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Amazon profits slump by 73 per cent

28 October 2011 - 13:01 by Graham Miller

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E-commerce giant Amazon has made the surprise announcement that its profits were down by almost three quarters over the past three month period.

This was a total drop-off of around £39 million against a total sales value of £6.8 billion. Although you might think that this is as a result of falling customer numbers, Amazon actually managed to increase its worldwide sales by 44 per cent, so it is by no means losing popularity.

The company is looking to extend its abilities to offer safe shopping online to consumers in the UK, by opening a new distribution centre in Hemel Hempstead, which will open prior to Christmas next year. A thousand new jobs will be created by this centre, which will be a real boost to the local economy.

Amazon could suffer further this quarter because it predicts that it will actually make a loss of up to £125 million. Shares fell by 12 per cent after the announcement of this news.

While Amazon is still experiencing strong sales growth, it does not look like it will manage to match the 51 per cent increase in safe shopping online that was registered in the run-up to the festive period during 2010.

Amazon is focusing not only on growing its business around the globe but has also had many of its resources tied up in the development and launch of the Kindle Fire. The Android-based tablet is intending to take on the Apple iPad and should arrive with a bargain basement price tag, which will doubtlessly squeeze Amazon's margins.

There is little doubt that Amazon is still the world's number one pure play online retailer, but its ambitions may actually be doing it harm, judging by the current profit figures announced within the last week.