Jassy: Amazon's Store Business Is Being Slept On

Amazon CEO Andy Jassy spent much of the company's third-quarter earnings call on Amazon Web Services and AI investments. He still made a point of defending retail.

Online store net sales grew 2% year over year to $68.5 billion in the quarter, according to the company's press release on Thursday. Physical store net sales rose at the same rate, to $5.7 billion.

"In stores, I think some folks are sleeping a bit on how much progress that business has made and what it's become in the last few years," Jassy told analysts. "I'm not aware of another retail business approaching Amazon's revenue size — hundreds of billions of dollars, with double-digit operating margins inclusive of ads — that's growing at this pace."

Groceries and Alexa

Jassy said fresh groceries and everyday essentials grew three times faster than the rest of the store business. Customers who buy perishables with same-day delivery purchase nearly seven times more essential units than those who don't.

GlobalData Managing Director Neil Saunders commented by email on Thursday. He called it "an important shift as it allows Amazon to win in a category that offers regularity and repetition." That, he said, "makes Amazon stickier, makes the fulfillment network more efficient, and improves perceptions around the value of Prime and other services."

Alexa for Shopping expanded its capabilities this week, ahead of the holidays. Its usage among Amazon shoppers is also growing. "U.S. customers using Alexa for Shopping are spending 50% more per order than those who don't," Jassy told analysts. He added that Amazon anticipates working with horizontal agents, but believes Alexa for Shopping "is going to be the primary shopping agent customers use to shop Amazon."

The year-over-year comparison for the quarter was tougher. Earlier this year Amazon moved its Prime Day event from the third quarter to the second, so the retail sales and advertising lift from the event did not fall in Q3. Earlier this month, the company also made job cuts in its retail division that affected hundreds of employees. A spokesperson said at the time that Amazon was adjusting parts of the store business to create a structure it hopes "will better enable us to deliver on our priorities."

Telsey Advisory Group analysts said in a Friday note that Amazon's retail market share could continue to grow as long as it leverages its Prime member base. "Amazon's ability to fuel key growth opportunities—grocery, pharmacy, logistics, ads, and AI/tech infrastructure—should make it more valuable," the analysts said.

Source: Retail Dive