Amazon’s total sales include its own product sales, sales from its marketplace, as well as marketplace seller fees, advertising fees and revenue from Amazon Web Services (AWS).

Amazon reported net income of $3.2 billon in the first quarter, a dramatic swing from the $3.8 billion loss a year earlier. Ecommerce sales dropped 0.06% year over year to $51.093 billion in Q1.

Amazon revenue breakdown

Amazon’s results suggest the company’s efforts to reduce costs are starting to bear fruit. Operating expenses increased 8.7% in the quarter, the slowest pace in at least a decade. The company’s North America segment was profitable on an operating basis for the first time since late 2021.

Amazon Web Services generated $21.4 billion in sales, a 16% rise from a year earlier and higher than the $21.2 billion analysts had expected. The cloud-computing division is the company’s largest source of income. Despite AWS’  better-than-expected Q1 performance, Amazon said it began laying off employees in the AWS operation amid slowing sales growth in its most profitable division.

That 16% rise from Q1 2022 is the slowest growth rate reported since Amazon began breaking out the segment and the fifth consecutive quarter in which growth slowed year-over-year.

Earlier this year, chief financial officer Brian Olsavsky warned that AWS growth would slow in 2023.

Advertising sales rose more than 21% to $9.51 billion in the quarter. Revenue from third-party seller services — which include commissions, shipping services and other fees that Amazon collects from sellers on its marketplace — jumped 17.7% to $29.8 billion in Q1.

“Amazon did what it needed to do in Q1 by reversing — or at least stalling — its most troublesome declining growth trends,” said Andrew Lipsman, an analyst at Insider Intelligence, told Bloomberg News. “Amazon’s stronger-than-expected performance for its key profit centers of AWS and advertising indicate that the enterprise and the digital ad sectors may be turning the corner.”

Amazon is No. 1 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales. It is No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.

Amazon announces BNPL option

Several hours before releasing its earnings, Amazon announced a new buy-now-pay-later option called Citi Flex Pay on Amazon Pay. Under the program, eligible Citi credit card members can pay over time with Citi Flex Pay when using Amazon Pay during checkout at participating online retail sites. The deal with Amazon marks the first time Citi credit card members can use Citi Flex Pay through a digital wallet.

Amazon already offers BNPL through Affirm. Amazon also accepts Apple Pay, and in March Apple announced a BNPL plan of its own.

Operational changes at Amazon

Amazon has made several moves in recent months to cut its operating costs, most notably by laying off thousands of workers from its ecommerce unit. In early January, CEO Andy Jassy said planned job reductions totaled 18,000 workers. That’s a full 1% of Amazon’s workforce — and well above earlier expectations that Amazon would slash 10,000 jobs.

The Seattle-based company employed almost 1.47 million people as of March 31, a decrease of 10% from the period a year earlier and down from more than 1.54 million workers three months earlier.

Second-quarter guidance on Amazon revenue

Seattle-based Amazon said it expects sales in the current quarter to reach between $127 billion and $133 billion, keeping in line with analysts’ forecasts.

Other news from the first quarter

On April 26, news site The Verge reported Amazon had decided to close its Halo division, which sold fitness- and sleep-tracking devices. Amazon had stopped selling its three Halo products and plans to lay off portions of the Halo team, the news site said.

“We have made the difficult decision to wind down the Halo program, which will result in role reductions,” Melissa Cha, Amazon’s VP of smart home and health, told staffers in an email The Verge obtained.

Some analysts said Amazon has more work to do. “We keep waiting for profit and cash flow to turn here,” Stefan Slowinski, an analyst at BNP Paribas Exane, told Bloomberg. “With all of the headlines on restructuring and closure of businesses, we’re really not getting that coming through in the numbers.”

Amazon earnings

For the fiscal first quarter ended March 31, Amazon reported:

• Amazon revenue from third-party seller services of $29.8 billion. That’s 17.7% increase from the comparable quarter of 2022.
• $9.5 billion in revenue from advertising services, a 21% jump from a year earlier
• Operating cash flow of $54.3 billion for the trailing twelve months, an increase of 38% from the $39.3 billion for the trailing twelve months ended March 31, 2022.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.

Bloomberg News contributed to this report.

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Amazon’s total sales include its own product sales, sales from its marketplace, as well as marketplace seller fees, advertising fees and revenue from Amazon Web Services (AWS).

Amazon revenue breakdown

AWS generated $21.38 billion in sales. The cloud-computing division is the company’s largest source of income. That’s a 20% increase from a year earlier. But that 20% increase is the slowest growth rate reported since Amazon began breaking out the segment.

In a call with journalists, chief financial officer Brian Olsavsky warned that AWS growth would slow in 2023.

“We realize everyone’s trying to cut their budgets — we are in our main Amazon business, in our infrastructure as well,” Olsavsky said. “We do expect to see some slower growth rates for the next few quarters.”

“The expected deceleration in AWS was even worse than expected and means Amazon can’t rely on that business units’ operating profits as much in coming quarters,” Andrew Lipsman, an analyst at Insider Intelligence, told Bloomberg News.

