Amazon’s net product sales for the first half of 2024 were $122 billion. Amazon’s online store sales rose 5% in the second quarter to $55.4 billion, compared with a growth of 7% in the first quarter. Reported slowing online sales growth in the second quarter and said cautious consumers were seeking cheaper purchase options, sending shares down nearly 8%.
The obsession with improving customers’ lives every day comes at a cost. The total cost of fulfillment rose from 31% in 2021 to almost 37,5% in 2024: almost 46 $ billion, up from 21% in 2017. In 2011, fulfillment costs were only 11% of sales. Are fulfillment costs still not under control despite the growth of businesses and economies of scale?
The year-on-year growth of Amazon’s online stores segment, which measures its first-party e-commerce performance, decelerated in the first quarter. Additionally, Amazon’s operating margin contracted. Despite this, Amazon has thrived in a robust e-commerce market, with consumers continuing to spend vigorously while hunting for deals. Amazon announced its annual Prime Day achieved record-breaking sales in July, although specific figures were not disclosed.
Amazon now faces strong competition from new entrants. Temu and Shein, both of Chinese origin, have attracted many global consumers seeking bargain deals online. Amazon’s CFO, Brian Olsavsky, told reporters that consumers “are continuing to be cautious with their spending trading down.”He added, “They are looking for deals,” and noted that lower priced products were selling briskly.
CEO Andy Jassy agreed, adding on a call with analysts that customers were trading down on price when they could. Amazon’s online retail business has faced heightened competition from budget retailers like Temu and Shein, which sell various goods at bargain-basement prices directly from China. In response, Amazon plans to launch a Temu-like service that focuses on shipping affordable fashion, household goods, and other products directly to customers from warehouses in China. Amazon is also working on making its bargain items more visible to customers and is expanding its fast delivery services further into rural America.
Also, read the analysis from 2021.
Walther Ploos van Amstel.