Lower-Than-Expected Q2 Revenue at Amazon Reflects Consumer Caution
If Amazon is a retail bellwether as well as a behemoth, its recent quarterly performance reflects a marketplace still tinged with consumer caution. For the second quarter ending June 30, the company notched a 10% gain in net sales and year-over-year (YoY) jump in net income to $13.5 billion from $6.7 billion, but came in short of analyst expectations for revenue and set a lower-than-anticipated range for revenue for the third quarter.
President CEO Andy Jassy noted that the operating environment remains challenging as disruptions of one kind or another continue. “We're seeing lower average selling prices or ASPs right now, because customers continue to trade down on price,” he said during the earnings call.
SVP and CFO Brian Olsavsky agreed. “We’re seeing a lot of the same consumer trends that we have been talking about for the last year – consumers being careful with their spend, trading down, looking for lower ASP products, looking for deals. That continued into Q2 and we expect it to continue into Q3,” he reported, adding, “The difference was in Q2 that, again, we had very strong unit volume growth.”
On that note, overall unit sales rose 11% YoY, in the three-month time frame, similar to the growth rate in the first quarter. Some of that unit growth came from staple items, as customers looked for both value and convenience. “We delivered our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like nonperishable foods, as well as health, beauty, and personal care items,” said Olsavsky.
In addition to everyday essentials, Amazon is finding pockets of growth in its Amazon Pharmacy business. “I think it was always a relatively natural extension for us to build a pharmacy offering from our retail business,” Jassy said “The combination of what's happening in the physical world and how much improved we've made our pharmacy experience is driving a lot of customer resonance and buying behavior.” In the second quarter, the company expanded Amazon Pharmacy’s RxPass program that now offers Prime members who are Medicare an unlimited consumption of 60 broadly used medications for just $5 a month.
[RELATED: Brick-and-Mortar Pharmacies Lag Behind Mail-Order, Digital Counterparts]
In its quarterly report, Amazon shared other recent results, including the launch of a new Grubhub+ membership for U.S. Prime members and the rollout of AI-powered features like the Rufus shopping assistant. Although the leaders did not provide specific updates on Amazon Fresh brick- and-mortar stores on the earnings call, a new Amazon Fresh recently welcomed shoppers in the Chicago suburbs and additional locations will open soon in the Philadelphia market.
Additionally, Amazon is improving the physical store experience. The company reported this week that is has refined its Just Walk Out technology to enhance the checkout-free experience for both customers and retailers. A new AI system makes Just Walk Out faster and more efficient, thanks to a multi-modal foundation.
According to Amazon its Just Walk Out systems are in place at more than 170 third-party locations in airports, stadiums, universities, hospitals and other sites in the U.S., UK, Australia and Canada. “We will launch more Just Walk Out stores in 2024 than any year prior, more than doubling the number of third-party stores with the technology this year. As we scale, the system will continue to learn from everyday shopping scenarios and raise the bar for accuracy and convenience, delivering the benefits of AI to retailers and customers around the world,” shared Jon Jenkins, VP of Just Walk Out technology, AWS Applications, in a recent post.
Within its Amazon Fresh stores in the United States, the retailer is focusing on its smart carts for a frictionless shopping experience.
Seattle-based Amazon is No. 2 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America. The company's Whole Foods banner has more than 500 stores in the United States, Canada and the United Kingdom. PG named both companies as its Retailers of the Century.