Amazon’s net income decreased to $278 million, compared with $14.3 billion in the fourth quarter of 2021. Amazon attributed the swing to a pre-tax valuation loss of $2.3 billion from its investment in Rivian Automotive, Inc., which makes electric vehicles.

For the year ending Dec. 31, Amazon reported a net loss of $2.7 billion. That marks the worst annual loss since the retailer went public in 1997.

Amazon is No. 1 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales. It is No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.

Operational changes at Amazon

Amazon has made several moves in recent weeks to cut its operating costs, most notably by laying off thousands of workers from its ecommerce unit. In early January, CEO Andy Jassy said planned job reductions totaled 18,000 workers — a full 1% of Amazon’s workforce — and well above earlier expectations that Amazon would slash 10,000 jobs.

Additionally, Amazon is seeking to sublease millions of square feet of underused warehouse space. 

In a statement announcing Q4 earnings, Jassy said he was “encouraged by the continued progress we’re making in reducing our cost.” He noted that the company remained “quite optimistic about the long-term opportunities for Amazon.”

The drop in ecommerce sales in Q4 marked the fourth such decline in the most recent five quarters.

Revenue from third-party seller services — which include commissions, shipping services and other fees that Amazon collects from sellers on its marketplace — jumped 20% to $36.36 billion. in Q4.

First-quarter guidance on Amazon revenue

Seattle-based Amazon said it expects sales in the current quarter to reach between $121 billion to $126 billion, keeping in line with analysts’ estimates.

Other news from the fourth quarter

Amazon now allows Buy with Prime merchants to display customer reviews from Amazon.com within their own online stores. The retailer also announced an integration with BigCommerce, an ecommerce platform, that will help merchants easily enable Buy with Prime on their storefronts with no coding required.

Amazon launched RxPass, a new Prime membership benefit from Amazon Pharmacy that offers unlimited eligible prescription medications for $5 per month, including free shipping.

For the fourth quarter, Amazon reported

• An operating income loss of $412 million from North American operations.
• A 47.8% drop in global operating income to $2.53 billion from $4.85 billion a year earlier.
• $2.87 billion in net income, a 9.37% decline from the $3.16 billion a year earlier.

For the year ending Dec. 31, 2022, Amazon reported

• A net loss of $2.7 billion, compared with net income of $33.4 billion in 2021.
• Operating income of $12.2 billion, less than half the $24.9 billion of 2021. The North America segment operating loss was $2.8 billion, compared with operating income of $7.3 billion in 2021.
• Operating cash flow of $46.75 billion, a 1% rise compared with $46.33 billion in 2021.

Percentage changes may not align exactly with dollar figures due to rounding.

Bloomberg News contributed to this report.

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It was that kind of year. Neither earth-shattering nor dismal. Neither ground-breaking nor a return to the norm.

We got the first indications of this in January. The COVID-19 pandemic wasn’t over, but the retail industry was pretty eager to act as if it was. The National Retail Federation planned a return to the real world for its Big Show. But just days before attendees were due to arrive, coronavirus cases spiked in New York and the keynote speaker — Honest Co. founder, actor and celebrity Jessica Alba canceled. Still, the show must go on, as actors say. The Big Show did come to New York. But not many attendees did.

There was another indication back in January that 2022 would be less than remarkable. The big business story in retail that month was that Kim Kardashian’s underwear label Skims had doubled its valuation to $3.2 billion in nine months. That suggested innovation in 2022 would involve attaching a celebrity’s name to a version of an actual innovation from two decades earlier.

By February, there was a throw-the-spaghetti-against-the-wall-and-see-what-sticks air about the entire retail world. Target Corp. offered Starbucks beverages as part of its curbside pickup. Peloton, Home Depot, Wish.com and Shipt all decided to try new CEOs, and Amazon laborers — who hadn’t had much luck working with the giants of organized labor — decided to organize themselves.

Then, on Feb. 24, Russia invaded Ukraine.

In the following weeks, the retail world behaved admirably. Toy companies became symbols of the resistance, while major companies around the globe cut ties to the Russian economy. In the meantime, there were other ominous signs for ecommerce. A global supply chain crisis was poised to worsen. And inflation for the year ending March 2022 hit 8.5% — the largest 12-month increase since 1981.

By April, the bad news had everyone in ecommerce worried that things were falling apart. Everyone seemed to be losing money and/or going deeper into debt. Buy-now-pay-later options grew popular with shoppers and retailers. Amazon.com Inc., No. 1 in Digital Commerce 360’s Top 1000, posted a $3.8 billion loss. Bed Bath & Beyond said its net sales fell 22%. Young adults borrowed money and engaged in crypto speculation, and Etsy sellers went on strike.

April showers are supposed to give way to May flowers. But in 2022 … not so much. The bad news continued. Surplus inventory levels soared. Ecommerce growth continued to slow. Wayfair Inc., No. 7 in Digital Commerce 360’s Top 1000, announced a hiring freeze. EBay’s sales fell and Target’s earnings plummeted. In the meantime, the spaghetti-against-the wall craze continued as Amazon started subleasing warehouse space while opening a clothing store, just as Walmart announced plans for delivery by drone.

