Amazon’s relentless rise has made it a source of fear and a topic of conversation in retail boardrooms. Based on the results Amazon reported on Thursday, those retail conversations are only going to grow more pressing.
The online retail giant reported a better-than-expected 23% jump in sales, thanks to the 24% gain in North America, nearly 60% of Amazon’s total sales, and a 16% increase in international markets and a 43% surge in Amazon Web Services cloud-computing unit.
By themselves, the gains are impressive, but it’s the fact that sales moved sharply higher in tandem with strong profit growth that should grab retailers’ attention.
For years, Amazon was criticized for boosting sales at the cost of profit, potentially a long-term vulnerability that could threaten its spending flow. It has proved skeptics wrong. Amazon on Thursday posted its eighth straight quarter of profit, as a 47% surge in AWS’s operating profit helps offset loss overseas, where Amazon has expanded and provided more services in countries from India to Mexico. Free cash flow, one of CEO Jeff Bezos’s favorite financial measures, rose 52% to $10.2 billion for the trailing twelve months.
“Amazon is putting a lot of pressure on everyone to raise the game,” said Marc-Alexandre Risch, chief retail officer for beauty giant L’Oréal USA, at a WWD Retail 20/20 conference in late March. In fact, at the event, pretty much all of the speakers mentioned the disruptive force of Amazon.
It’s not just Amazon’s disruptive impact on their business that’s being felt. One speaker asked the roomful of about 200 mostly beauty and fashion industry attendees to raise their hands if their household has a Prime membership. All but a few put their hands up.
Amazon said Thursday that its retail subscription services, which include Prime membership fees, jumped 52%, excluding the impact of currency translations.
Amazon doesn’t disclose the size of its Prime membership, but Consumer Intelligence Research Partners, or CIRP, in a report earlier this week, estimated Amazon Prime, a key feature for keeping users engaged in its ecosystem, had 80 million US members as of March 31, up from 58 million a year earlier. CIRP estimated that Prime customers spend on average $1,300 a year, compared to about $700 for non-member customers.