After seeing some reacceleration within Amazon’s retail business in Q2, the company has reported its financial results for Q3, stating that net sales grew by 24% year-on-year from USD56.6 billion to USD70.0 billion. Operating income contracted from USD3.7 billion to USD3.2 billion on the back of future-focused investments in the retail business, with one-day delivery resulting in fulfillment expenses rising by 23%. However, this effort also reignited the slowing online retail business. Net sales excluding AWS increased by 24.1% to USD42.6 billion in North America, and by 18.0% to USD18.3 billion in the international division.
As shoppers are responding to having more items accessible more rapidly, this period should be seen as a return to growth orientation versus margin expansion for Amazon. Yet, on its investor call, Amazon gave little detail about the impact of one-day delivery on sales across product categories, despite the competitive relevance of such information, with Walmart having its own high speed delivery initiative underway in the US.
While all categories should be seeing a lift, CPGs have an opportunity to benefit disproportionally as accelerated delivery removes a barrier in everyday household replenishment missions. Brands should consider shifting standards around viable items for Amazon, given the effort to push sales via high speed delivery.