Amazon reported first-quarter results and guidance that far exceeded expectations as a pandemic-driven pick-up in online shopping and cloud demand showed no signs of slowing down.
Amazon’s first-quarter net sales jumped 44% to $108.52 billion, marking a second straight quarter with revenue of more than $100 billion.
The increase was driven by each of Amazon’s ecommerce, cloud computing and advertising segments, with online store net sales of $52.9 billion and Amazon Web Services net revenue of $13.5 billion each topping estimates.
The online shopping giant also signalled this strength was set to continue into the current quarter.
Amazon projected net sales of between $110 billion and $116 billion for a jump of as much as 30% year-over-year, with its shopping holiday Prime Day moved back to the second quarter this year. Operating income will likely come in between $5 billion and $8 billion, even including an estimated negative impact of another $1.5 billion due to virus-related costs.
Industry comment
Paul Kirkland, Retail and Hospitality Business Development Director at Fujitsu
“The stellar results from Amazon aren’t surprising, particularly as the pandemic caused a rapid acceleration in the amount of time consumers spend online. While many businesses faltered in trying to meet increased customer demand, Amazon delivered again and again – with its steadfast supply chain and seamless online infrastructure holding firm for the whole year.
“And Amazon’s success will likely continue despite stores reopening, now that customers have become accustomed to the ease, variety and competitive pricing the eCommerce platform offers. Its next-day delivery has set the benchmark for all online shopping experiences and has caused the brand to become synonymous with impeccable customer service; with many retailers now looking to replicate this in their own offering. Not only that, but a handful of retailers now want to cash in on the global audience the brand demands by featuring on the platform to enhance their sales funnel; something that’s also helped to bolster Amazon’s Q1 results.
“Looking ahead, retailers can learn a lot from Amazon; how to sustain growth through customer service and innovate to pique interest. If retailers want a slice of the eCommerce market, sprucing up their online marketplaces and freshening up their digital offerings is vital to cashing in on the UK’s pent-up demand.”
Hugh Fletcher, Global Head of Consultancy and Innovation at Wunderman Thompson Commerce
“Amazon’s success has always been built on its vast digital marketplace so its most recent quarterly results are indicative of a company that has taken advantage of a more digital, post-Covid-19 world in its eCommerce base, as well as successes in its cloud venture. Yet as countries look to recover from the economic impact and reopen their high-streets, Amazon faces a renewed challenge to retain the customers that it gained over the past year; this is especially true as consumer confidence increases thanks to the global vaccine rollout. High-street retailers will also need to reassure shoppers who are fearful of physical retail, with 48% scared about in-store shopping last year. However, the signs are already pointing towards a busier high street in 2021.
“This could explain why Amazon Go launched across London; three frictionless, physical stores that use Amazon Fresh technology to give the eCommerce giant a physical presence and allow it to expand even further into the UK market. Customers will be hard-pressed to find a more convenient small basket shopping experience, especially during a period where consumers are conscious of what they touch and general hygiene. There’s no denying that Amazon’s Go service is its way to expand into the high-street and keep consumers engaged in its marketplace; the advent of an Amazon Salon with an in-store augmented reality app is further evidence of this. What’s more, it draws back to three characteristics that sit at the heart of Amazon: convenience, reliability and a vast array of products and services. As long as Amazon keeps delivering these services on and outside of the high street, it’s hard to look past them as the marketplace and retailer to beat.”
Chris Mole, Founder and CEO of Europe’s leading Amazon agency, Molzi
“Amazon’s Q1 earnings call revealed that the company’s booming success during the pandemic is showing no sign of slowing down. Amazon has made significant gains in the grocery sector this quarter by opening its first Amazon Fresh stores in the UK and even more in the US. It has also continued to grow its ads business which is quickly becoming one of its biggest revenue streams, beginning to rival the advertising giants of Google and Facebook.
A key question for brands and investors throughout the quarter has been whether consumer habits would change and impact Amazon retail growth, now that vaccination programmes are gaining momentum worldwide. But Amazon’s impressive revenue figures have shown they need not be concerned. What’s more, projections suggest that ecommerce sales as a percentage of total retail sales will never again be as low as they were pre-pandemic: Covid-19 has delivered an unprecedented boost to consumer confidence in making online purchases. During the pandemic, Amazon has established itself as a trusted brand and the company will undeniably be one of the big winners benefitting from this long-term shift to online retail.