In June, things grew darker. Bed Bath & Beyond’s CEO stepped down as sales fell further. So too did the CEO of The RealReal, No. 40 in the ranking of Digital Commerce 360 Top 100 Online Marketplaces. Meanwhile, Apple and PayPal both made it easier for shoppers to go deeper in debt.

July was supposed to be a time of great excitement in ecommerce, as Amazon held its Prime Day sale. But shoppers were underwhelmed. As if in response to the disappointment, Amazon announced a drop in ecommerce sales (albeit for the quarter before Prime Day), Shopify slashed its workforce, and soaring inflation pushed consumers to amass BNPL debt to pay for groceries.

In August, things grew both darker and brighter. Best Buy, No. 6 in the 2022 Digital Commerce 360 Top 1000, said U.S. online sales dropped 14.7%, while Macy’s said its Q2 online sales fell 5% and multiple retailers struggled to unload excess inventory. By contrast, Walmart said its online sales rose 12% in the second quarter, albeit largely because of inflation. Overall ecommerce numbers grew, but at a pace that was well below what the industry had grown accustomed to. U.S. ecommerce spending in Q2 marked its fourth straight quarter of single-digit growth following the 45%-50% jumps during the first year of the pandemic, according to a Digital Commerce 360 analysis of U.S. Department of Commerce figures.

The industry responded once more by throwing pasta against the wall. Peloton said it would sell on the Amazon marketplace, and Walmart added streaming video to its membership program.

In September, things turned macabre. Bed Bath & Beyond’s chief financial officer died by suicide. Shortly before that, the world learned that Chewy founder and activist investor Ryan Cohen — who had driven Bed Bath & Beyond shares higher during the meme stock craze — had sold his entire stake in the retailer. Shares fell 40% in the wake of Cohen’s action. Unsurprisingly, Bed Bath & Beyond soon announced it had another dismal quarter.

By now, the pattern was clear. Times are tough; pasta must be thrown. So Amazon announced it would have another Prime Day sale. Meanwhile, Kanye West severed ties with the Gap, suggesting that in 2022 true innovation might mean removing a celebrity’s name from someone else’s innovation.

In October, the ecommerce world watched as that second Prime Day — dubbed the Amazon Prime Early Access sale, in a sign that in 2022 true innovation might mean changing the name of an earlier innovation — fizzled.

Meanwhile, in a particularly disturbing development, online prices for food hit a new record high. Then, in a move that no one thinks would help those prices fall, The Kroger Co. said it had agreed to buy rival Albertsons Cos. Inc. for $24.6 billion.

As October ended, Digital Commerce 360 warned that “online retailers again will have a tough go of it this season, trying to convince shoppers who are contending with inflation and recession fears not to skimp on their gift lists.”

November, of course, is when the hopes and fears of all of ecommerce converge in the Cyber 5 period. Early in the month, there were some pieces of bad news that suggested Cyber 5 results might prove disappointing. Alibaba Group Holding Ltd. decided not to disclose full sales results for its signature Singles’ Day shopping festival for the first time, after forecasts that the figure may suffer a decline unprecedented in the event’s 14-year history. Alibaba owns and operates Taobao and Tmall, which hold the No. 1 and No. 2 spots in the ranking for Digital Commerce 360 Online Marketplaces. And Singles’ Day is the world’s largest shopping festival.

Meanwhile, Amazon said it planned to cut about 10,000 jobs — the largest ever headcount reduction at the ecommerce giant as it braces for slower growth and a possible recession.

Yet December — like 2022 itself — saw the release of news that was both good and bad. Cyber 5 results, the effects of inflation, struggles over supply chain and inventory levels, all proved to be neither earth-shattering nor dismal. Neither ground-breaking nor a return to the norm.

Early in December, the industry learned that web sales grew 4% to reach $35.27 billion in the Cyber 5, or the five-day period of Thanksgiving through Cyber Monday, according to Adobe Analytics. Amazon and Walmart were the big winners. That news came just days after the U.S. Commerce Department said the value of overall retail purchases dropped 0.6% in November — the largest decline in 11 months.

Also in December came the piece of news that most perfectly summed up the entirety of 2022 in retail. Celebrity Justin Bieber blasted H&M for what he called the “trash” of the all-new Justin Bieber-themed merchandise sold by H&M, suggesting that the biggest innovation of 2022 involved attaching a celebrity’s name to innovations they don’t like.

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Amazon reported total sales of $127.10 billion in Q3, a 15% jump from the $110.81 billion a year earlier. The nation’s largest retailer returned to profitability after two consecutive quarters of losses. Still, the $2.87 billion in net income in the third quarter was a 9.37%  drop from the $3.16 billion of Q3 2021.

Ecommerce sales jumped 13% to $53.39 billion in Q3 2022 year over year. But year-to-date numbers show a 0.3% decline in ecommerce sales.

Amazon’s total sales includes its own product sales, sales from its marketplace, as well as marketplace seller fees, advertising fees and revenue from its software Amazon Web Services.

Amazon is No. 1 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales. It is No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.

Industry watchers were largely impressed with Amazon’s Q3 performance.

