Sounding a bit like the pandemic is over and done, Amazon is talking of a return to “normal” patterns, as Prime growth continues despite some slowing at the world’s largest retailer.
On a Q1 2022 earnings call with analysts Thursday (April 28), Amazon Senior Vice President and Chief Financial Officer Brian Olsavsky revealed that Prime Day will happen in July this year.
“Throughout the past two years, we’ve seen stronger usage of prime benefits by Prime members and a greater reliance on Amazon for their shopping and entertainment,” he said. “Prime members continue to be a key driver of growth. Prime members have meaningfully increased their spend since the start of the pandemic, and we continue to see consistently high member renewal rates.”
Prime Day occurred in Q2 of 2021. Olsavsky also talked up the new Buy With Prime service announced in April, which enables Prime members to use Prime through non-Amazon retailers.
When asked if factors from supply chains to inflation to the Russia-Ukraine war were impacting Prime numbers, Olsavsky said, “There’s no indicators we’re seeing of weakness in consumer demand, but we’re wary of it, as probably all companies are because household budgets are tightened. It ripples through food. It ripples through everything. We’re cognizant of that.”
“What we’ll focus on is the customer experience, continuing to get our delivery times to be better, and increasing selection, which is better than in the pre-pandemic time period,” he said, adding, “We don’t any macroeconomic factors generally in this forecast on the demand side. We definitely see it on the cost side though.”
Not touched on in the earnings call was the recent opening of eight Amazon Fresh grocery stores, bringing that total store count to 46. Amazon also debuted a larger Amazon Go store format.
Its Just Walk Out tech is now operational in two Whole Foods locations — Washington, D.C., and Sherman Oaks, California — as well as “new third-party locations, including travel retailer WHSmith in LaGuardia Airport in New York City; UBS Arena in New York; and Minute Maid Park in Houston, Texas. In addition, a food and beverage store equipped with Just Walk Out technology and Amazon One will be opening soon at T-Mobile Park in Seattle.”
“The new format features Amazon’s Just Walk Out technology for a checkout-free shopping experience, an expanded selection of grab-and-go food and beverage items, and a Made-to-Order kitchen with freshly prepared, customizable breakfast and lunch items. Amazon has plans to expand this format to the Los Angeles area in the coming months,” the company said in a release.
Primed for Prime Day, and Then Some
Amazon finds itself with excess staff after a pandemic hiring binge. On that front, Olsavsky said, “We’ll be really glad we have this capacity in Q3 when Prime Day hits, because that’s always a big surge of inventory and orders, and then definitely in the holiday season.
“The way we see it is we’ve come out of a very tumultuous two years. We are glad we made the decisions we made. Now we have a chance to right size our capacity to a more normalized demand pattern. What’s left is really inflation and that’s what we’re working on, evaluating and finding ways to mitigate, in some cases having to pass some costs through to third-party sellers so that we’re not subsidizing sales.”
Overall, it’s been a busy Q1 for Amazon, with forays into healthcare via its Amazon Care clinics and Echo connectivity, as well as space commerce, “with Arianespace, Blue Origin, and United Launch Alliance to provide launch services for Project Kuiper,” Amazon’s broadband satellites.
Not mentioned on the call was Amazon closing its acquisition of MGM Studios for a reported $8.45 billion. However, the press release noted that the trailer for The Lord of the Rings: The Rings of Power “broke a global record for the most-watched entertainment trailer to debut during a Super Bowl telecast, with 257 million views globally in the first 24 hours of its release.”
Amazon Web Services (AWS) was a standout with connected economy and metaverse implications. Per the release, “AWS announced the general availability of AWS IoT TwinMaker, which makes it significantly faster and easier for developers to create digital twins of real-world systems like buildings, factories, industrial equipment, and production lines — helping more customers build applications that improve operational efficiency and reduce downtime.”
Noting the $3.8 billion loss in Q1, Olsavsky said, “This net loss includes a pre-tax valuation loss of $7.6 billion included a non-operating expense from our common stock investment in Rivian Automotive. You may remember that we had a $12 billion gain on Rivian in Q4.”