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Things are looking less than stellar for retail behemoth Amazon, which took a massive hit upon its release of Q1 2022 earnings.
Stock plunged a brow-raising 12% early Friday afternoon after the company announced a quarterly net loss of $3.8 billion. At the same time last year, the company had made an $8.1 billion profit.
Overall revenue did grow 7% year over year to $116.4 billion, but Amazon estimates that next quarter’s revenue will be taking a dip.
So what happened?
Here’s what’s contributing to Amazon’s downfall.
A failed investment
In 2019, Amazon was a part of a $700 million investment into electric pickup maker Rivian Automotive. The online retailer reportedly provided “the majority” of the funding though the company did not disclose precisely how much was invested.
At the time, Rivian was rolling out a pickup truck and an SUV using “skateboard” technology that allows for off-road driving on various terrains, and the future looked bright for Amazon as it looked to expand its delivery fleet.
In November 2021, Rivian went public and went downhill fast. The company’s value has dropped over a whopping 75% since its initial debut, and Amazon is definitely feeling the heat of the failed investment.
Amazon stated in its earnings report that the company has lost an estimated $7.6 billion this quarter as a result of Rivian’s failures.
Related: Amazon Increases Prices for Prime Members Once Again. Is It Still Worth It?
A post-pandemic frenzy drop-off
Undoubtedly, the height of the pandemic was prime (no pun intended) time for Amazon’s business, as many flocked to the website to stock up on toilet paper and household items while experimenting with fun and different items that were going viral on social media sites like TikTok and Instagram.
In Q3 of 2020, when the pandemic was in full effect, the retailer saw a soaring 37% increase in quarterly revenue. In 2020 overall, net sales for the company were up 38% year over year, coming in at $386.1 billion total.
As the pandemic has waned down, the end of Q1 marks a period of time when many are returning to “normal” life as mask mandates are lifted and social distancing guidelines have eased or been diminished.
Combine this with the holiday season surge of Covid cases in Q4 (which led many back into their homes and preferring to do their shopping online), it’s not a huge shock that there was a drop off in revenue.
Simply put, the demand just isn’t as high as it was.
Supply chain issues and rising rates of inflation
Nearly every business has felt the effects of continued supply chain issues and shortages as a result of the pandemic. But the recently escalated conflict between Russia and Ukraine has only made these issues worse, as well as contributed to rising inflation rates and business costs that are pummeling retailers small and large.
“The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” Amazon CEO Andy Jassy, said in a company statement. “Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network. We know how to do this and have done it before. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, but we see encouraging progress on a number of customer experience dimensions, including delivery speed performance as we’re now approaching levels not seen since the months immediately preceding the pandemic in early 2020.”
Earlier this month, the company announced that it would be implementing a 5% “fuel and inflation” fee to third-party sellers on its site in an attempt to offset increasing costs.
It was rolled out on Thursday.
Related: The New Pandemic and Its Effects on Amazon Aggregators
Increasing fees for loyal members
Amazon Prime members also felt the heat from inflation-related pressures this quarter.
Earlier this month, Amazon increased Amazon Music Unlimited prices for Prime members by $1.
This came after a February price hike that left Prime members looking at an annual increase from $119 to $139, with monthly subscriptions raising from $12.99 to $14.99, leading to a social media “cancellation” of the company that left customers fuming.
As of late Friday afternoon, Amazon was continuing to plummet, down just shy of 14% in a 24-hour period.
Related: Amazon Prime Completes Acquisition of Metro-Goldwyn-Meyer (MGM)