What is Amazon’s main expense?
Tags: Amazon, Data Visualization

That might surprise you! It’s all about investing in growth.

I have recently read an article on macrotrends.com that explained what is that ticks Amazon, what is the secrete behind slim profit ratio while the revenue is surging over the past few years.

Sources:

https://www.macrotrends.net/stocks/charts/AMZN/amazon/gross-profit

Limitation:

The data provided has just two columns which are not showing a clear image of the expenses and income. It would be helpful to know what categories provided the revenue, what expenses and sub-categories of expenses shape the business expenses.

Also, As Amazon is an international company, if there was more data about the locations and showing how this company is doing in various countries, that would be very informative.

Furthermore, there was no data on Taxes paid on each quarter, while it was mentioned in the written part of the article that Amazon benefitted from having headquarters overseas and also, investing back profits to its businesses.

Biases:

In the data-gathering stage, considering there is an almost 18 days gap between the time something is ordered and then paid, it is not clear how they decided to take these gap days into account when it comes to the reporting revenue and expenses. The same note applies to Free Cash flow data which is not actually provided in the data set.

Assuming Amazon pays taxed quarterly, while the timing of the investments back the profit is not clear. Another way to put is that, from all quarterly expenses, what part is real expenses, and what percentage is reinvestment? It is not clear.

Insight Biases considering using the most common definition of revenue and income, as there are just two these two types of info is provided, then there is no room for having a different type of taking from the data.

Data set source:https://data.world/makeovermonday/2020w25-amazons-tiny-profits-explained

Problem Statement:

Is Amazon’s Profit increasing at the rate that its Revenue is increasing over the years? Why?

Three items mentioned in the main article as the reasons why Net profit does not follow the Revenue rates. No data in dataset support refer to these items.

New Visualization:

Is Amazon really successful?

https://public.tableau.com/profile/tara4527#!/vizhome/AmazonsExpense/Dashboard1?publish=yes

What are the improvements:

Compare annotations to the Monday Makeover annotations: There are very few annotations on the original one. I have added more to point out the highest and lowest profitable years.

Compare chart choice to the Monday Makeover chart choices: The original charts were definitely good and very easy to follow. I just added another chart to explain and compare the loss and profits with a bar chart. Darker background probably is easier on the eyes as well.

Compare alignment to the Monday Makeover alignment: The tableau link that I have shared, is interactive and one can explore it for themselves. Also, I tried to align the letters in different sections of my visualizations.

Compare layout to the Monday Makeover layout: This new one that I have shared has a few images, notes, and more charts to expand the points that are made in the body of the article.

In summary, Amazon keeps growing and doing very well as the strategy is investing in growth infrastructure, which means paying fewer taxes. Also, the amount of free cash flow thanks to the online payments, enables the company to stays on top of all the expenses and growth. Then next time you ordering on Amazon, keep these notes in mind. Are you investing in your growth?