Amazon's e-commerce sales take another hit
Amazon's growing web services, advertising and entertainment businesses garnered most of the attention on yesterday's earnings call — with e-commerce mentions notably scarce.
Why it matters: Online stores' sales shrunk for a third consecutive quarter, as Amazon continues its shift to being more of a tech conglomerate.
Yes, but: E-commerce remains an important part of the business. When combined with physical stores, retail makes up 46% of Amazon's net sales.
By the numbers: Online stores' sales declined 4% year over year to nearly $51 billion from about $53 billion.
- Physical store sales, on the other hand, grew 12% year over year to about $4.7 billion from nearly $4.2 billion.
Of note: It's not been all bad news. U.S. online spend during Amazon Prime Day, which took place over the two-day period of July 12 and 13, was $11.9 billion, up 8.5% year over year, according to Adobe.
The big picture: Amazon's net sales increased 7%, the same growth rate as Q1, to about $121 billion.
- The company also saw a net loss, for the second consecutive quarter, of $2 billion.
Between the lines: Despite sales growth in brick and mortar, Amazon moved to close 68 physical locations, including bookstores, pop-up shops and stores selling toys and home goods back in March.
- Whole Foods, another example, has lost some of its magic under Amazon's aegis, increasingly void of the new products customers enjoyed discovering that made it popular in the first place.
- Amazon Style, its fashion concept store in Glendale, California launched in May, is one promising new merchandising channel. A second Amazon Style store is coming to Columbus, Ohio, in the fall.
- And while Amazon will continue to expand in grocery, it faces stiff competition from banners (Walmart, Kroger, Aldi, Trader Joe's, Dollar General, etc.) who have decades of experience making grocery shopping enjoyable or efficient, or both.
The bottom line: If Amazon wants to keep a foothold in retail and set the stage for a new phase of growth, the conglomerate needs to master the art of brick-and-mortar as online sales falter.
- Physical stores don’t just offer a new growth channel, they also boost sales online, as shoppers increasingly prefer to float between the two.