Why Amazon.com, Inc. Is Investing Heavily in Europe

By Markets Fool.com

As the world's biggest online shopping destination, Amazon.com obviously doesn't require staff to run brick-and-mortar stores. But make no mistake: The Internet retail behemoth still needstens of thousands of people to ensure its operations in any given locale run smoothly. Consequently, that also means tens of thousands of jobs wherever Amazon.com decides to set up shop.

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In a press release Tuesday, for example, Amazon.com announced it created and filled more than 6,000 new permanent jobs across the European Union in 2014, bringing its total number of employees in the region to 32,000. That's up from over 4,000 new jobs in 2013, and marks the most people Amazon has hired in a single year since opening its first EU websites, Amazon.co.uk and Amazon.de, in 1998.

What's more, last year's EU hiring was widespread across more than 50 locations, from corporate offices to fulfillment centers, software development centers and customer service centers. The jobs themselves were also wide-ranging, ranging from software engineers to data-center technicians, linguists, machine learning experts, site merchandisers, supply chain managers, buyers, designers, and customer-service reps.

Now (perpetually) hiring
Better yet, explains Amazon VP of EU Retail Xavier Garambois, "Even with all of this hiring, we remain in a phase of heavy investment and have many positions available which we look forward to filling in 2015."

Amazon shareholders are no stranger to heavy investments in the name of sustaining growth, even though it frequently comes at the expense of GAAP profitability. Despite the fact those investments have served shareholders extraordinarily well since Amazon.com's founding in 1994 -- CEO Jeff Bezos was recently named the world's top-performing CEO in terms of shareholder returns over his tenure -- this approach has become a source of contentionbetween skeptics and stockholders, the former of whichwould prefer Amazon let the cash its businesses generate flow to the bottom line instead.

Nonetheless, Bezos has continued to stubbornly stick to the expectations he so clearly laid out in his very first shareholder letter in 1997. Perhaps most notable among them are these two gems:

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  • "We will continue to make investment decisions in light of long-term marketleadership considerations rather than short-term profitability considerations orshort-term Wall Street reactions."

  • "When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we'll take the cash flows."

Why Europe?
With this in mind, investors should know there's a logical purpose behind Amazon's sustained EU investments. During Amazon's most recent quarter, international revenue grew "just" 14% to $7.7 billion. That might sound impressive, but it significantly lagged the North American segment revenue, which climbed 25% from an even larger base to $12.87 billion over the same period.

Sure enough, when Amazon CEO Tom Szkutak was asked by analysts about the discrepancy between the two, he responded:

We are expanding from a capacity standpoint. We've gotten great penetration on Fulfilled by Amazon customers. So you'll see that our unit growth rate is actually higher than our revenue growth rate, and so that's what we've been experiencing. So certainly adding capacity from a fulfillment perspective, adding capacity from an infrastructure standpoint.

In short, Amazon has seen great success so far with third-party sellers taking advantage of the Fulfillment by Amazon service, where Amazon receives a much smaller slice of each sale compared to merchandise sold directly through the company itself. In order to scale along with that unit sales growth, Amazon must make these initial investments in capacity and infrastructure.

Eventually, however, the vast selection of products from third-party sellers will also serve to drive more consumers in the EU to Amazon's sites, helping it secure the all important market share it so desires.

The article Why Amazon.com, Inc. Is Investing Heavily in Europe originally appeared on Fool.com.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.