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EDITORIAL How Amazon, AO and Sainsbury’s are balancing larger online businesses with rising costs

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In today’s InternetRetailing newsletter, we report as leading retailers come up against the question of how they stay profitable following two years in which online sales – and investment in delivery capacity – have grown strongly during the pandemic. At the same time, retailers and brands face challenges in areas from logistics and the supply chain to the cost of living issues that are now facing their customers.

Amazon, AO and Sainsbury’s are all seeing more sales take place online after expanding quickly during the pandemic. Amazon, for one, doubled the size of its fulfilment networks in two years after sales grew by 39% when the pandemic hit in 2020. But the cost of serving rising sales at a time of inflation is hitting the bottom line and it reported its first quarterly loss since 2015 – and predicts it will make losses next quarter as well.

For Amazon, the answer lies in improving productivity and cutting costs while improving the customer experience. “We know how to do this and have done it before,” says chief executive Andy Jassy.

At the Sainsbury’s retail group, 39% of sales are now online, including 17% of grocery sales, and the supermarket says it is now the UK’s second largest online grocery retailer – up from fourth before the pandemic. It says it has improved profitability by improving picking rates and routing its vans more effectively, and it is now looking to make delivery both still more efficient and better for customers.

AO says it now has 54% of the major domestic appliance market in the UK, but it is facing challenges including the cost of living, driver shortages and logistics challenges. It expects to report sales and profits in the year to March 31 that are lower than last year but higher than the year before – with rising logistics costs and lower sales having an impact on profitability.

Unilever, meanwhile, reports sales increases in the first quarter of its year that are driven by price increases in the light of higher costs. The brand owning business, which is now steadily seeing more of its sales take place online, is also seeing the volume of goods that it sells falling across its divisions, to a varying extent.

Meanwhile, new figures from the ONS show the scale of logistics business closures in the first quarter of the year. The number of transport and storage businesses closing was 75% higher than a year earlier.

In today’s guest comment Louisa Murray of Railsbank argues that the death of paying in store in nigh.

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