Amazon managed to deliver modest retail growth in the third quarter despite a tough prior-year comparison due to a shift in Prime Day timing.

Prime Day took place in the second quarter this year instead of the third quarter like last year, which means the company was lapping a period boosted by one of its biggest sales events.  

Against this backdrop, Amazon still produced growth in its retail business, with net sales from both online stores and physical stores increasing 2 per cent.

GlobalData MD Neil Saunders described this as a solid achievement, adding that a lot of the momentum came from grocery and everyday essentials, which grew three times faster than other product areas.  

“This is an important shift as it allows Amazon to win in a category that offers regularity and repetition. That, in turn, makes Amazon stickier, makes the fulfillment network more efficient, and improves perceptions around the value of Prime and other services,” Saunders said.

“Online grocery is a tough arena to win in because the cost of fulfillment is so high in a category where margins are low. Amazon’s advantage is that it can leverage an established fulfillment network already supported by substantial volumes of non-food orders. 

“Moreover, it has spent years refining its fulfillment operations and lowering the cost to serve with considerable success. This makes it a formidable competitor in the arena,” he added.

The analyst noted that AI-enabled shopping is part of a broader effort to ensure that Amazon remains one of the main starting points for online shopping journeys. Its shopping assistant, Alexa for Shopping, has been used by more than 400 million customers in the past year, with interactions increasing by 570 per cent. 

During the quarter, total sales rose 12 per cent to $201.9 billion, with North America segment up 6 per cent, international segment up 5 per cent, and Amazon Web Services (AWS) up 39 per cent.

On the bottom line, Amazon’s net income declined slightly during the quarter, but operating profit soared 61 per cent, with great improvements in the retail business. 

According to Saunders, the discrepancy is largely down to a significant one-off gain from Amazon’s investment in Anthropic last year, which inflated the prior-year bottom line. 

Stripping this out, the company is making excellent progress on profitability, especially given the investments it continues to make in enhancing its proposition and infrastructure, he added.

“The relentless focus on improving the customer proposition is why Amazon remains at the vanguard of retail. While there are legitimate concerns about the scale of its AI investments and some caution around fourth-quarter growth, these do not alter the fact that Amazon remains one of retail’s most sophisticated businesses, both in its strategic thinking and its ability to execute,” Saunders said.

• Further reading: Amazon boosts investment after strong cloud sales, fuelling shares leap.