“Amazon continues to push past the ecommerce competition despite another rocky quarter for many tech companies. The challenges of this past quarter reflect that while Amazon remains above water, the ecommerce giant must continue to find new ways to stay above their competitors and remain relevant in the online retail space,” said Brent Ramos, director of product, search at Adswerve, which provides data services to marketers, analysts and others. “Although Amazon’s October Prime Early Access sale saw lower numbers than its annual July sale, which was to be expected amid worries of slowing economic growth and a lighter holiday shopping season, it still delivered on its purpose: to boost sales over the two-day shopping event.”

Fourth quarter guidance

Seattle-based Amazon warned that holiday sales will be less than Wall Street analysts had expected. Net sales are expected to be between $140.0 billion and $148.0 billion in the fourth quarter, growing between 2% and 8% compared with fourth quarter 2021. Analysts had forecast Q4 revenue of $156 billion, according to Bloomberg News.

There have been indications that Amazon’s fourth quarter would not be particularly bright.

The fourth quarter will include results from Amazon’s second Prime Day event of 2022, the so-called Early Access sale. And data from web measurement firm Similarweb suggests that the second event did not perform as well as the July event.

The October Prime Day earned 46% less revenue, Similarweb said, suggesting dampened consumer demand for online shopping, likely due to the struggling economy and close proximity to Amazon’s last sale event.

Similarweb bases its estimates on machine learning algorithms that are fed by millions of websites’ and apps’ first-party analytics (e.g., Google Analytics), both proprietary and sourced through partners. 

Inflation worries

Amazon’s marketplace

Week-to-week marketplace ecommerce order volume on the Amazon marketplace in the third quarter was mostly flat, with a slight increase in the average weekly movement, according to Extensiv, which publishes a weekly analysis of marketplace volume. Extensiv tracks that volume through customers of its platform, which coordinates fulfillment, warehousing and third-party logistics providers for marketplace sellers.

The Amazon marketplace saw an average weekly gain of 1.4% in the third quarter, Extensiv said. However, the average number of sellers was down 10%.

Competition has been growing for Amazon’s marketplace, particularly from the marketplace owned by Walmart, Inc. (No. 2 on the Top 1000.). But data from Jungle Scout shows that Amazon remains the go-to marketplace in the U.S.

• 75% of U.S. consumers have purchased from Amazon recently, compared to 43% who have shopped on Walmart.com.
• 63% of consumers begin their search for a product online on Amazon over Walmart.com (43%).
• Consumers are more likely to have an Amazon Prime membership (57%) than a Walmart Plus account (31%).
• Consumers prefer to shop on Amazon over Walmart.com for electronics, books, and clothing. 

Marketplaces seller software vendor Jungle Scout based its findings on data from its Consumer Trends Report, a quarterly, survey of more than 1,000 U.S. adults, and its annual State of the Seller survey of more than 3,500 first- and third-party Amazon and/or Walmart sellers.

For the third quarter, Amazon reported

• An operating income loss of $412 million from North American operations
• A 47.8% drop in global operating income to $2.53 billion from $4.85 billion a year earlier
• $2.87 billion in net income, a 9.37% decline from the $3.16 billion a year earlier

For the nine months ending Sept. 30, 2022:

• An operating income loss of $2.60 billion from North American operations
• Global operating income of $5.8 billion, a decline of 61.1% from the comparable period of $24.42 billion
• A $3.00 billion net loss, a dramatic swing from the $19.04 billion in net income a year earlier.

Percentage changes may not align exactly with dollar figures due to rounding.

Bloomberg News contributed to this report.

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Digital Commerce 360 projects ecommerce revenue will reach $224.31 billion during the holidays this year, up from $211.41 billion for the same two months in 2021. That means online sales growth would be in the single-digit range for the first time dating back to pre-2015, the first year for which revised Digital Commerce 360 seasonal data is available. That’s a drop-off from 2021’s 10% online sales increase the muted 10.0%, which already was less than a quarter of the 40.8% surge in online seasonal sales during a COVID-19-fueled 2020.

Consumers to scale back on in-store shopping

Retail sales through all channels — including physical stores — are likely to rise 4.0% for the season, Digital Commerce 360 estimates. Shoppers will spend $916.42 billion overall with online and offline combined, up from $881.17 billion last year. That growth would also be a significant slowdown from 2021, when total retail grew 13.4% over the holiday period but is still higher than the median 3.2% in the five years before the pandemic.

2022 Top 1000 Report

Analysis of North America’s leading 1,000 online retailers. Includes over 100 charts, rankings by 2021 web sales, benchmarking data, growth analyses by category and merchant type, and an executive overview on the current state of ecommerce. 

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In 2021, physical store sales drove overall retail growth during the holidays as vaccinated shoppers flocked back to stores, eager to resume shopping traditions. Store sales soared by 14.5% year over year, outpacing 10.0% online growth, Digital Commerce 360 estimates. But that will subside in the 2022 season, giving way to the importance of comparison shopping and the ease of doing so online. In-store spending will considerably decelerate to 3.3% — which still is more than double the five-year median before the pandemic.

