The impact of three economic indicators on Amazon's performance

Economics

The Impact of Three Economic Indicators on Amazon

The way any organization performs will reflect a number of factors; one of the major factors will be the macro environment. Amazon.com, a major online retailer, can be considered in the context of the macro-economic by looking at the way that firm is impacted by different economic patterns. Three macro-economic indicators; personal income and outlay, producer prices index and the retail sales report will all be considered and discussed with reference the way that Amazons' performance may be impacted.

Personal Income and Outlay

An important, but lesser quoted, economic indicator is the personal income and outlays measure, which is published monthly. The figures for January 2012, which were published at the beginning of March, demonstrated that there was a 0.3% increase in total income and disposable income increased by 0.1% (BEA, 2012). Increases in the income measures are positive for Amazon.

This is important as Amazon is a retailer and their main markets are consumers rather than businesses. When the level of personal income, and more importantly the level of personal disposable income, increases this is likely to have a positive impact on Amazon; increasing their sales. This occurs because of the type of products sold by Amazon. Although the firm started out as a book store, product range has diversified, but the majority of goods remain those which are not essential. This makes them more sensitive to changes in income and disposable income. When the consumers have an increasingly level of disposable income that is free to be spent on discretionary items, Amazon is well placed to benefit as it is offering a wide range of items that may appeal to large sectors of the consumer population. An increase in sales also leads to increased profit levels with all other influences remaining equal.

Retail Sales Report

The retail sales report is also likely to be interesting to Amazon. This index measures the value of good sold in the retail environment. The measure may not directly impact on Amazon, as they are a retail firm and may contribute to the measure, indicating a past pattern in the firm. However, the pattern of changes may indicate the degree of competition and whether it is increasing or decreasing. In January the retail sales report indicated a 0.4% increase on December 2011 and a 5.8% increase on January 2011 (U.S. Census Bureau, 2012). Increased sales in this report may indicate increased competition, and as sales increase it may also indicate there will be more conception, as the environment may be becoming more attractive for new competitors.