours of Friday afternoon after the company announced a quarterly net loss of $ 3.8 billion. At the same time last year, the company had made a profit of $ 8.1 billion.

Global revenue grew 7% year-over-year to $ 116.4 billion, but Amazon estimates revenue for the next quarter will fall.

So what happened?

Here’s what contributes to the fall of Amazon.

A failed investment

In 2019, Amazon was part of a $ 700 million investment in electric truck maker Rivian Automotive. It has been reported that the online retailer provided “most” of the financing, although the company did not disclose exactly how much was invested.

At the time, Rivian was launching a van and an SUV with skateboarding technology that allows off-road driving on various terrains, and the future looked bright for Amazon as it sought to expand its delivery fleet.

In November 2021, Rivian went public and went down quickly. The company’s value has dropped more than 75% since its initial debut, and Amazon is certainly being the heat of the failed investment.

Amazon said in its earnings report that the company has lost about $ 7.6 billion this quarter as a result of Rivian’s failures.

Related: Amazon raises prices for major members once again. Is it still worth it?

A post-pandemic frenzy decline

Undoubtedly, the peak of the pandemic was a turning point (no pun intended) for Amazon’s business, as many went to the website to stock up on toilet paper and household items while experimenting. with fun and different articles going viral on social media like TikTok and Instagram.

In the third quarter of 2020, when the pandemic was in full effect, the retailer saw a 37% increase in quarterly revenue. Overall, in 2020, the company’s net sales increased 38% year-over-year, to a total of $ 386.1 billion.

As the pandemic has subsided, the end of the first quarter marks a period of time in which many are returning to “normal” life as mask mandates are lifted and social distancing guidelines have been eased or decreased.

Combine that with the increase in Covid cases during the holiday season in the fourth quarter (which brought many home and preferred to shop online), it’s not a big shock that there has been a drop in revenue.

In short, demand is not as high as it used to be.

Supply chain problems and rising inflation rates

Almost all companies have suffered the effects of continued supply chain problems and shortages as a result of the pandemic. But the recent escalation of the conflict between Russia and Ukraine has only worsened these problems, as well as contributing to rising inflation rates and business costs that are affecting retailers small and large.

“The pandemic and the post-war war in Ukraine have led to unusual growth and challenges,” Amazon CEO Andy Jassy said in a statement from the company. “Today, as we are no longer pursuing physical or staffing capabilities, our teams are directly focused on improving productivity and cost efficiency across our entire compliance network. We know how to do it and we’ve done it. This may take a while, especially as we work with inflationary pressures and the current supply chain pressure, but we see encouraging progress in a number of dimensions of the customer experience, including speed performance. delivery, as we are now approaching levels not seen since the months immediately preceding the pandemic in early 2020. “

Earlier this month, the company announced it would implement a 5% “fuel and inflation” tariff on third-party vendors instead to try to offset rising costs.

It was released on Thursday.

Related: The new pandemic and its effects on Amazon aggregators

Increase in fees for loyal members

Amazon Prime members also felt the heat of inflation-related pressures this quarter.

Earlier this month, Amazon raised Amazon Music Unlimited prices for Prime members by $ 1.

This came after a price hike in February that left Prime members looking at an annual increase of $ 119 to $ 139, with monthly subscriptions rising from $ 12, 99 to $ 14, 99, which caused a “cancellation” of the company’s social media that left customers angry.

In the late hours of Friday afternoon, Amazon continued to plummet, 14% over a 24-hour period.

Related: Amazon Prime completes acquisition of Metro-Goldwyn-Meyer (MGM)

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