Amazon: Q3 profits up 96% and Sweden market entry

Date : 30 October 2020

As Amazon announces its Q3 results, we round up news from the retailer.

In its third quarter, Amazon's net sales increased by 37% to $96.1 billion, and operating income rose 96% to $6.2 billion. 

Amazon also this week launched in Sweden, the Nordic region’s largest grocery market. Customers can shop from European and local Swedish business, across 30 categories.  

North America leading the way

Sales in North America increased by 39%, with the region accounting for 61.8% of total sales, up 0.9% year-on-year. It also delivered an operating income of $2.2 billion, an increase of 77%.

Amazon’s international sales grew by 37% and the segment was once again profitable at $407m.

Marketplace driving sales

Sales from third-party seller services (commissions from its Marketplace) increased 55%. Whilst first-party online sales were up 38%, and sales from subscriptions increased 33%. On Prime Day (October 13-14) sales from third-party sellers surpassed $3.5 billion, a nearly 60% year-on year increase.

Whole Foods Market decline

The shift to online has hit Amazon’s sales in physical stores, (the vast majority coming from Whole Foods Market), as sales declined (10)% year-on-year. In its Q2 results, Amazon stated that its online grocery sales had trebled, and Whole Foods Market has helped enable this, through in-store picking, and the roll out of pick-up.

 Forward outlook

Jeff Bezos, Amazon's founder and CEO, stated, “we’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season.”

Net sales are expected to be between $112 billion and $121 billion. This could be a growth of between 28% and 38% compared with the fourth quarter of 2019.

Operating income is expected to be between $1 billion and $4.5 billion, compared with £3.9 billion in the fourth quarter of 2019.

First launch in a Nordic country

The launch sees Amazon’s entry into the Nordics. Customers in Sweden could previously shop on Amazon through other European countries including Germany. However, this would mean Swedish customers would often have to pay high delivery charges.

The range includes more than 150 million products across 30 categories including baby, beauty, health and household. Free delivery is eligible on orders over SEK229 (US$25) that are fulfilled by Amazon.

Amazon said it has invested billions of dollars in infrastructure and technical services that help small and medium-sized businesses reach new customers across the market. These include simple listing tools that support all seven European Amazon stores, 24/7 online Selling Partner support, open and transparent selling conditions and pricing, and reports and analytics tools. 

Sustainability investments

The launch in Sweden follows Amazon’s announcement of its largest investment in renewable energy outside of the US. The retailer launched the 91-megawatt Bäckhammar project in Western Sweden that will support Amazon Web Services (AWS) data centres in the country. It will also be used to expand Amazon’s retail business. Another renewable energy project is currently in construction in Sweden, a 122-megawatt onshore windfarm in Västernorrland. In total, these projects will add 213 megawatts of new clean energy to the Swedish grid.

These launches are part of Amazon’s Climate Pledge, which launched last year. The Climate Pledge was co-founded by Amazon and Global Optimism as a commitment to reach the Paris Agreement ten years early, and be zero net carbon by 2040.

Expansion into Europe

The move into Sweden sees Amazon expand further into Europe, where it already has six marketplaces in UK, France, Italy, Germany, Spain, and most recently in the Netherlands. Once marketplace and logistics are established in a market, Amazon can roll out other channels including Prime Now, Pantry, Amazon Fresh and Amazon Business.

The expansion of Amazon means manufacturers should share best practice across markets in order to quickly capitalise on opportunities.

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