According to a recent report from eMarketer, despite a challenging year for retail in 2020, worldwide retail e-commerce sales grew 28% with sales exceeding $4 trillion. Total worldwide retail sales declined by 3% during the year and economies worldwide are facing recessionary conditions. But the pandemic and lockdown conditions have accelerated the spread of e-commerce. Growth is expected to continue even in 2021, albeit at a slower pace. Amazon (NASDAQ: AMZN) recently reported its fourth-quarter results that clearly benefitted from this growth.

Amazon’s Financials

Amazon’s fourth-quarter revenues grew 44% to $125.56 billion, ahead of the market’s forecast of $119.7 billion. Net income of $14.09 per share was significantly higher than the Street’s forecast of $7.23 per share.

By segment, net product sales grew 13.1% to $57.1 billion and net service sales increased 47.7% to $54.5 billion.

North American sales grew 40.4% to $53.7 billion, while international sales grew 57.3% to $37.5 billion.

Amazon ended the year with revenues growing 38% to $386.1 billion. Net income increased to $21.3 billion, or $41.83 per share, compared with net income of $11.6 billion, or $23.01 per share a year ago.

Amazon expects first-quarter revenues of $100-$106 billion with an operating income of $3-$6.5 billion.

Amazon’s Product Upgrades

During the quarter, AWS announced two smaller new outposts from factors, 1U and 2U servers that provide customers with access to AWS on-premises in small locations, such as branch offices, factories, hospitals, cell towers, and retail stores. It also announced the general availability of its product EC2 P4d instances, accelerated computing instances that are powered by NVIDIA A100 Tensor Core GPUs, and AWS petabyte-scale networking. It provides up to 3x faster training time and is 60% less expensive than the previous generation instances for machine learning training and high-performance computing in the cloud.

In hardware, Amazon announced the general availability of Ring’s Mailbox Sensor. It also launched customizable motion zones for all of its battery-powered video doorbells and security cameras. Ring’s geographical presence is also growing as Amazon announced the availability of the Ring Alarm in Spain.

For Alexa, Amazon announced its first Alexa built-in commercial trucking integration for Volvo Trucks in the EU, the BMW and MINI cars in Brazil, and several new vehicle launches in other countries. Amazon added bilingual capability to Alexa, allowing users to interact with it in two different languages, without having to change the settings. For the US, the new mode allows users to switch with a code from English to Spanish. It also launched the mode in several other languages and countries, such as Germany, Spain, France, Italy, and Japan.

The current pandemic has accelerated the transition to online shopping for the world. Despite its issues, the 2020 holiday season was the best ever for independent businesses selling on Amazon. These independent businesses are mostly small and medium-sized ones and their worldwide sales grew more than 50% over the year. Sellers surpassed $4.8 billion in worldwide sales from Black Friday through Cyber Monday, growing about 60%. During the holiday season, the SMB businesses in the US sold nearly one billion products on Amazon’s store.

Since the start of the pandemic, Amazon has been investing in its SMB focused offerings. It has increased square footage across its fulfillment and logistics network by 50% and dedicated 60% of fulfillment center capacity to seller products. It also postponed annual selling fee adjustments until June 2021. It launched small business accelerator programs across Europe to help entrepreneurs and small businesses. These programs offer free access to online training, expert advice, live events, and services. In December, Amazon India hosted Small Business Day, an event focused on increasing visibility and sales for entrepreneurs and small businesses selling on Amazon’s store. Over 55,000 sellers from over 4,000 Postal Index Codes in India benefitted from this event.

Last quarter, Amazon also launched its Pharmacy in the US. Amazon Pharmacy will bring prescription medications to customers’ doorsteps. Customers can now browse medications, create a secure pharmacy profile, and request or manage prescriptions on Amazon.com. It also launched a new Amazon Prime prescription savings benefit that brings pharmacy savings to customers who pay without insurance. These savings can be used at 50,000 participating pharmacies nationwide.

Jeff’s Transition

In a surprising announcement, Jeff Bezos announced plans of transitioning to the role of Executive Chair this year. Long-term Amazon veteran Andy Jassy will step in as the CEO. The most pressing question for Amazon is how will Andy run Amazon?

Andy comes with a background in cloud computing, and as an employee that built and ran AWS, and with comparatively limited exposure to retail. Some had expected another Amazon long-timer Jeff Wilke to get the position. Jeff had been in charge of running the retail segment – which accounted for over 40% of the quarter’s revenues. Jeff announced that he would be leaving the company, probably on account of him not getting the coveted position.

Andy will need a trusted advisor in the driver seat of Amazon’s retail. While Amazon may be doing spectacularly in revenue growth, there are pockets of concerns. Shoppers are worried about fake reviews that promote shoddy products, and there is the question of expansion into new and existing geographies while managing competition and legal regulations. The recent pandemic may have driven Amazon’s shopping volumes up, but it has also exposed tough working conditions in Amazon’s warehouses and Amazon’s stand on unionization and worker rights.

Also, with Bezos remaining in an executive position, he may continue to wield a lot of influence. Andy definitely has big shoes to fill. It will be interesting to see just how well he is able to take up the new position.

Amazon’s stock is trading at $3,352.15 with a market capitalization of $1.7 trillion. It had touched a 52-week high of $3,552.25 in August last year. It had fallen to a 52-week low of $1,626.03 in March last year.