Looking at the collective performance of Amazon’s businesses (cloud computing, media, retail, and logistics), Wall Street and the media would have you believe the company underperformed in the fourth quarter of 2016. But as far as retail should be concerned, for Amazon it’s business as usual.

The company reported global net merchandise sales of $32.1 billion in the fourth quarter, representing growth of 24.4% year-over-year (YoY). For comparison, Amazon logged 23.5% growth YoY in Q4 2015, so its e-commerce business is actually accelerating.

To put into context, total U.S. retail sales grew 4% YoY this holiday season and e-commerce sales grew 16%, according to the National Retail Federation. This suggests Amazon was certainly a winner this holiday season.

We believe Amazon’s Prime membership program is among the major factors driving the company’s e-commerce growth at the moment. Current estimates peg Prime membership at around 50 million (in the U.S. only), according to Cowen & Co. On the earnings call Amazon execs said its total active customer base is “over 300 million.”

Prime allows Amazon to capture a larger share of customers’ wallets, because the incentive of two-day shipping, which is included in the membership fee, has conditioned consumers to expect fast delivery with online purchases. In L2’s recent report Omnichannel: Third Party Fulfillment, we outline ways in which retailers can compete with Prime and prevent Amazon from taking market share.


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