Last week Amazon released its Q2 earnings report. The report was the first since Andy Jassy took over as CEO of Amazon on July 5, 2021, after Jeff Bezos stepped down. In comparison to recent quarters, this earnings report revealed slower growth, with net income dropping $300 million from Q1 2021. Nonetheless, Amazon saw a favorable year-over-year (YoY) performance across the board.
Prime Day Performance
More buyers than ever went to Amazon during stay-at-home orders in Q2 2020, resulting in a significant surge in e-commerce sales. This growth made maintaining significant year-over-year growth in Q2 2021 a difficult task (which isn't ideal for a new CEO's first quarterly earnings announcement). Despite Amazon's denials, it appears that this was a major influence in the company's decision to move Prime Day 2021 to the second quarter. And it was successful. Prime Day 2021 was “the largest two-day period ever for small and medium-sized businesses in Amazon's stores worldwide,” according to the earnings report.
Furthermore, Prime Day 2021 was the most successful Prime Day ever, with Prime Members from 20 countries purchasing more than 250 million items. The success of Prime Day 2021 clearly increased performance indicators in Q2, resulting in a 27 percent increase in net sales year over year.
Takeaways for Sellers
The quarterly earnings report has a lot to digest, but the most interesting lesson is the continuous increase of Amazon advertising revenue and what it means for companies selling on the platform. Amazon stated that Amazon Advertising has added over 40 new features and self-service capabilities, indicating that it will continue to be a major focus in the future. In Q2, Amazon also announced that adverts would be available on Amazon Streaming TV and Twitch, which together have 120 million monthly viewers in the United States. Amazon's ad income increased over the previous quarter, making it one of the few performance measures to do so.
This increase can be linked to the fact that many Amazon sellers cut their advertising costs in Q2 2020 due to economic uncertainties caused by the coronavirus. With more sellers advertising and sellers raising their ad budgets, businesses must figure out how to keep ad prices down while maintaining performance.
FBA Trying to Catch Up
Amazon noted that it has been "playing catch-up pretty much since the pandemic started," which is something that Amazon sellers are all too familiar with. Brands selling on Amazon will need to establish additional and alternative fulfillment processes as we approach the busiest time of year for online shopping. FBA has long been the gold standard for online fulfillment, however, due to inventory shortages, more companies are combining FBA and FBM fulfillment techniques.
Amazon Hasn't Stopped Growing
Amazon's second-quarter earnings of $113.1 billion fell short of the $115 billion forecast, causing the stock to drop as much as 5%. Nonetheless, this is the third quarter in a row that Amazon has reported quarterly earnings of more than $100 billion, which is a mind-boggling thought. Despite the fact that Amazon's revenue growth fell short of analyst estimates, the company remains the largest online marketplace in the United States and a critical component of consumer brands' digital strategies. Sellers will have to remain on their toes and ready for anything in these upcoming quaters.
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