Artificial intelligence may accelerate the ultimate takeover of e-commerce in the retail sector, despite the current dominance of brick-and-mortar stores, Amazon CEO Andy Jassy told analysts during the company’s recent earnings call.
“If you look at the worldwide market segment share of retail, still 80% to 85% of it lives in physical stores,” he said. “That equation is going to flip over time. And I think AI is going to only accelerate that.”
Still, the tech giant sees a “significant opportunity” for growth in its grocery-focused physical stores, announcing plans to expand same-day delivery of fresh groceries to 2,300 cities by the end of the year, up from roughly 1,000 currently. While this strategy combines e-commerce and brick-and-mortar operations, Jassy anticipates a broader shift toward online sales over time.
Physical retail remains a small but growing part of Amazon’s business. According to Retail Dive, Q3 online store sales rose 10% year-over-year to $67.4 billion, while physical store sales grew 7% to $5.6 billion. Overall product sales increased 9.6% to $74.1 billion. Notably, Amazon’s shipping costs rose 8% to $25.4 billion during the quarter.
While the Seattle-based firm continues to gain share in retail, other parts of the business are growing even faster. Seller services sales grew 12% to $42.5 billion, advertising revenue jumped 24% to $17.7 billion and subscription services rose 11% to $12.6 billion.
AI is playing a significant role in Amazon’s technology operations, particularly its AWS cloud business. Q3 net sales for AWS grew 20% year-over-year to over $33 billion. Analysts at William Blair noted that “AWS continues to drive the bus here, with acceleration in growth and better-than-expected operating margin in the segment.”
Additionally, Amazon recently announced 14,000 layoffs, citing expectations that advances in generative AI will reduce the need for human labor in certain operations.
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