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Amazon predicts ‘unprecedented’ peak trading performance following fast third-quarter growth

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Amazon chief executive Jeff Bezos has predicted an “unprecedented holiday season” as the retail-to-technology giant reported third-quarter sales up by more than a third and profits up threefold. 

The retailer, ranked Elite in RXUK Top500 research, overnight reported record net sales of $96.1bn (£72.95bn)  in the third quarter, up by 37% on the same time last year. Net income of $6.3bn (£4.8bn) was three times – or 200% – the $2.1bn (£1.6bn) reported at the same time last year. 

In the first nine months of the year, the retailer reported net sales $260.5bn, up from $193.1bn at the same time last year, while net income of $14.1bn (£10.1bn) was up from $8.3bn (£6.3bn) last time.

Looking ahead, the retailer expects to see net sales in the fourth – peak trading– quarter of its year grow by between 28% and 38% on the same time last year – to between $112bn (£85bn) and $121bn (£91.9bn). Operating income is expected to come in at between $1bn (£0.76bn) and $4.5bn (£3.4bn), compared with $3.9bn (£2.96bn) last year, after taking into account an expected $4bn (£3bn) in costs related to Covid-19. 

Amazon’s own Prime Day event kicked off the Christmas season, on October 13 and 14 and the retailer said the event saw third-party sellers increase their sales by almost 60% to more than $3.5bn (£2.7bn), while Prime members saved more than $1.4bn (£1.1bn). However, the retailer did not say how its own sales compared with Prime Day last year.

Jeff Bezos, Amazon founder and chief executive said: “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.”

He said the retailer had created more than 400,000 jobs around the world this year alone, with a minimum wage of $15 – including 10,000 in the UK, where it now employs a permanent staff of 40,000. 

Amazon customers have now connected more than 100m smart home devices to Alexa, and new ways to connect include Amazon Sidewalk, a shared network that Amazon Echo, as well as security cameras, outdoor lights and motion sensors can connect to. Amazon says AI is being used to make Alexa more conversational and natural. 

During the quarter Amazon launched in Sweden for the first time and extended Amazon Prime to Turkey. Customers at two Amazon Go shops in Seattle can now pay using their palm ‘signature’ via the new Amazon One contactless solution and the solution is set to expand to its other shops. 

Amazon also announced that it had ordered 1,800 electric delivery vehicles from Mercedes Benz Vans, set to make their first deliveries to customers in 2021. It also expanded its wind and solar farms and use of sustainable materials, which new Echo and Fire TV devices being made of recycled materials and the launch of a Climate Pledge Friendly programme to identify products that have sustainability certifications.

Commenting, Hilding Anderson, head of retail strategy, Americas at digital consultancy Publicis Sapient, said: “Amazon is well positioned this holiday season as physical stores’ importance diminishes this year. As the pandemic rages on, I expect that more consumers will stay at home, further solidifying the seismic shift towards shopping online. This year will likely bring the highest ecommerce sales we’ve ever seen for the holiday season, which is certainly an advantage for Amazon’s business.

“This season will reveal which retailers have revamped their ecommerce experience, and could prove to be another nail in the coffin for primarily store-based retailers, and those who have yet to prioritize digital channels and have not made significant moves towards digital business transformation. Transformation will be essential as retailers have to move more quickly to release new features, create digital products, upgrade loyalty programs, and monetise their data.”

Chris Mole, chief executive of Amazon agency Molzi, said: “Profits have taken a short-term hit due to Amazon’s investment in its Covid-19 response, but this should not alarm brands and investors:  ecommerce demand is healthy and will only continue to grow into Q4. Research shows that 75% of Amazon shoppers are planning to make purchases on Black Friday, 69% on Cyber Monday, and 84% during the Christmas shopping rush in December. On average, Amazon shoppers are set to spend £400 each on the platform in the run-up to Christmas.

“Q4 is set to be huge for Amazon earnings due to its run of sales moments which this year included a delayed Prime Day. And with these moments coinciding with a second wave of Covid-19, brands should be prepared for a rush of consumers relying upon Amazon for Christmas purchases. Simply discounting products and hoping for sales is rarely enough. Deals should be paired with a carefully planned advertising strategy, retail ready listings and available stock to get the most out of the upcoming sales peak.”

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