Amazon published their Q2 earnings report today. The report was the first with Andy Jassy at the helm of Amazon, having replaced Jeff Bezos as CEO on July 5, 2021. This earnings report showed more humble growth compared to most recent quarters, with net income decreasing by $300 million from Q1 2021. Nevertheless, Amazon boasted positive performance across the board, year-over-year (YoY).
Q2 2020 marked massive growth in ecommerce sales as more shoppers than ever flocked to Amazon during stay-at-home orders. This growth presented a rather difficult challenge for Q2 2021 to continue boasting strong year-over-year growth (which also isn’t ideal for a new CEO’s first quarterly earnings report).
Though Amazon spokespersons denied it, it seems likely that this was a key factor in Amazon’s decision to move Prime Day 2021 into the second quarter. And it worked.
According to the earnings report, Prime Day 2021 was “the biggest two-day period ever for small and medium-sized businesses in Amazon’s stores worldwide.” Additionally, Prime Day 2021 was the biggest Prime Day ever, with Prime Members from 20 countries buying over 250 million items during the event.
Prime Day 2021’s success undoubtedly boosted performance metrics for Q2, contributing to the 27% growth in net sales YoY.
There’s plenty to process in the quarterly earnings report, but the most interesting takeaway in this writer’s opinion is the continued growth of Amazon advertising revenue, and what that indicates for brands selling on the platform.
Amazon made clear that Amazon advertising remains a keen focus for the future, stating that Amazon Advertising added over 40 new features and self-service capabilities. Amazon also announced in Q2 that ads were being made available for Amazon Streaming TV and Twitch.tv, which together reach 120 million viewers per month in the U.S.
It’s also notable that the “Other” segment, which consists mostly of Amazon advertising revenue, grew more than it did the previous quarter, making it one of the few performance metrics to do so. This growth can be attributed to the fact that many Amazon sellers reduced their advertising budgets in Q2 2020 as the coronavirus created economic uncertainty.
With more sellers advertising and sellers increasing their ad budget, brands must learn how to overcome rising ad costs without sacrificing performance.
Amazon stated that is has been “playing catch-up pretty much since the pandemic started” – something that brands selling on Amazon are all too aware of. As we head into the busiest time of the year for online retail, brands selling on Amazon will need to prepare supplementary and alternative fulfillment strategies. FBA has long been the gold standard for online fulfillment, but repeated inventory restrictions has driven more brands to create hybrid FBA + FBM fulfillment strategies.
Amazon’s Q2 earnings of $113.1 billion fell short of the $115 billion expected, which resulted in the stock falling as much as 5%. Nevertheless, this is still the third quarter in a row where Amazon has boasted over $100 billion in quarterly earnings, an absolutely mind boggling thought. While Amazon’s revenue growth may have failed to meet investor expectations, it still easily maintains its reign as the largest U.S. online marketplace and a key factor in consumer brands’ digital strategy.
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