Amazon.com Eyeing Distribution Improvements
Jim Milliot -- Publishers Weekly, 3/22/1999
Improving its distribution infrastructure will be a top priority for Amazon.com in 1999, the company indicated in its 10-K filing with the Securities &Exchange Commission.According to Amazon, the online retailer plans to open one or more distribution centers in the year and to increase investment in developing its existing infrastructure to increase efficiency. The company has already announced plans to open a distribution center near Reno, Nev. (News, Jan. 18). Amazon also intends to add to its on-hand inventory. As a result of expanding its distribution network, Amazon expects an increase in fulfillment costs in 1999 as well as higher costs in marketing and sales. Amazon spent $133 million on marketing and sales (the budget item where distribution costs are allocated) last year, and the company reported that it expects to "significantly" increase its investment in this area in 1999.
The company has already had some success in lessening its dependence on Ingram as its primary source for books. In 1998, Ingram accounted for 40% of its inventory purchases, compared to 60% in 1997.
International expansion will be another primary goal of Amazon in the current year. In 1998, international sales totaled $122 million, up from $37 million in 1997.
Earlier this year, Amazon reported an 313% increase in total sales, to $610 million. Other signs of growth include a jump in the number of employees, from 614 to 2100, and an increase in its associates program to more than 200,000.
Amazon also noted that its accumulated deficit through 1998 was $162.1 million. The filing contained the familiar refrain that Amazon expects to incur substantial operating losses for the foreseeable future and that the losses may be significantly higher than its current losses. Amazon lost $124 million in 1998, while its stock price rose 966%.
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