Amazon growth beats expectations, revamps 1-day Prime delivery
Amazon posted a record quarterly profit of $3.6bn, more than doubling from $1.6 billion in the year prior, while its ad revenue growth slowed to a still impressive 34%.
This marks the sixth straight quarter in which Amazon’s profits have topped $1 billion and the fourth consecutive quarter of record profits.
The online retail giant also said it will offer one-day delivery for its Prime members on most items. In some other countries, such as the UK, Prime members are already offered one-day shipping.
Brian Olsavsky, Amazon’s chief financial officer, said the company is well equipped to offer one day shipping, since it has spent more than 20 years adding warehouses around the country where orders are packed and shipped.
Amazon has also been delivering more packages itself instead of relying on UPS, the post office and other carriers. It has expanded its fleet of jets, has plans to open package sorting hubs at two airports and launched a program last year that allows contractors around the country to deliver Amazon packages in vans stamped with the Amazon smile logo.
Ad revenue growth slows
Amazon’s flourishing ad revenue slowed to 34% growth while it reported that slowdown in retail giant’s ‘other’ services is greater than expected to $2.72bn (£2.11bn). This number consists almost entirely of advertising sales. Last year, Amazon enjoyed a year-on-year doubling of ad revenue, which surpassed $10bn for the first time in 2018.
The slowdown in ad revenue growth means that it is no longer the fastest-growing area of the business, despite it still being a relatively small part of Amazon’s overall revenue.
Amazon didn’t say when the change to its U.S. Prime membership will happen, but it said Thursday that it in the past month it has been increasing its selection of items eligible for one-day deliveries.
Michael Schirrmacher , Managing Director UK at Bloomreach said: “Brands and retailers often think they need to replicate Amazon to compete with it, but in reality they can perform better in many areas. Offering customers speed and convenience is great, but those elements alone won’t always be enough.
“While continuing to perform strongly in its cloud business, Amazon’s march towards ecommerce domination is stalling. That’s because it is falling behind when it comes to delivering the contextual shopping experiences that today’s customers crave. Just because your customer searched for an item a month ago, doesn’t mean the same thing will be of interest now. People might seek simple online experiences, but they also want to feel understood and have little tolerance for subpar digital experiences.
“These chinks in Amazon’s armour are exactly where retailers can up their online experience efforts and beat the giant at its own game. It is about improving every step of the shopping journey, from personalised content and recommendations, through to delivering on search results.