Rachel Tipograph, Founder and CEO of Mikmak, joined Closing Bell to break down what investors can glean from Amazon's disappointing earnings report as supply chain challenges continue to weigh on e-commerce platforms.

Closing Bell

Amazon Plummets as Tech Giant Cuts Q2 Forecasts

amazon stock not in its prime today. Let's face it, the stock plunging following a disappointing earnings report after the bell thursday? The company reporting a net loss of 3.8 billion bucks in Q. One compared to a more than $8 billion profit in the same quarter. Last year as we mentioned, one thing weighing on the company was at stake and E. V. Startup rivian, which Cause the loss of more than $7.6 billion dollars and Q. Two not looking too great either. As amazon is warning of a slowdown in shopping, joining us down to talk about this is Rachel tip, a graph founder and Ceo of MIK MAK and e commerce analytics firm Rachel Anyway, you slice it a bad report for amazon. What were your biggest takeaways from this? Yeah. You know it's less about Amazon and it's more about everyone else. Amazon is our number one most traffic retailer at Knickknack. We work with 1500 retailers around the world. And if Amazon is seeing a slowdown, imagine what it's gonna do to the 400th most traffic retailer. So it speaks more to the macroeconomic factors which very much go back to what's happening with supply chain Russia Ukraine. Imagine if you're in the cereal business, 80% of wheat production happens in Ukraine, you can't get cereal on the shelf. So it's more about the macroeconomic factors that amazon is signaling to the rest of the ecosystem. Alright so the rivian slump caused all kinds of issues for amazon and for ford. So what are the risks that these folks take when they choose to invest in these E. V. Startups? I mean like anything, it's such a huge cost investment and you have to ask yourselves, you know do you invest in the future or do you invest in things that are more profitable? You look at Amazon's business aws highly profitable, advertising, highly profitable. I mean the good news is that Amazon's media business grew 25%. Compare that to what was happening with Facebook snap. You can still see that there's a shining light for Amazon to continue to invest in profitable sides of the business. So Amazon salt slowest revenue growth since 2001. Does this maybe signal a shift in consumer spending habits? Are we seeing less online shopping? We're not seeing less on Lion shopping but we are seeing two things happen. One there isn't enough product availability, pent up consumer demand exists but the products aren't on the shelf whether it's physical or online. That then shows up in the revenue if it's not available whether it's online or in store, people are then not going to spend ad dollars. So it has this domino effect in the industry. What we see in our data at Mic Mac is that actually the people who have the highest conversion rates right now on amazon is either a late stage gen z couple or early stage millennial that doesn't have kids. So that's another signal that people with discretionary income are willing to spend? There just needs to be products on the shelves. Okay, Amazon had its slow, I'm sorry Amazon is expecting its second quarter revenue to come in at $116 billion, two, billion. So both that that shy of expectations. Why is that again? It's going back to what's happening with the global supply chain crisis. There isn't right now enough product to buy and then it has a domino effect for the rest of the industry because it becomes more expensive than ever before to produce products, get them into the fulfillment center, get them into people's homes. The cost of gas. What happens is consumer product companies that want to raise prices, retailers like amazon don't want that to happen because at the end of the day, you want to give the consumer value. It's just a perfect storm to cause a slowdown. But the consumer demand exists. You just can't get products on the shelves right now. So amazon increase the price of prime right from 1 19 to 1 39. Did that help at all offset these additional costs? Absolutely. And what you're seeing retailers like amazon do right now is try to figure out any which way to make up margin. So prime other forms of loyalty programs, retail media, This is all extremely profitable and it allows them to have greater apartments. So when it comes to let's talk about Covid a little bit and with mandates going away and restrictions getting dissolved, people are heading out more amazon in the most recent months closed down their physical stores and are just solely on online shopping. Was that the right move? Are they missing out on folks getting out of their house, getting off of their computers and going into stores to shop? It's interesting if you look at D2C brands and how they think about their brick and mortar presence, they see it as an out of home marketing expense. It's a form of advertising and brand engagement. It's actually not a place to shop. People go in there like it's instagram looking to experience the brand, but more and more purchases are happening online. So unless you treat your store like a local fulfillment center to then deliver on fast delivery for online purchases. It's just an out of home marketing expense. So I very much understand why amazon shut down their stores also this year amazon decided to move their prime day from june to july with files amazon. I want people on my site obviously to help me with revenue. Was that a good idea? Are they doing this? So they have a little bit of pad to get those products on the shelves. You got it exactly right ken the more time that they can buy right now with the massive global supply chain crisis that we live in, the more likelihood that the products will hopefully end up on the shelves. So if I'm an investor in amazon, is this just a bump in the road? Or is this a long time problem that I have to deal with? I'm a proud investor in amazon and this is just a bump in the road. I am long on amazon. Okay, thanks Rachel tip, A graph founder and Ceo of Micmac and e commerce analytics firm Rachel. It's been a pleasure. I hope you have a great weekend.