Amazon business during pandemic surprisingly soared and the company posted it’s highest profits in its 26-year history. The company executives were surprised as they had expected a downfall in shopping trends due to the pandemic. The founder of the mega corporation and now the richest person in the world, Jeff Bezos calls this an highly unusual quarter.
The company had expected to spend 4 billion dollars on protective equipment for its staff and other pandemic related expenses. Despite that they earned $5.2 billion- almost double its net income from the previous year.
Reason of Amazon Business During Pandemic
Brian Olsavsky, Amazon’s chief financial officer told reporters that there was a significant shift in shopping trends of its customers. When they had made the prediction in the first quarter, everyone was shopping for lower-margin products like masks, gloves and groceries. This unprofitable mix gradually changed in the 2nd quarter when people started buying more normal mix of products like electronics and clothing. Prime members of the company were shopping more often and were ordering larger baskets.
Other Sources Of Income
There was an increase of 48% in amazon sales during COVID 19 in second quarter to the tune of $45.9 billion. Moreover, the merchants paid more to amazon to get their products in the forefront of the large customer base of Amazon. This gave the company a 52% jump in revenue from seller services and a 41% jump in other sources of revenue like ads. These were one of the key contributors in amazon business during Covid 19.
Apart from this, Amazon Web Services (AWS) saw a rise in demand as more and more offices shifted their workforces from a physical office to a virtual one. AWS which provides data storage and cloud services saw an increase of 29% to $10.81 billion.
The company also posted a rare operating profit in it’s international markets due to increased customer spending in Europe and Japan.
Confident by this successful trend, Amazon has predicted a net sales of $87 billion to $93 billion for the third quarter. Meanwhile analysts are sceptical and only expect a $86.34 billion of sale. It will be interesting to see how it works out considering that Jeff Bezos was recently grilled by the US lawmakers. It’s due to Amazon’s ascension to a dominant position through its trade practices.
It’s shares rose by 5% in after-hours trade. Amazon’s shares have increased in value by 60% and are partly responsible for amazon profit 2020. But Amazon is not the only company seeing growth. Business of other retailers like Walmart and Target has also seen a considerable rise like amazon sales during pandemic.
The Covid 19 crisis has forced consumers to change their shopping habits and shift to online shopping from brick and mortar shops. The company has decided to push back Prime Day, it’s summer marketing sale to fourth quarters except it’s business in India. It is pretty evident from amazon profit 2020 that shopping online will be the future of consumption.