And the digital share of total retail sales will hit 24.5%, meaning nearly $1 in every $4 spent on retail purchases during the 2022 holiday season will come from online orders. That’s still less than the peak of 24.7% penetration in 2020 but does mark an increase over 24.0% last year.

A summary of previous holiday seasons

The last couple of holiday periods threw big challenges at merchants. In the first year of the pandemic — a pre-vaccine 2020 — retailers were grappling with store closures and enforcing social distancing during a season known for its crowded aisles and long lines. The sudden shift in consumers’ reliance on ecommerce led to what the industry called “Shipageddon.” Overburdened carriers couldn’t keep up with unprecedented demand from online shoppers, resulting in a massive number of delayed packages at arguably the worst time of year.

By 2021, retailers instead were navigating massive supply chain issues. Many merchants struggled to get enough merchandise into their warehouses before the high-volume season. A raw material shortage made it tricky to manufacture goods, shipping containers were scarce, and massive bottlenecks at ports meant holiday shipments were idle. That all worked to stunt ecommerce growth last year.

Now, it’s inflation and surplus inventory that are troubling retail executives and causing consumers to expect deep discounting.

How Digital Commerce 360 derives holiday projections

The Digital Commerce 360 research team studies various factors when considering how the ecommerce market might perform in the future. We analyze historical online and in-store spending behavior and follow how digital’s share of total retail has trended. We examine the year-to-date performance of the overall market, using retail data from the U.S. Department of Commerce and individual publicly traded online retailers.

Additionally, we use the following insights to inform our numbers: traffic patterns to ecommerce sites, shipment volume, discounting levels, recent shifts in pricing and average order value, retailer and consumer surveys, consumer confidence indices, editorial interviews, holiday marketing that we track and more.

Here are five insights that contributed to Digital Commerce 360’s holiday projections:

1.) Year-to-date online sales growth has been weak

There’s not a lot of spending momentum heading into the season.

Through the first half of 2022, ecommerce grew a moderate 7.0%, according to retail data released by the U.S. Department of Commerce. Q2 marked the fourth straight quarter of single-digit growth in online sales as the market has continued to normalize after giant spikes in ecommerce spending earlier during the pandemic.

Starting in Q2 2020, COVID-19 drove four straight quarters of 40%-plus year-over-year increases in digital revenue. Online consumers maintained their prior spending levels as the market lapped the first pandemic year, but growth tapered off. According to Commerce Department data, shoppers spent 6.7% more on the web in Q1 2022 vs. the same quarter the prior year. And in Q2 2022, growth reached 7.3%.

The Commerce Department won’t publish ecommerce figures for the third quarter until mid-November. But there likely will be a higher bump than Q1 or Q2 as Amazon.com Inc.’s popular Prime Day sales event was moved later to Q3 this year, and the increase in online traffic typically translates into a bigger sales day for many retailers.

Other firms with ecommerce spending data available for a bigger chunk of the year also show single-digit growth so far in 2022. Adobe Analytics registered an 8.9% year-over-year increase in digital revenue for January through August. Data from technology vendor Salesforce Inc. showed more sluggish growth for the same eight months of 2022 — just 3.0% in the U.S.

2.) Inflation woes likely to make shoppers scale back on holiday purchases

Up until mid-summer, prices for goods on ecommerce sites had been rising year over year for more than two years straight — 25 consecutive months — according to the Adobe Digital Price Index. In July, online shoppers finally got a small reprieve, with a 1% drop in the cost of items vs. the same month in 2021. Although prices on the web rose again year over year in August, they dipped by 0.2% in September. But through the first nine months of 2022, the median inflation rate was 2.0%, according to Adobe data.

Average selling prices will increase monthly between 8% and 12% for the remainder of 2022, according to Salesforce predictions. And surveys suggest the economic landscape is impacting consumers’ willingness to spend heading into the holidays — especially as the higher cost for necessities like groceries and gas has left shoppers with less money for discretionary items.

Nearly two-thirds — 63% — of online retailers anticipate high inflation will cause consumers to purchase fewer gifts overall this season. That’s according to a Digital Commerce 360 survey of 70 merchants conducted from July through September. More than half — 56% — of respondents cited rising inflation as a major obstacle for their businesses heading into the holidays.

Merchants seemingly have accurately gauged consumer sentiment, according to a Digital Commerce 360 and Bizrate Insights survey of 1,088 online shoppers in September. More than half — 52% — of consumers named competitive pricing as one of the most important factors in choosing an online retailer this season. Four in 10 respondents reported they would comparison shop more because they expect prices to be high, and 35% said those high prices would lead them to buy less for the holidays.

With shoppers’ magnified price consciousness, retailers’ customer service policies like price matching and price adjusting will take on added importance this year. 16% of online shoppers said they would seek out retailers that offer price matching more than in the prior year.

3.) A more promotional holiday season

The 2021 holiday season was a far less promotional one than usual. Product scarcity coupled with soaring costs for retailers — on everything from materials and labor to freight and last-mile shipping — meant consumers didn’t get the same holiday deals last year and paid more for gifts.

Online retailers offered weaker year-over-year discounts in five out of eight tracked merchandise categories, according to Adobe data. That was largely due to increased competition among consumers for limited quantities, which meant merchants didn’t need to offer heavy promotions to sell off products, and items were left at full price for longer or not marked down as much.