This should encourage brands that have pivoted to invest in a significant Amazon offering as a result of Covid-19. But with increased competition both from brands that flocked online over the past year and recently reopened brick and mortar stores, online retailers must prime their listings to ensure that they maintain the customer base they have grown since the start of the pandemic. Brands must not blindly discount products to generate sales, but instead ensure that they have retail ready listings, with high quality images and descriptions, a well thought out keyword and advertising strategy based on data insights and most importantly available stock to meet increased demand.”
Vijayanta Gupta, Senior Vice President of Salsify
Amazon has been one of the only winners to come out of the pandemic, as online shopping grew and businesses relied more on the cloud. This time around however, it’s the ecommerce business that’s taking centre stage and exceeding expectations in its Q1 results. Net sales increased by 44% to $108.5 billion in the first quarter, compared with $75.5 billion in first quarter 2020.
This huge uptick in sales line up with the incredible growth Amazon has seen in its Prime subscription numbers, with the tech giant recently revealing it now has over 200 million members signed up to the service. This presents a serious challenge for brands in the UK who are likely to see their market share decimated, but it’s also a huge opportunity that UK independent brands cannot afford to miss out on. For those who rely on partnerships with traditional retailers, now is the time to start experimenting with Amazon.
Why is Amazon so successful? Simple, it is a customer-first technology company that is in the business of retail. And as a customer-first tech company, it invests heavily in taking customers on a frictionless shopping journey. An experience other retailers simply cannot match.
Amazon is unique from many other retailers in that it provides brands with an open and fertile ground on which to test, learn and gain a loyal consumer following. To gain a competitive edge, brands should be embracing Amazon’s adaptability and innovation. While it would be too expensive for most brands to copy what Amazon does, they should instead use Amazon’s platform as a channel for experimentation to enhance brand presence at a very low cost.
Despite its dominance and undeniable success, the question needs to be posed as to whether Amazon will see this reign over retail continue. In the UK alone, over 33 million people have had the Covid-19 vaccine, and this means people are more comfortable to go outside as life returns to normal. As restrictions lifted across the country, retail footfall increased over 100% week-on-week, according to the latest Springboard figures. Despite this, consumers will have picked new shopping habits over the past year, ones that will be very hard to break. These habits will be dominated by online and new level of convenience they now demand — something that simply can’t be matched on the high street.
Steve Ricketts, UK Head of Ecommerce at MediaCom
“COVID-19 and subsequent lockdowns have changed shopper behaviours, bringing entirely new customers to categories, such as grocery and toys. This goes some way to explaining Amazon’s continued dominance, outstanding just-announced quarterly results and continued share price rise. Post-lockdown, we’re expecting consumers to stick with these new eCommerce habits and continue Amazon’s growth, as it looks towards investing in its other business units, such as advertising and video content.
“Amazon is already the third largest ad platform, behind Facebook and Google, and through the new customers captured during the pandemic, it now has an incredible wealth of customer data gleaned from billions of online transactions that it can use to advertise to consumers with a great level of reach and accuracy. Amazon has continued to enhance opportunities for brands across advertising and insights, going as far as to offer online training for agencies and brands, helping support clients in eCommerce.
“But Amazon is catching up with the big two; while it’s unlikely that Amazon will overtake Google or Facebook in terms of advertising reach, it’s already solidifying its offering. What’s needed now is further investment into brand content and customer engagement experiences – and in order to grow at scale further, the development of APIs and tools, which enable media agencies to leverage more automation and efficiency for clients. Firmly implementing these tools will be a defining part of its ad offering in order to truly begin to make a name for itself as the biggest ad player.”
Aaron Goldman, CMO, Mediaocean
“Amidst a monster earnings report, Amazon Advertising continues to grow faster than its core business and faster than most other ad-supported media properties. Amazon benefits from its closed loop of intent to purchase and gives advertisers opportunities to insert their brands at critical apertures in the shopping process. Beyond direct response and e-commerce, Amazon has all the trappings for brand and video advertising with a compelling pitch forthcoming at the NewFronts. From commerce to advertising, Amazon embodies the omnichannel imperative and is well-positioned for further growth.”
