Friday, April 24, 2009

Amazon did great on the first quarter. Can it also help the book industry to go green now? announced yesterday its first quarter (Jan-Mar 2009) financial results and not surprisingly it did very well and even managed to beat Wall Street expectations.

Here are some key figures from Amazon's press release:

Net sales increased 18% to $4.89 billion in the first quarter, compared with $4.13 billion in first quarter 2008.

Operating income increased 23% to $244 million in the first quarter, compared with $198 million in first quarter 2008.

Net income increased 24% to $177 million in the first quarter, or $0.41 per diluted share, compared with net income of $143 million, or $0.34 per diluted share, in first quarter 2008.

So how come other companies both in the book industry (as well as outside the industry of course) are struggling so much and Amazon is doing so well? well, there are couple of good reasons:

1. The Kindle factor - Jeff Bezos, Amazon's CEO is quoted on their press release saying "We’re grateful and excited that Kindle sales have exceeded our most optimistic expectations." Now, Amazon didn't release new sales numbers, but according to a couple of estimations we discussed earlier this year when Kindle 2 was released it can be very substantial. In any event, the Kindle definitely helps to generate a positive buzz around Amazon and generate a positive sentiment.

2. The weakness of Brick and mortar companies - Imran Khan, an analyst at JP Morgan told the New York Times that "Brick-and-mortar companies are going bankrupt and going out of business altogether and that is helping Amazon gain market share".

3. According to Reuters, Bezos also said shoppers enrolled in the Amazon Prime discount shipping program were boosting growth, as they were picking up goods across multiple categories.

I don't know if Amazon actually sold more books on the first quarter in comparison with the first quarter of 2008. Books are part of the media segment, which we know that rose in 7% this quarter to $2.7 billion sales. But we don't know more than it, so we could only estimate and my estimation is that there was probably a modest growth, which is also impressive in the current economic environment.

The last but not least point I wanted to make is regarding the carbon reduction goals of the book industry we discussed here on Wednesday. As Amazon gains a greater importance in the book industry, I thought of an idea that could generate a stronger incentive for the publishers to meet their goals (and I'm leaving the impact of selling more e-books aside for a moment, as this is still inconclusive).

My suggestion is that Amazon will provide better pricing to publishers that will meet certain carbon reduction goals. As the biggest bookstore, a carbon-based pricing can definitely drive publishers to put more efforts into their carbon reduction attempts.

It makes sense if we look at it through the ultimate test of 'creating a shared value' - publishers will gain more profits with better pricing on sales of their books and Amazon can gain by strengthening the green side of its image and attracting more customers that will feel good about being part of such a program and supporting the environment without the need to pay any premium. Looks like a win-win model to me.

I can only hope Amazon will take the challenge of leading the book industry not only by sales, but also with the efforts to reduce the industry's carbon footprint and make reading more sustainable.

Raz @ Eco-Libris