It was another period of double-digit growth for Amazon in the second quarter, the company revealed Thursday, with North American sales up 11% to $82.5 billion year over year.
The company’s physical-store sales growth—Whole Foods, Amazon Fresh and Amazon One stores—also mirrored first-quarter results, up 7%, to $5 billion, from the same period last year, the company reported.
Despite negative headlines about at least a dozen Amazon Fresh stores across the nation that were built out but never opened, Amazon CEO Andy Jassy reassured investors, saying the company is moving forward and taking a “thoughtful and disciplined” approach to the market.
Amazon owns and operates more than 500 Whole Foods Market stores, 44 U.S. Amazon Fresh stores and approximately 30 Amazon Go convenience stores. Amazon announced on Wednesday that it had renovated two of the Amazon Fresh locations in suburban Chicago, part of an ongoing reimagining of the brand. The company also said it updated its policy to begin offering Amazon Fresh delivery to non-Amazon Prime members. Prior to the change, shoppers would have to pay $139 annually, or $14.99 a month, for the premium service.
“You know, we started with Whole Foods, which is the pioneer in organic grocery, it continues to be, and we really liked the way Whole Foods is growing. We've made a number of really important adjustments, and the business has changed its profitability trajectory over the last year,” Jassy told analysts. “We really like where that's headed, and we're expanding that meaningfully. But if you want to be really broad, you have to have a mass physical format. We have been working on that for several years with Amazon Fresh.”
He said the rollout of the new format at stores in Schaumburg and Oak Lawn, Illinois, is just the beginning and that Amazon will soon overhaul its Southern California-area locations.
“You've seen a refined decor in the stores. You see refined Dash Carts to keep a running tally for people, so they understand where they are at the moment wherever they're shopping, as well as refined self-service checkouts. And all those things, to me, are part of an effort we're trying to pursue to have a format ... that resonates more with customers.”
Jassy said the company has been slow to move on expansion because “we weren’t pleased with the inputs,” which he said includes issues like having the right in-stock levels and cost structures.
“We just felt like we could be sharper and better,” he said. “I think that team has made a lot of improvements. We have, you know, spent a lot of time thinking and rethinking how we want the formats to look,” he said, noting a number of aesthetic improvements Amazon has made at its Chicago-area stores and the installation of Krispy Kreme doughnut shops at the two locations.
Jassy said he believes there are “a number of opportunities” to grow the business, but the company will continue to take a measured approach. “We're optimistic that we'll be able to do so, but we're also being disciplined about not expanding the physical fresh stores until we have a format that we think is more resonant with customers,” he said.
Amazon also touted its improvement in same-day deliveries, noting in its earnings release that more than half of orders from Amazon Prime members in Q2 in the company’s top 60 metro areas reached their destination on the same or next day. And that’s good news for the company’s grocery business, Jassy said.
The expansion of its warehouse and shipping facilities is “going to not just help with speed and demand, but we’re going to also like the cost structure associated with that,” he said.
“I do think there’s some optimization, some leverage, we get from our fulfillment network, and particularly in the case of being able to inject a number of items into our same-day facilities to increase the number of items that people can add at the last minute, even grocery items, that they can get the same day,” Jassy said. “And I think that you see some of that already; you’ll see more of that moving forward.”