Amazon sales grow 43% as Prime members rise by 100m

27/04/2018

Amazon has seen a huge 43% rise in first quarter sales to $51bn, as investors grow more confident about the ecommerce giant’s new businesses including subscription services, advertising and cloud computing.

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Amazon saw its profits for the period more than double from $724m to $1.6bn. Shares rose 7% as it also forecast a jump in second quarter profit.

Net sales in North America, its biggest market, jumped by 46% to $30.7bn helping operating profit for the region to jump by 93% to $1.1bn.

International revenues rose by 34% to $14.9bn though the retailer continued to be loss-making, losing $622m for the first quarter.

Meanwhile there was a surge in revenues for cloud computing arm Amazon Web Services (AWS), up 49% to $5.4bn.

The results come after Amazon revealed membership of Amazon Prime, its loyalty club that offers benefits including faster delivery and video streaming services, had risen to more than 100 million.

Industry comment

Hugh Fletcher, Global Head of Consultancy and Innovation at ecommerce consultancy Salmon:“It’s no surprise that Amazon has had a phenomenal year, especially as it most recently announced it reached the 100 million Prime subscriber mark. Amazon’s figures clearly demonstrate the mounting trend that shoppers are becoming increasingly loyal to service over the brands they purchase. Our own research found 88% of shoppers value speed of delivery over the brand they are buying (78%). But the company has also tapped into the new retail culture of immediacy: services like Amazon Prime are designed to offer shoppers the products they want with little waiting time and has effectively locked in shoppers to the ecommerce giant.

“Today, customers are now judging their experience with companies right from first awareness, through purchase, delivery, ownership and right through to repurchase – this is what we’re calling the “Prime effect”. Amazon has built an unparalleled online shopping platform that can harness customers’ purchasing habits to offer personalised, tailored deals.

“Amazon also clearly isn’t afraid to diversify, as we have seen with its investment into more of its own content production and entertainment services. Amazon wants to drive everything through Prime because it knows that if you own the interface, you own the customer. And if you own the customer, you own the data. Ultimately, Amazon wants to ‘lock in’ the customer, and all businesses (including retailers) should be taking note. Just think, if you can shop for your favourite fashion, grocery, music and TV products and services and get these delivered with ease and convenience, why would you need to go anywhere else? This is the type of immediacy and innovation that customers now desire, and retailers must revolutionise their own offering to combat digital leaders like Amazon.”

Adrian West, Director, Commercial Sector, Fujitsu UK: “Once again Amazon has demonstrated an exceptional quarter, but what’s interesting is that even with its strong online sales, which is its bread and butter, the e-commerce giant isn’t being complacent. In order to help diversify its offering for customers and provide a complete omnichannel experience that consumers today expect, the past year has seen Amazon invest heavily in brick-and-mortar retail with the launch of its Amazon Go stores and the acquisition of Whole Foods.

“This shift of pure-play providers moving into physical stores and merging the online and offline experience is becoming an increasing trend. What’s clear is that it is no longer one or the other. To be successful in retail you need to have both, and this is what customers themselves are telling us. In fact, retailers could even boost their sales through a more unified and advanced technology experience, as eight in ten consumers told us they would spend more with retailers that have a better technology offering.

“In today’s retail landscape retailers need to stop thinking of digital and the high-street as separate entities. Instead they must view them as one unified experience that links their customer journey seamlessly from one to the other. By having the right digital strategy in place, retailers can map out their new, more agile future that will enable them to grow and sustain their business in this new digital era.”

Rob Meakin, Managing Director, Loyalty Pro, said: “Amazon Prime is the ultimate subscription service, and is a key driver for the company’s success. It now has more than 100 million members globally because shoppers value the fact that they can purchase what they want, when they want. The announcement of a price increase is unlikely to put anyone off. People are hooked on the convenience and service that they get from Prime; it’s second to none.

“It’ll be interesting to see if the price increase slows down the rate of new subscribers. But I suspect not. Current Amazon Prime subscribers are loyal to the company because it can deliver speed, efficiency and a degree of personalisation at every stage of the shopping experience. Until someone else can rival this, shoppers will continue to sign up to the service.”

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