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Amazon’s international sales make a jump but still have a long way to go

Amazon’s international sales make a jump but still have a long way to go
01 Nov 2017

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Amazon reported its Q3 2017 results last week, with net sales increasing 34% year-over-year (YoY) to $43.7 billion, while operating income fell 40% YoY to $347 million.

The company continues to make significant investments in itself across all of its operations, hindering its present-day growth in favor of its future performance. Its North America and Amazon Web Services (AWS) segments managed positive operating incomes despite increased expenses, but the International segment posted a loss of $936 million, which is more than it lost in the comparable period in 2016 and in Q2 2017. Despite this drop, its international net sales increased 29.3% YoY to $13.7 billion following a successful Prime Day and Diwali. This is up from 16.7% YoY growth in Q2 2017, meaning its heavy investments may be having the right impact.

International sales may be taking off because of Amazon’s efforts to improve its international logistics capabilities and Prime benefits. The company has been investing internationally in order to offer faster shipping and add Fulfillment by Amazon (FBA) merchants overseas. These moves improve Amazon’s logistics and allow it to offer more products and better Prime benefits. Amazon has often struggled overseas because its logistics and membership program have not been up to par with its US operations, but this improvement in sales suggests that its investments are improving its appeal in new markets.

Amazon continues to invest heavily in itself to build and improve its logistics capabilities, allowing it to compete and win on convenience, Josh Blechman, director of Capital Markets at ACSI Funds, which counts Amazon as the top holding in its flagship fund, told BI Intelligence. Amazon’s fulfillment capabilities in the US are unmatched and are one of the main drivers of its success, as its speedy delivery creates an appealing online shopping experience. Therefore, it’s trying to bring its international segment up to the same level in the hopes of finding similar success.

The e-commerce titan is not resting on its laurels when it comes to fulfillment in the US. Amazon continues to invest in domestic fulfillment in order to keep building on one of its greatest strengths.

  • Amazon recently launched Amazon Key, a service that will provide secure in-home delivery, and is also reportedly considering introducing the ability to deliver goods directly to consumers’ car trunks. These offerings further its fulfillment strength, as it can cut down last-mile delivery costs, and offer consumers a new valuable feature.
  • The company recently acquired Whole Foods and struck a partnership with Kohl’s, both of which expand its brick-and-mortar network, giving it even more fulfillment capabilities.
  • It plans to hire 120,000 US workers for the holidays, many of whom were brought in for Q3, as it readies itself for the most demanding season for retail and fulfillment.

If these new initiatives and expansions are successful, Amazon may look to implement similar versions overseas to further improve its international capabilities.

Source: Business Insider