Amazon racked up $45.8 billion in global online store net
sales in Q2 2020, exceeding the $45.7 billion it brought in during Q4 2019
thanks to the holiday season, which has historically made Q4 Amazon's biggest
sales quarter.
It bucked this trend in Q2 because the coronavirus pandemic
pushed consumers to shop online over in-store, leading its online sales to grow
49% year-over-year (YoY), excluding F/X, a massive acceleration from the 16%
YoY growth it posted in Q2 2019.
Amazon's surging demand should position it to flourish in
the years to come in three key areas:
Its Prime subscription thrived in Q2, building Amazon's base
of loyal customers. Amazon's existing Prime member renewal rates improved, its
growth rate accelerated, and Prime members engaged with Amazon more and
increased their basket sizes, CFO Brian Olsavsky said on the company's earnings
call. This should help Amazon drive more sales going forward since its growing
subscriber base may get used to spending more with Amazon, helping Amazon fight
off Walmart+, Walmart's reportedly forthcoming subscription service.
Amazon's online grocery sales tripled on an annual basis in
Q2, positioning it as a major player in the burgeoning market. It increased its
grocery delivery capacity by over 160% and tripled its number of grocery pickup
locations in an effort to meet surging interest in online grocery services
during the pandemic. Its booming sales suggest its efforts have been
successful, and it can try to use this performance to add loyal online grocery
customers to compete for online sales with grocery stalwarts like Walmart and
online grocery-focused businesses like Instacart.
The e-tailer's international business skyrocketed and turned
a profit, as it may be gaining more traction abroad. Amazon's international
segment posted an operating income of $345 million thanks to its net sales
growing 41% YoY, excluding F/X, in the quarter after posting an operating loss
for the last several years. This could mean Amazon is attracting new customers
in other markets and driving more spend from existing customers during the
pandemic, setting it up to win more sales internationally even after the crisis
subsides.
The e-tailer has already spent over $4 billion to adjust for
the pandemic, and it'll need to spend even more to meet demand in Q3 and Q4. Q2
is typically Amazon's weakest quarter for retail volume, which gave it room to
expand its operations and handle the increase in demand this past quarter,
Olsavsky said.
But to meet demand in Q3 and Q4 — the latter of which will
feature both Prime Day and the holiday season this year — it'll need to expand
its capacity, which will require new investment in its fulfillment network to
quickly and safely fulfill orders if demand continues to surge.
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