World’s largest online retailer, Amazon printed the biggest profit in its 26-year history on the back of a boom in online sales and its lucrative business supporting third-party merchants that ballooned during the coronavirus pandemic.
Amazon benefitted from government-imposed lockdowns which forced rival brick-and-mortar retailers to shut stores to curtail the growing spread of the pandemic. Amazon hired 175,000 people in recent months and saw demand for its services soar. The company said revenue jumped 40percent from a year earlier to $88.9 billion.
The online store sales jumped 48percent to $45.9 billion in the second quarter. Meanwhile, merchants paid Amazon more to fulfill and sponsor their products in order to reach the company’s loyal customers. That resulted in a 52percent and 41percent jump in seller services revenue and other revenue such as from ads, respectively.
Amazon’s cloud services also saw higher demand as companies switched to virtual offices in the pandemic. Revenue from Amazon Web Services (AWS), which sells data storage and computing power in the cloud, rose nearly 29% to $10.81 billion.
According to Brian Olsavsky, Amazon’s chief financial officer, the outsized profit surprised the company because at the time it issued its forecast last quarter, shoppers were buying lower-margin products.
“Everyone was looking for masks; everyone was looking for gloves; everyone was buying groceries online. That mix is not super profitable,” he said. “What we saw in Q2 was not only did the mix start to shift back to a more normal mix” but that “we also were able to ship a lot more than we had originally thought.”
Online grocery sales tripled year over year, and worldwide streaming video hours doubled, Olsavsky said on a call with analysts. Delivery and video services bundled with the company’s loyalty club Prime are a key reason why customers subscribe to that program and do more of their shopping on Amazon.
