Amazon has said that it expects to increase the cooperation online and offline between its Whole Foods, Amazon Fresh and Prime Now operations as it develops its omnichannel strategy. In a call with analysts to discuss its third quarter results, Chief Financial Officer Brian Olsavsky said that the company was working together to explore “different ways” to serve customers and also hinted at potential future expansion plans for Whole Foods.
Meanwhile, Amazon’s third quarter results for the three months to 30 September exceeded both its own and analysts’ expectations. The company’s stellar performance was driven by Prime Day, which it said was received particularly strongly in its international markets, as well as by its AWS cloud computing division. Total sales were up 34% to USD43.7bn (EUR39.47bn), including a USD1.3bn (EUR1.17bn) contribution from Whole Foods Market, which was acquired during the quarter. Excluding Whole Foods, sales were up 29% year-on-year.
Amazon’s international revenues grew by 29% during the three month period, whilst net sales in North America jumped 35%. The company recorded its tenth consecutive quarter of net profit, which reached USD252mn (EUR227.66mn).
As Amazon exceeded its own forecasts and those of analysts, the list of quarterly highlights continues to get longer. Alexa, new devices, investment into original content and of course the acquisition of Whole Foods Market for USD13.7bn (EUR12.38bn) at the end of August. For the first time this quarter the retailer posted store sales separately from online.
Whole Foods contributed USD1.3bn (EUR1.17bn) to the quarter as the company worked to lower prices on a range of key grocery items, add Amazon lockers to its stores and to make Amazon Prime the new rewards programme. The retailer has not wasted any time since its 28 August acquisition in launching Whole Foods shop in shops online. These are already available on both Amazon Fresh and Prime Now in the US and UK markets. This omnichannel approach could give both Amazon Fresh and Whole Foods significant boosts as the grocer’s popular organic foods and private label lines such as Whole Foods and 365 Everyday Value reach a broader audience. The access to private label lines for grocery is arguably one of the main drivers behind the Whole Foods acquisition.
In the coming months we can expect to see further omnichannel developments at Amazon, as it explores combining Fresh, Prime Now and Whole Foods across different touchpoints. This may include integration with Fresh Pickup or using Whole Foods stores as hubs for Amazon Prime Now. Whole Foods’ nine stores in the UK are mainly urban and located in London, but it has two stores outside of the capital in Cheltenham and Glasgow which could provide interesting potential. We would also not rule out the possibility of Amazon looking to expand its Whole Foods banner with new stores, potentially introducing concept stores in new markets to support an online push.
Meanwhile, loyalty to Amazon remains at an all-time high among shoppers. The company achieved a 59% jump in subscription revenue during the quarter, mainly the result of continued and consistent growth of Amazon Prime membership. The company is seeing more international members signing up and has also found the monthly programme useful in attracting new subscribers. Growth has also come from Echo devices as more customers begin to use voice ordering.
In short, there appears to be no stopping the Amazon juggernaut. Its list of achievements for the last quarter reads like something most companies would take five years to achieve. We should certainly expect more growth and disruption ahead.