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Amazon finds reasons to be cheerful in its shops, as fourth quarter in-store sales beat expectations – but online sales fall

Shoppers can buy without checking out from Amazon Fresh stores in the UK. Image courtesy of Amazon

Amazon today signals that it expects to see “significant growth” from its physical stores in coming years, following a fourth quarter in which its online sales fell, compared to the previous year, but in-store sales grew.  

Amazon chief executive Andy Jassy says sales in its stores beat its expectations over the Christmas period – and its continued focus on improving the customer experience would pay dividends. Physical store sales grew by 6% during the fourth quarter, while online declined by 2%.

“Our relentless focus on providing the broadest selection, exceptional value, and fast delivery drove customer demand in our stores business during the fourth quarter that exceeded our expectations—and we’re appreciative of all our customers who turned to Amazon this past holiday season,” says Jassy. “We’re also encouraged by the continued progress we’re making in reducing our cost to serve in the operations part of our stores business. In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon. 

“The vast majority of total market segment share in both global retail and IT still reside in physical stores and on-premises datacenters; and as this equation steadily flips, we believe our leading customer experiences in these areas along with the results of our continued hard work and invention to improve every day, will lead to significant growth in the coming years. When you also factor in our investments and innovation in several other broad customer experiences (e.g. streaming entertainment, customer-first healthcare, broadband satellite connectivity for more communities globally), there’s additional reason to feel optimistic about what the future holds.”

In recent years, Amazon has opened stores in the US and UK markets. It has built on its 2017 purchase of Whole Foods Market and since developed its own ‘just walk out’ technology that is used in a fast growing number of Amazon Fresh stores in both the US and, at a smaller scale, in the UK. Rather than having to queue to checkout, Amazon Fresh shoppers download an app that gives them entry to a store, tracks what they pick up – and put back – and are sent their grocery receipt once they leave the store. Amazon has also opened other shops, ranging from bookshops to Amazon Four Star shops.

The update comes at a time when in the UK market, footfall and retail figures continue to show shoppers returning to stores in the wake of the pandemic but buying less online than they did during Covid-19 peaks. However, online sales still tend to be higher than they were before the pandemic.

The figures

The comments come as Amazon today reports net sales of $149.2bn (£121.7bn) in the fourth quarter of its financial year, to December 31 3022. That’s 9% up on the same time last year. North America sales grew by 13% on last year but international sales fell by 8%. When foreign currency fluctuations were excluded, international sales were 5% ahead of last time. 

Online sales of $64.5bn (£52.6bn) were 2% down, a year earlier, while in-store sales of $4.96bn (£4.05bn) were 6% ahead of last time.  

Operating income fell by 22.9% to $2.7bn (£2.2bn) and net income fell 97.9%to $0.3bn (£0.2bn) from $14.3bn (£11.7bn) last time, after a $2.3bn (£1.9bn) loss relating to its stake in electric vehicles manufacturer Rivian Automotive. 

In the full 2022 year, net sales grew by 9% to $514bn (£419bn), while operating income fell 51% to $12.2bn (£9.95bn). A net loss of $2.7bn (£2.2bn) was down from $33.4bn (£27.25bn) a year earlier. Again, the bottom line loss includes losses – this time of $12.7bn (£10.4bn) – related to its stake in Rivian Automotive. 

Looking ahead, Amazon expects 2023 first quarter net sales to come in at between $121bn (£98.7bn) and $126bn (£102.7bn), and warned that operating income would be somewhere between $0 and $4bn (£3.3bn), compared with $3.7bn (£3.1bn) in the first quarter of 2022. 

Fourth quarter update

Amazon cited sales volumes and small businesses sales via its marketplace as it reported a record-breaking holiday season, especially over the Black Friday weekend. 

Elsewhere it invested in making same-day delivery faster in US cities, and says its new same-day delivery site in Sacremento will be the world’s first logistics site certified as zero carbon by the International Living Future Institute.

It expanded Buy with Prime in the US, where participating merchants can share Amazon reviews as well as its checkout. It also launched Inspire as a new feed in the US Amazon shopping app, featuring content from customers and influencers to help shoppers find relevant products.

Amazon is an Elite retailer in RXUK Top500 research.

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