Amazon says its online grocery sales tripled in the second quarter of its financial year, compared to the same time last year. The US retailer, which sells in the UK via the Amazon UK website, expanded its grocery delivery capacity across its markets by more than 160% during the quarter and tripled the number of locations where shoppers can pick up their groceries. And today the company reported sales up by 40% and profits by 100% in the second quarter of its financial year – despite spending $4bn (£3bn) on Covid-19 costs including making its warehouses and logistics secure.
The figures illustrate the way that Amazon has expanded its presence in the grocery market at a time when demand for online deliveries soared across markets including the UK during Covid-19 lockdowns. Since the end of the quarter, Amazon UK has made Amazon Fresh grocery delivery free for members of its Amazon Prime subscription scheme and is expanding the scheme further across the country.
The update comes as Amazon, whose UK retail website is ranked Elite in RXUK Top500 research, overnight reported net sales of $88.9bn (£66.8bn) in the three months to June 30, 40% up on the same time last year. Net income – or profits – increased to $5.2bn (£3.9bn) in the second quarter, up from $2.6bn (£1.9bn) a year earlier. The retailer, marketplace, streaming service and technology provider said that third-party sales – via the merchants who trade on its marketplace – grew faster than its own direct sales to customers. This highlights the benefits of owning the platform that others trade on rather than focusing only on direct customer relationships.
During the quarter the company also saw businesses including Verizon, Infosys, Reckitt Benckiser and Oak View Group sign The Climate Pledge, the commitment it has made with Global Optimism to achieve net-zero carbon by 2040, and which it funded with an initial $2bn (£1.5bn) at launch. Amazon itself now expects to run on 100% renewable energy by 2025 – five years ahead of its 2030 target.
In the UK, Amazon has run a small business accelerator to support more than 200,000 small businesses affected by the Covid-19 crisis, including a one-week boot camp hat helped 1,000 offline businesses move online. It also invited up to 1,000 businesses to tour its Amazon fulfilment centres to see and learn from how it has put Covid-secure measures in place.
Meanwhile, it has also continued to expand the range of devices through which its Alexa voice assistant is now available, launching the Echo Auto in the UK.
“This was another highly unusual quarter and I couldn’t be more proud of and grateful to our employees around the globe,” said Jeff Bezos, Amazon founder and chief executive. “As expected, we spent over $4bn on incremental Covid-19 related costs in the quarter to keep employees safe and deliver products to customers in this time of high demand – purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits and paying a special thank you bonus of over $500m (£375.5m) to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions.”
Amazon now expects that third-quarter net sales will come in at between $87bn (£65bn) and $92bn (£69bn), growing by between 24% and 33% on the same time last year.
Commenting on today’s figures, Hugh Fletcher, global head of consultancy and innovation at digital consultancy Wunderman Thompson Commerce, said: “Amazon has had a strong performance during lockdown due to its ability to continue to provide a service to customers, with an unrivalled worldwide infrastructure and access to stock that is second-to-none. Before the pandemic, 75% of consumers said they wished brands and retailers offered similar services to the ecommerce giant, highlighting the grasp it already had on shoppers. And over the years it has managed to successfully extend its products and services, from non-essential items to grocery and even a recent foray into gaming – offering customers a speedy online experience that satisfies all needs.
“We recently found that over a third (35%) of all online shopping was conducted through Amazon’s marketplace during the lockdown period, reinforcing the company as the big retail winner in the wake of the Covid-19 pandemic. This rapid increase in market share may well be offset by rising costs over Q2 and the remainder of the year, but the pandemic has already conditioned consumers further towards Amazon. One in five (20%) consumers said they intend to purchase more with Amazon after the pandemic has passed, despite 21% expressing worries about its ongoing dominance.
“With Amazon making clear headway over its rivals, the focus will likely turn to the company’s image. The business outgoings may have risen to introduce extra measures that prevent the threat and potential spread of Covid-19 to frontline workers – but they are necessary investments and will be well-received by its customer-base. The company still has a long way to go in its journey towards social responsibility to improve consumer trust, reduce its global carbon footprint and improve its equality processes. If Amazon and Jeff Bezos can maintain a positive image throughout the COVID-19 pandemic, it has the potential to grow its market dominance even more.”
Paul Kirkland, director of retail and hospitality at IT services and solutions business Fujitsu UK, said: “Even a global pandemic couldn’t put a stop to Amazon’s appetite for disruption. From the launch of its cashless Amazon Go stores earlier this year to, more recently, offering free delivery of groceries in London, Amazon has pivoted and evolved in line with consumer demand to maintain its position as an industry behemoth. And it’s paid dividends. The company’s strong performance during lockdown is down to its tried and tested ecommerce and delivery models.”
He added: “Now that Amazon has had such a successful quarter, it could be time for the company to turn its attention back to its presence on the high street. After all, it still has a long way to go to convince consumers that it’s more than just an online destination. Since lockdown measures were eased, footfall has drastically increased – proving there’s still a place for bricks and mortar stores in retail. If Amazon can continue firing on all cylinders and establish a successful physical presence on the high street in the coming months, the only way is up.”