But there will be a big swing in discounting levels this year as merchants face the opposite inventory problem.

Big retailers, including Walmart Inc. (No. 2 in the Digital Commerce 360 Top 1000), Target Corp. (No. 5), Macy’s Inc. (No. 16), Nordstrom Inc. (No. 20) and Kohl’s Corp. (No. 21) acknowledged an inventory glut when reporting their Q2 earnings. And nearly one in five — 19% — of respondents in Digital Commerce 360’s retailer survey conducted in Q3 also reported they have too many products sitting ahead of the holidays. 27% of merchants surveyed said they have enough inventory but not in the right categories for gifting and gathering season. That means they’re likely to mark down less in-demand items.

The well-documented surpluses have dominated headlines, and shoppers know how much extra retailers have left in stock. That means consumers wield a lot of power leading into a big shopping period by passing on lackluster sales and waiting for retailers to slash prices further. A third — 33% — of merchants surveyed said consumers will expect more promotions now that they’ve seen the news. And a quarter — 25% — of online shoppers said they are anticipating better deals this year than in past holiday seasons, according to the Digital Commerce 360 and Bizrate Insights survey from September.

Adobe is predicting “massive” discounts that will “hit record highs (upward of 32%) this holiday season.” While the firm expects the period between Thanksgiving and Cyber Monday to offer the best deals, bargains as high as 15% were likely to kick off in the second week of October. Discounts will probably stretch until the end of the year, with promotional rates as high as 20% in the weeks after Cyber Monday, Adobe says.

Because consumers are generally worried about their finances, they’ll hunt for and be tempted by good deals on gifts for others and stock up on cheaper items for personal use. So this year’s deeper discounting is likely to at least partially offset inflation, and online sales growth will be temperate.

4.) Holiday shopping season kicks off even earlier

Retailers are perpetually making a case for early holiday buying so they can distribute revenue more evenly throughout the year and to ease the burden of fulfilling high order volumes during peak season. But more sales in October may mean fewer online orders in November and December, which would translate into a smaller year-over-year increase in ecommerce.

Early purchasing picked up steam in 2021, and merchants’ nudging will be effective this year, too.

Many shoppers will likely snap up deeply discounted items online to avoid increased prices later. 41% of online retailers in the Digital Commerce 360 survey reporting they’ve extended return windows for the season, there’s one less reason for shoppers to hesitate to get a gift before the official holiday kickoff.

Additionally, retailers’ holiday marketing has started earlier and earlier for years now. This year, nearly two-thirds — 64% — of online merchants began their seasonal campaigns in October or earlier, according to the Digital Commerce 360 retailer survey. That’s up from 59% in 2021. What’s more, a quarter — 25% — of respondents kicked off holiday messaging during the summer, up from 16% the prior year.

And consumers have responded. More than four in 10 — 44% of — online shoppers said they would begin checking off gift lists in October or earlier, according to the Digital Commerce 360 and Bizrate Insights survey. That’s up from 40% in 2021. And more than a quarter — 26% — of consumers reported that they had already started their holiday buying in August or earlier. In 2021, that share was just 16%.

Amazon’s July Prime Day sale also influenced in early-season spending. 17% of online shoppers who placed an order during the two-day summer sale said at least a quarter of their purchases were gifts for the upcoming holidays, according to a Digital Commerce 260 survey of 875 online shoppers in July. And while that’s not a huge share, it will have an impact on the winter holidays. Especially since Amazon ran a second big early access sale for Prime members in October, when consumers were even more mentally prepared to holiday shop.

These changing dynamics mean consumers now spend some dollars they have historically reserved for the November-December season earlier in Q4. In some cases, that spending is even being pulled into Q3. And that erodes growth figures for online sales during the traditionally defined holiday period.

5.) Consumer confidence fluctuates in 2022 but on the rise heading into the holidays

Consumers have faced a lot of economic uncertainty recently. Aside from inflation, shoppers are weathering steep declines in the stock market, rising interest rates that are making borrowing more expensive and geopolitical upheaval with Russia’s war in Ukraine that’s causing spikes in energy costs. And the stimulus payments that helped line consumers’ wallets and encourage spending in previous years have stopped rolling in.

And that rollercoaster is reflected in some economic indicators. The Conference Board’s Consumer Confidence Index is based on a survey that measures consumer sentiment on current economic conditions and prospects for the next six months. The numbers reflect the general public’s degree of optimism on the state of the U.S. economy. In 2022, confidence has generally scored low vs. prior years outside of 2020. In the five years leading up to the pandemic, the median monthly index was 120.2. The monthly median for 2022 through September was 14.5 points lower at 105.7.

After registering three consecutive month-to-month decreases, the index dropped to its lowest point of the year in July at 95.3, down 13.3 points from 108.6 in April. But since mid-summer, it has been on the rise. September’s confidence reading hit 108.0, nearly recovering to hover near mid-spring’s high.

While this index isn’t always a predictor of online spending growth — like when 2020’s lower figures translated into the largest seasonal ecommerce bump tracked by Digital Commerce 360 — last month’s reading is good news for retailers hoping for consumers primed to spend.

