Amazon sees grocery as a strong avenue for growth following Q3 earnings
Amazon's net sales grew 12% to $201.9 billion in the third quarter ended Sept. 30, compared with $180.2 billion in the same period last year. Fresh groceries and everyday essentials increased about three times faster than other categories in Q3, accounting for about half of all units sold during the quarter.
Gross sales of perishables and everyday essentials hit nearly $250 billion in the trailing 12 months, CEO Andy Jassy said on Amazon's earnings call. He credited "increasing speed" with helping to drive that growth. The company reported its fastest delivery speeds for Prime members in Q3 when it delivered more than 1.5 billion items in the same day or overnight, and its Amazon Now ultra-fast delivery service now delivers to more than 450 cities and towns worldwide.
Amazon is seeing growth among Prime members in particular ordering fresh groceries for free same-day delivery, executives said on the company's earnings call.
"Over the past year, monthly orders of fresh groceries placed by our Prime members for free same-day delivery have more than tripled," CFO Brian Olsavsky said on the call.
Overall, executives said grocery shoppers are significantly more valuable than those who don't buy groceries on the platform.
"Customers who shop perishables with same-day delivery buy nearly seven times more everyday essential units than those who don't," Jassy said. "Active grocery customers shop nearly four times more non-grocery categories like home and apparel, and spend over two times more on those categories compared to non-grocery customers."
For this reason, executives said on the call that the company is looking to grow its stronghold in the grocery category beyond center-store shelf-stable goods to include fresh foods as well. They said perishables are key for capturing broader retail spend that currently goes to traditional brick-and-mortar stores.
"We have always known, if we wanted to be able to serve customers the way we think they want to be served and the way we want to, we have to have a mass offering, and it starts with perishables," Olsavsky said. "Again, if you are trying to close that gap between what consumers spend overall on the items that we can provide versus what they spend with us, perishables has a huge impact on that."
Ultimately, Amazon is looking to leverage fresh foods as the entry point for shoppers to fulfill more of their household needs, with the goal of growing cross-category spending.
"We believe that the progress we are making on perishables and grocery is going to ultimately lead to being more relevant to customers for more of their shopping missions," Olsavsky said on the call.
Olsavsky also pointed to Whole Foods Market's strong Q3 performance. He noted Whole Foods is growing faster than the overall grocery segment, aided by the growth of its urban Daily Shop format.
Amazon saw its North American segment sales grow 6% year over year to $112.9 billion in Q3.
This article was first published on Canadian Grocer's sister site, Progressive Grocer.
