Prime Day Set for Q4, Amazon CFO Confirms; 1-Day Shipping Still Elusive
Prime Day 2020 will be in Q4, Amazon Chief Financial Officer Brian Olsavsky confirmed on Thursday evening's Q2 earnings call. It's investing in “meaningfully higher” year-over-year square footage growth for fulfillment center space, sort centers and delivery stations due to come online in late Q3 into Q4. “We need to build the inventory more for Q4, and we've run out of space,” he said.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The company delayed Prime Day from July due to fulfillment constraints created by strong COVID-19-related demand that began in March and “remained elevated” throughout Q2, said Olsavsky. Q2 revenue surged 41% year on year, to $88.9 billion. Prime Member renewal rates improved in Q2, and Prime member growth continued to accelerate in Q2 as the company benefited from the surge in online orders during COVID-19 lockdowns.
Results crushed Cowen’s expectations of 36% growth, analyst John Blackledge wrote investors Friday, led by Prime members, who shop more and with larger baskets, helping to drive a three times increase in grocery sales. A doubling of worldwide streaming video hours was primarily on Prime Video adoption.
Amazon has had to slow down in studio production of video content, said Olsavsky. “In this time, when people want entertainment, people are having trouble creating new content across the board.” He called it a “challenge” that’s not being done intentionally, but to protect actors and film crews.
The e-tailer's top priority continues to be COVID-related: social distancing, cleaning and temperature taking with warehouse and transportation employees. Second is expanding capacity, said Olsavsky, heading into the higher volume second half. “We're not back to where we were pre-COVID,” and won’t be near term, he said: As the company continues to improve fulfillment, “hopefully, it'll be less noticeable for our consumer base.”
On a date for return to one-day shipping, which Amazon had to scale back during fulfillment constraints, the executive said: “We've already created the capacity to be able to ship; it's just a matter of whether or not we can get it out through the warehouse and to you in one day or not.”
The company incurred more than $4 billion of COVID-related expenses in the quarter, “getting products to customers and keeping employees safe.” Most costs were compensation for frontline employees, including higher hourly wages through the end of May and $500 million allocated for June bonuses, said Olsavsky. The company added 175,000 employees in March and April to meet order demand; it’s transitioning 125,000 to regular full-time positions. It expects to incur $2 billion in COVID-related expenses in Q3. Shares closed 3.7% higher Friday at $3,164.68.