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While third-parties and researchers are still working on estimates, early results suggest retailers that sold televisions, desktop computers and other more expensive items fared poorly during the Early Access event, according to Chicago-based market research firm Numerator’s survey of 1,025 verified Early Access shoppers. But merchants that sell lower-cost items on Amazon’s marketplace did well during the Early Access event. Some 58% of items purchased during the early hours of the Amazon sale cost less than $20, according to Chicago-based market research firm Numerator, indicating shoppers weren’t spending heavily. 

Amazon said Prime members ordered more than 100 million items from merchants during the Early Access sale. Some of the best-selling items in the United States included Laneige Lip Sleeping Mask, Apple AirPods (2nd Generation), Vital Proteins Collagen Peptides, and Crest 3D Whitestrips Professional Effects Teeth Whitening Strips. Amazon did not released dollar figures.

Tom Funk, director of ecommerce for Ann Clark Cookie Cutters, said sales on Amazon for his company were about 15% higher than on an average day.

“For many sellers, this season is primarily a buildup to holiday,” Funk told Digital Commerce 360. “But for us on Amazon, Halloween is a busy season in its own right, with cookie cutters and baking supplies seeing healthy seasonal demand. We are not discounting or offering any Early Access promotions. I imagine many sellers are feeling inflationary pressures, so I’d expect discounting to be muted.”

Promotions and discounts during Amazon Prime Early Access

Hanna Houglum, vice president of Art of Tea, said sales rose 35% during the event compared to an average day. However, rising advertising costs as well as shoppers increasing their use of Amazon-specific coupons across Art of Tea’s product pages put pressure on margins.

“We noticed our coupon utilization rate grow by about 20% throughout the event, signaling that consumers were heavily influenced by special discounts for our products,” Houglum told Digital Commerce 360. “However, our keywords saw a drastic decrease in efficiency throughout the event as key branded terms became much more expensive to bid against.”

The final result was that “our sales ended up at about 15% to 20% over what a typical Tuesday and Wednesday would have looked like,” Houglum said.

Houglum also said sales during the July Prime Day event were about 25% higher than during Early Access and that return-on-advertising-spend was about 20% better during the July event.

Leading Lady Co., which sells bras, offered discounts on its Amazon store and held a sitewide sale on its direct-to-consumer website during the Early Access event.

“There has been a lot of hype in the media about people shopping earlier again this year,” Barbara Shears, ecommerce and marketing director at Leading Lady, told Digital Commerce 360. “So we have boosted our ad spend to try to get in front of some of the early traffic.”

The tactics worked. The retailer’s Amazon store sales increased 30% compared with the prior two days. Meanwhile, the DTC  website sales increased more than 40%.

Beyond Amazon

Eighty retailers in the Top 100 held some sort of promotion on their own sites during the Early Access event. Of those, 8.8% of retailers competed directly with Amazon, running a Prime Day Early Access-like sale, according to a website check of a panel of 100 retailers by Digital Commerce 360. That’s down from the 38.0% of 79 retailers that ran a sales event during Amazon’s Prime Day event in July.

Leading Lady referred directly to the Amazon sale on its own website.

Fewer retailers offered percent-off discounts (71.3%) as part of the October promotion.

Some retailers managed to successfully pre-empt the Early Access sale, according to estimates from Salesforce Inc.

• U.S. non-Amazon sales during the Prime Day event were essentially flat year over year when compared with the Tuesday and Wednesday of the comparable week in 2021.  Sales grew only 2%. But over the weekend (Thursday through Sunday), online sales grew 10% versus the comparable weekend last year.
• Compared with the same period in 2020, sales were up even higher at 19%. With brands and. retailers like Target starting their sales events early, the industry had success pulling sales ahead of the weekday Prime event.

And outside of Amazon, retailers embraced price cutting, Salesforce said. The average discount was just over 21% during the Tuesday and Wednesday Prime event on non-Amazon sites. That’s a 25% increase in year-over-year discount rates. Outside of the Cyber Five period of Thanksgiving through Cyber Monday, that’s the deepest discount rate seen since the start of the pandemic, according to Salesforce.

Inflation worries

Concerns about inflation among both merchants and shoppers during the sale proved warranted. On Oct. 14 — the day after the sale ended — the U.S. Bureau of Labor Statistics announced inflation rose 8.2% in September from a year earlier. Food costs have risen 11.2% in the past year, prompting households to cut back on discretionary spending.

Kristin McGrath, a shopping expert at the deal-tracking website BlackFriday.com, told Bloomberg News that inflationary pressure caused shoppers to shun major purchases.

“A lot of the TV deals (during the sale) were surprisingly good,” she said. “But are these the things people are looking to buy if they’re worried about paying for their next grocery run?”

Amazon is ranked No. 1 in the Digital Commerce 360 Top 1000.

Gretchen Salois and Bloomberg News contributed to this article.

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During the first 36 hours of the event, some consumers used the Amazon Prime Early Access sales event to get a jump on holiday gift buying. But most said they bought for other reasons. And early results showed the Prime Day sequel generated about the same sales as a regular day during its first eight hours.

