Amazon Sales Leap 40% as It Triples Grocery E-Commerce

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Amazon Sales Leap 40% as It Triples Grocery E-Commerce

By Lisa Johnston - 07/31/2020

Amazon reported net sales of $88.9 billion in the second quarter, up 40% from $63.4 billion last year, in what founder and CEO Jeff Bezos called “another highly unusual quarter.”

Unusual perhaps, but hardly surprising for the No. 2 retailer.

Online grocery sales tripled in Q2 vs. the prior-year period, and the retailer increased grocery delivery capacity by more than 160%. It also tripled grocery pickup locations during the quarter in order to meet the escalated demand prompted by COVID-19.

What’s more, third-party sales grew faster during the quarter than Amazon’s first-party sales, a repeat from Q1. Third-party units represent more than half of overall unit volume.

Putting Amazon a bit more in line with the rest of retail is that it reported year-over-year store sales declines of 13%. Store sales for the quarter were $3.77 billion, down from last year’s $4.33 billion; however, it’s worth noting that Amazon breaks out store sales quite literally — delivery or other click-to-collect orders are excluded from this segment, and it only includes sales made physically within the store. 

The company spent over $4 billion on incremental COVID-19-related costs, which included employee safety, delivery costs related to heightened demand, purchasing personal protective equipment, increased facility cleaning, following new safety processes, adding new backup family care benefits, increasing compensation, and doling out more than $500 million in bonuses to front-line employees and delivery partners.

Amazon also invested $9.4 billion in capital expenditures and finance leases in the second quarter, a year-over-year increase of 65%, primarily driven by fulfillment and logistics investments. 

"As we move towards peak in the second half of the year, we will ramp up our space needs even further, and we’ll be adding significant fulfillment center and transportation capacity in the second half of the year," said Brian Olsavsky, CFO, in an earnings call.

The retailer — which has created over 175,000 new jobs since the start of the pandemic, with 125,000 of them being developed into full-time positions —now employs more than 1 million combined regular and seasonal employees. Notably, it’s piloting 20 medical facilities with Crossover Health in Texas, Arizona, Kentucky, Michigan and California that are available for its associates and their families.

AWS was also busy during the quarter, introducing such managed services as Amazon Honeycode, which lets customers build mobile and web apps with no programming required, and IoT SiteWise, which collects data from a plant floor, structures and labels the data, and generates real-time KPIs and metrics to help customers make data-driven decisions.

AWS’ new Amazon Interactive Video Service, meanwhile, is a managed service that uses the same technology powering Twitch. Customers can use set up live, interactive video streams for web or mobile apps that can be delivered to millions of concurrent viewers globally with such interactive features as virtual chat spaces, votes and polls, moderated Q&As and synchronized promotional elements.

Olsavsky noted that the AWS is “seeing a lot of companies that are really wishing that they had made more progress on the cloud because they’re seeing how companies that are on the cloud can turn into a variable cost and either scale up or scale down depending on their particular situation.”

As a result, AWS is seeing migration plans accelerate. “They’re certainly not going to happen overnight, but we see companies moving more in that direction,” he said. “We think that will be a good long-term trend. And there’s certainly winners in this area right now, things like video conferencing, gaming, remote learning and entertainment. All are seeing usage growth. And it’s a bifurcated world out there."

Consumers around the world intend to spend more on groceries and household goods in the coming weeks, according to a tracker from Deloitte, with both bargain hunting and stockpiling behavior holding steady during the pandemic.

Those that started the process years ago have an advantage, but there are large numbers of companies that are playing catch-up and within a short period of time will close the gap. The goal for small businesses is to continue the process of making the online purchase experience a good one.

Will the Black Friday to Christmas Eve stretch be boom or bust? Retailers are certainly tasked with a complicated consumer mindset this year, but preparedness and last minute agility will likely be a winning combo. As the industry enters the throes of the holiday season, RIS reviews the latest expert forecasts and findings.