Why Amazon's Q4 physical store sales were weak
Amazon’s phenomenally good fourth quarter had one blemish, according to some. Sales at its physical stores declined 1%, but that figure doesn’t tell the full story. The way Amazon tallies its store sales is different than most other operators of physical stores and the result is Amazon effectively obscures the true performance of it physical presence, primarily Whole Foods Market locations.
Amazon said sales at its physical stores declined 1% in the fourth quarter and the third quarter and increased 1% during the first two quarters. Retailers who compete with Amazon might be tempted to feel good about those numbers, but that would be a huge mistake and here’s why. Unlike many physical first retailers, Amazon’s physical store sales includes only product sales where customers physically select items in a store. Sales from customers who order goods online for delivery or pickup at a physical stores are included in the line item called, “online stores.”
While Amazon’s physical store sales declined 1% to $4.36 billion in the fourth quarter, sales from online stores increased 15% to $45.6 billion. If Amazon were to apply the portion of sales from online stores that were fulfilled by physical locations, especially as delivery and pick up have gained adoption, its physical store sales would be higher, perhaps much higher.
That’s why Walmart’s same store sales have been so strong the past few years. As it has rolled grocery pick up service to more and more stores and the service has grown in popularity, the pick up sales are rolled into the comp base even though the transaction was initiated online. If Walmart applied Amazon’s approach its comps would likely be much less, perhaps even negative.