Amazon Online Sales Growth Slows Amid Lockdown Easing

Amazon posts another strong set of financial results under the new leadership of CEO Andy Jassy, who took over control of the online behemoth from Jeff Bezos on 5 July.

Amazon admitted that people are “doing things besides shopping”, after it posted weaker than expected revenues, despite it bringing forward its Prime Day sales event in June.

However Amazon’s cloud division, which Jassy was previously the head of, continued to perform robustly, as firms that had been quiet during Coronavirus lockdowns (airlines etc) began to restart operations in the last couple of months.

This helped AWS post $14.8bn in revenue in the second quarter, compared with $10.8bn in the same period last year.

Amazon results

When examining the overall performance, it is clear from the results that Amazon posted that it remains in very rude health indeed.

For the second quarter ending 30 June, Amazon posted a net profit of $7.8 billion, up from $5.2 billion in the same year ago quarter.

However a drag on Amazon’s top line came from its core e-commerce online shopping business, which grew at 15 percent, the slowest rate since 2019.

Revenues meanwhile rose 27 percent to $113 billion, from $88.9bn in the same quarter a year earlier.

Analysts had been expecting revenues of $115 billion.

Brian Olsavsky, Amazon’s chief financial officer, said during an earnings call that the deceleration was “essentially a combination of lapping last year’s Covid strength”, when demand for online shopping had grown to record levels.

But the advanced rollout of vaccines in countries such as the US, UK and Israel, meant an easing of lockdown rules and according to Olsavsky, Amazon was “seeing among our customers in especially United States and Europe, people are getting out more doing other things besides shopping”.

He also pointed out that spending by customers with Prime memberships had “moderated”.

“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic,” noted CEO Andy Jassy.

“At the same time, AWS has helped so many businesses and governments maintain business continuity, and we’ve seen AWS growth reaccelerate as more companies bring forward plans to transform their businesses and move to the cloud,” Jassy said.

“Thank you to all of our passionate, innovative, mission-driven employees around the world for continuing to stay focused on delivering for customers – I am very excited to work with you as we invent and build for the future,” he concluded.

Amazon said that among the highlights in the past quarter, was it creating more than 10,000 new corporate and operations jobs in the UK, and investing £10 million over three years to train up to 5,000 employees in new skills.

Expert reaction

Experts have pointed out that Amazon, after a period of significant growth during the pandemic, is now entering a period of heavy investment in its operations.

“Amazon had a big boost during the pandemic in 2020 and its growth rate is now settling back towards more normal levels, though it is a much bigger company than it was a year ago,” noted Martin Garner, COO at CCS Insight.

“Because of the pressures from the pandemic, Amazon’s shopping has been running at peak capacity for more than a year, even though it expanded rapidly during that time,” said Garner. “It is now investing further to give itself space for growth in each warehouse, and to build out its delivery network to get back to its pre-Covid Prime target of one-day delivery for Prime. The company looks set to remain in a heavy investment phase for at least the next 12 months.”

“Amazon’s cloud division, AWS, had a really good quarter and now generates $59 billion annually,” said Garner. “Its growth continued to accelerate thanks to several factors.”

“During the pandemic many of AWS customers deliberately limited their spend and some of this is now coming back,” Garner concluded. “Some customers, like airlines, saw their business very hard hit but are now recovering. Others accelerated their digital transformation and are spending more.”