“In many areas, July is vacation month, so it might be better for customers, sellers and vendors to experiment with a different time period,” Amazon CFO Brian Olsavsky said on a call with investors on Thursday, according to CNBC.
Amazon expects net sales in the quarter ended June 30, 2020, to be between US$110 billion and US$116 billion, an increase of between 24 per cent and 30 per cent year on year.
‘They are now the default’
“It’s not surprising that Amazon has done really well,” Jason Pallant, a senior lecturer in marketing at Swinburne Business School, told Inside Retail.
“They’re perfectly set up for the pandemic. They’re the first place a lot of people go to search for products – particularly in America – and that’s a huge advantage.”
More than half of US adults (53 per cent) start their product search on Amazon, compared to 23 per cent who do so on a search engine, such as Google, according to eMarketer.
“They are now so big and so powerful that Amazon is the default,” Nathan Bush, director of e-commerce strategy at eSuite, told Inside Retail.
While other retailers arguably offer a better, more engaging and more personalised online shopping experience than Amazon, they don’t have Amazon’s same ecosystem of services, from video streaming to same-day delivery, which has enabled the online retailer to attract more than 200 million paid Prime members worldwide.
“Amazon [has] the infrastructure to scale rapidly, and the data smarts to respond rapidly to customer trends, generating additional sales and profit,” Richard Umbers, former Myer CEO and current retail consultant, told Inside Retail.
Jessica Sinclair, senior strategist at Retail Oasis, noted that Amazon was “ready to go” with swipe-to-buy payment methods and fast delivery for in-demand products and categories during Covid-19, such as baking, air-frying, home tech and streaming content subscriptions.
“Many domestic retailers were not strong on digital, especially department stores which offer similar home product ranges,” she told Inside Retail.
Amazon’s Achilles’ heel
One weak spot in Amazon’s quarterly results was its physical retail sales, which fell by almost 16 per cent.
“To us, Whole Foods reveals the Achilles’ heel of Amazon,” Neil Saunders, managing director of GlobalData, said, referring to the US supermarket chain acquired by Amazon for US$13.7 billion in 2019.
“As great as it is at functional factors such as convenience, operational prowess, technological innovation and so forth, it lacks something of a soul when it comes to creating inspiration and excitement,” Saunders said.
Some of Amazon’s recent innovations in physical retail include the launch of Amazon One, which enables people to pay with their palm, and the expansion of Just Walk Out, the company’s checkout-free store technology, which is now available in three Amazon Fresh stores in London and two third-party convenience stores in the US.
Amazon’s relative weakness in the physical retail space is “one of the big opportunities for other retailers and, as a retailer like Target shows, focusing on things that Amazon isn’t so good at is a recipe for considerable success”, according to Saunders.
But at the end of the day, he said, “there is no denying that Amazon is one of the most successful retailers in the world.”
A quarter of online sales in Australia
While Amazon’s biggest market remains the US, it continues to gain traction overseas.
“What was interesting was that international revenue increased 60 per cent in the quarter, which shows the impact Amazon has in growing its tentacles beyond the US,” Bush said.
The company last year crossed the billion-dollar revenue mark in Australia, where it launched in December 2017, though it still reported a loss due to increased costs.
“While Amazon and Australians aren’t in a hot and heavy relationship yet, they continue their steady advances,” Bush said.
“Amazon is already building Australia’s largest ever warehouse. We are kidding ourselves if we think that Amazon can’t have the impact in Australia that they have had in the US.”
Morningstar has predicted that Amazon will account for a quarter of online sales in Australia by 2030.