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Amazon’s online store net sales totaled $31 bilion in Q2. This performance represents 16% year-over-year (YoY) growth, excluding exchange rates, which is an acceleration from the 12% YoY growth Amazon posted in the metric in Q1 2019. Q2 2019 was a particularly strong quarter for Amazon’s online retail business, considering it posted its best online store net sales growth since Q4 2017. 
Here’s what it means: The e-tailer’s shift from free Prime two-day delivery to one-day likely boosted its online sales.
"Customers are responding to Prime’s move to one-day delivery," CEO Jeff Bezos said in the earnings release, and the speedy offering may be creating new sales opportunities for Amazon. Amazon announced its plans to move its standard Prime free shipping offering from two-day delivery to one-day in April, and it’s now available for over 10 million items sold on its marketplace.
This rollout is already having an impact, as the company is "attributing a good bit" of the acceleration in revenue growth of its North America retail segment — it grew 20.2% YoY in Q2 2019, outpacing the 16.6% YoY growth from the prior quarter — to the introduction of one-day, CFO Brian Olsavsky said on the company’s earnings call.
It could be boosting sales because there may be situations where consumers need an item in one day, so Amazon’s previous two-day shipping wouldn’t suffice, opening the door for Amazon to make more sales, especially since 40% of US consumers say next-day shipping would make them more likely to shop online.
The bigger picture: Despite its improving growth in online retail, physical retail holds greater potential for Amazon, but it still needs to improve its brick-and-mortar business to take advantage.
Amazon’s net online store sales dwarf those of its physical retail segment, despite in-store retail still accounting for the vast majority of retail sales. The firm’s physical stores segment — which is made up of businesses like Whole Foods and Amazon Go — brought in just $4.3 billion in sales this quarter, up 1% YoY.
There’s a huge amount of room for Amazon to grow in physical retail, which made up nearly 90% of total US retail in Q1 2019, while it’s difficult to keep finding significant growth opportunities online since it already brings in so much revenue.
Amazon Go may be its best chance to build its physical retail business, but it needs to move quickly as its competition is growing stronger.
- Amazon Go’s cashierless shopping experience is a serious differentiator in physical retail, and Amazon is expanding to take advantage. Amazon is currently the only company operating multiple stores featuring autonomous checkout technology, which enables consumers to skip physical checkout in-store, and it’s opening three more locations to its existing base of 13. This is a far cry from the 3,000 it’s reportedly interested in opening, but adding more and expanding to different types of retail could propel its physical sales segment.
- Competing autonomous checkout technology providers are raising funding and partnering with retailers, which could eliminate Amazon Go’s advantage. Standard Cognition recently raised $35 million in Series B funding at a post-money valuation of $535 million, while a number of firms have announcedpartnerships with retailers to bring autonomous checkout to their stores. If they successfully launch their own autonomous checkout experiences soon, Amazon’s moment to capitalize on its Go stores could pass it by.
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See Also:
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Source: Business Insider – dkeyes@businessinsider.com (Daniel Keyes)