Amazon's Q4 revenue takes a 300 bps hit due to Diwali timing, Japanese tax

Firms says large part of impact was felt as Diwali season moved more into third quarter, boosting Q3 sales at the cost of Q4

Amazon, the world’s largest online retailer, said its December quarter (Q4) revenue took a hit as the Diwali festive season in India moved more into the third quarter. The other factor which affected sales was Japan’s consumption tax increasing from 8 per cent to 10 per cent.

“Those two items impacted the Q4 growth rate negatively by about 300 basis points,” said Brian T Olsavsky, senior vice-president and chief financial officer, during an earnings call on Thursday. “The Diwali timing, the Indian holiday, which has a very large swing factor on international revenues, moved more into the third quarter in 2019 versus 2018. So, it was a help to Q3 and a penalty to Q4.”

For the fourth quarter, Amazon’s net sales increased 21 per cent to $87.4 billion, compared with $72.4 billion in Q4 of 2018. For all of 2019, the rise was 20 per cent to $280.5 billion, compared with $232.9 billion in 2018.

During his India visit this month, Founder and Chief Executive Jeff Bezos pledged to invest $1 billion (a little over Rs 7,000 crore) to help digitise traders and micro, small, and medium-sized businesses (MSMBs) across India, with the goal of bringing more than 10 million MSMBs online by 2025. 

The Seattle-based firm said there were about 550,000 sellers on the Amazon India marketplace. A little more than 60,000 Indian manufacturers and brands were exporting their ‘Make in India’ products to customers worldwide on Amazon. The company said it expects the new $1-billion investment to enable $10 billion in cumulative Indian export by 2025.

“There are a lot of different facets (of) those types of investments. I won’t go into too much for specifics but a lot of work is being done there,” said David W Fildes, director of investor relations, during the earnings call.

Amazon claims it has, since launching ‘amazon.in’ in 2013, created more than 700,000 direct and indirect jobs in India. This month, it announced plans to create an additional million jobs in India by 2025, with continued investments in technology, infrastructure and logistics.

Since 2014, Amazon has grown its employee base more than four times. Last year, it inaugurated a campus building in Hyderabad, the first fully-owned campus outside America and the largest building globally in terms of employees and space.

“That team over there continues to do a great job locally, of taking a lot of the tenets that we’ve had at Amazon around innovation building and really run with that over there,” said Fildes. “They have done a great job of coming up with some interesting and new services and features that, I think, are specific to that region.”

Amazon India on Thursday announced a partnership with Eastern Railways to set up a pick-up kiosk at Sealdah railway station in Kolkata. In 2019, as an experiment, it partnered Indian Railways to launch such kiosks in four railway stations across Mumbai.

Fildes  said the company would keep identifying areas in toolsets and other features in India that “we can bring back to other regions to help benefit other sellers and the other websites more broadly”.

This month, Amazon India also announced it would have 10,000 electric vehicles in its delivery fleet by 2025. 

This investment is part of Amazon’s recent co-founding of The Climate Pledge, a commitment to meet the Paris Agreement 10 years early, by achieving net-zero carbon emissions by 2040.