Amazon’s first quarter operating profit and net sales grew strongly in 2023. Operating income grew by 30.1 %y-o-y to $4,774m, and net sales were up 9.4% to $127.4bn.
Andy Jassy, CEO of Amazon said, “Our Stores business is continuing to improve the cost to serve in our fulfilment network while increasing the speed with which we get products into the hands of customers (we expect to have our fastest Prime delivery speeds ever in 2023).”
As such, Amazon has continued to invest in its fulfilment capabilities and its relationship with its third-party sellers. Amongst highlights, the online giant recently launched a new Fulfilled By Amazon capacity management system for its FBA sellers. This system looks to helps sellers who use Amazon’s storage, packing and shipping fulfilment service to better manage inventory and capacity as they scale their businesses. Speaking of the product launch in a blog in January, Dharmesh Mehta, VP of Amazon Worldwide Selling Partner Services said, “These changes provide sellers more visibility and control over capacity limits in order for them to better plan and manage their inventory and supply chain.”
Furthermore, Amazon recently expanded its Buy with Prime service to U.S-based merchants. The service, which allows third-party merchants to offer Prime benefits like free shipping and returns on their own apps, was initially only available to those merchants who were already using Fulfillment by Amazon (FBA) to handle their shipping and logistics.
Despite its roll out of new services and scaling the business to become one of the largest retailers in the world, Amazon is very much reliant on its cloud computing service AWS for profitability. From retail sales, it made $898m operating income from its North American operations but a $1,247m loss from its international retail operations in the quarter. Though it made a relatively small profit from its North American retail sales, the majority of its operating income came from its $5,123m AWS profits. There have been calls from some quarters to spin off the AWS business as a separate, profitable business. Given these figures and long term trends of reliance on AWS for profitability it would be very hazardous for the company as a whole.
Amazon is scaling its online and bricks and mortar sales all the time, and at the same time refining its offerings. These may well lead to profitability in the medium term. Jassy concluded, “There’s a lot to like about how our teams are delivering for customers, particularly amidst an uncertain economy.”
Author: Richard Shrubb