According to Chicago-based market research firm Numerator’s survey of 1,025 verified Early Access shoppers, 31% of Prime Early Access shoppers used the sale to purchase holiday gifts. But 51% said they bought items “for myself or my household,” and 14% said they purchased large-ticket items they’d only buy on sale. 21% said they bought gifts for non-holiday occasions and that same percentage said they made purchases of everyday goods they would buy anyway. Respondents could make more than one choice in that part of the survey.

Of those who purchased gifts, 70% said they completed less than half of their holiday shopping. 95% said they will likely shop on Amazon again for additional holiday items in the next three months.

In addition to the survey, Numerator compiled consumer data from its Numerator OmniPanel shopper panel. The shopper panel data covered 19,512 Amazon Prime orders from 9,477 unique households. The shopper panel includes purchasing data from more than 1 million online contributors across 16 retail channels. OmniPanel data is unweighted and is not guaranteed to be representative of the U.S. population, Numerator says.

Amazon.com Inc. is the No. 1 in the 2022 Digital Commerce 360 Top 1000, which ranks the largest North American e-retailers by web sales.

Off to a slow start with cautious consumers

As of 11 a.m. Eastern Time on Tuesday — eight hours into the event — sales were similar to the previous 30-day average, according to Klover, a commerce data platform. Klover uses real-time spending data from 3 million U.S. shoppers. By contrast, spending during the entire Prime Day sale in July was about 40% higher than October’s Early Access Sale, the firm said.

“Usually, it’s off to the races,” Klover CEO Brian Mandelbaum said in an interview with Bloomberg News. “This Prime Day isn’t going to move the needle.”

The Numerator data also indicates shoppers are being cautious. Among those who shopped both the Prime Early Access sale and Prime Day 2022 — held July 12 and 13 — 36% spent more at the Early Access event while 64% spent the same or less. Also, 30% said they waited for the sale to purchase a specific item at a discounted price, while 27% passed on a good deal because it wasn’t necessary. Numerator found that inflation also drove 14% of individuals to look at prices outside of Amazon before buying.

Numerator also says 47% of Early Access shoppers considered only Amazon when making their purchases, while 53% considered other retailers. Most Prime Early Access shoppers (58%) shopped only at Amazon during the Early Access event, but 22% also purchased at another retailer or website.

Elissa Quinby, senior director of retail marketing at Quantum Metric, a digital analytics platform, says inflation is changing consumer behavior.

“Customers are spending more time hunting for lower prices amid inflation. In fact, Quantum Metric found 76% of Americans have cut their spending by a quarter, and 38% have halved their spending this year to better manage their money due to rising costs,” Quinby said. “This means that customers are more inclined to start holiday shopping earlier if they spot better deals, so Christmas shopping in October is likely to become more of a mainstream trend.”

How much — and what — shoppers are buying

During the first 36 hours of Early Access, the average order size was $46.44, Numerator reported. Nearly half (49%) of households shopping the Early Access sale have placed two or more separate orders already, bringing the average household spending to roughly $95.62. Meanwhile, 44% of orders were $20 or less, and 3% of orders were $200 or more.

“In the first 36 hours of the Prime Early Access Sale, we saw an average order size of $46,” said Amanda Schoenbauer, a Numerator analyst. “For Prime Day, the order size was closer to $60. It appears that Prime Early Access shoppers are spending less and focusing on affordable gift categories like toys and games and apparel rather than electronics and smart home devices, which are Prime Day staples.”

The average price per item was $30.45. Just 4% of items were $100 or more. 57% of items cost $20 or less.

Numerator says the top five items, based on units purchased were:

• Amazon Photos Projects (users create prints from photos on their Amazon Photos accounts)
• Amazon gift cards
• Melissa & Doug brand toys
• Amazon Essentials women’s apparel
• Echo Dot 3rd Generation

What retailers should do now

Quinby at Quantum Metric says this is a good time for retailers to go beyond merely offering discounts to shoppers.

“While flash sales and store-wide promotions are a tried-and-true approach, shoppers also demand a highly tailored experience,” she says. “This includes offering unique promotions that align with their purchasing behaviors and preferences. For some, this might mean a free shipping code since the shopper rarely goes in-store, while others might get a 10% off discount to place a curbside order.”

In addition to discounts, Quinby adds, retailers must ensure they’re making it as easy for customers to shop with them as possible, such as personalized product recommendations.

“It’s far cheaper to retain a customer than it is to attract a new one,” Quinby said. “To build shopper loyalty — especially while other brands offer their own sales and promotions — retailers should consider website and app upgrades to improve design.”

Gretchen Salois and Bloomberg News contributed to this report.

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Amazon Prime Early Access runs Oct. 11-12. The sitewide sale spans multiple categories. Digital Commerce 360 reviewed how retailers across the Top 1000 approached this year’s additional Amazon Prime sale. Amazon.com Inc. is the No. 1 in the 2022 Digital Commerce 360 Top 1000, which ranks the largest North American e-retailers by web sales.

Amazon Prime Day vs. Early Access

Of those 80 retailers running promotions, 18.8% of retailers competed directly with Amazon, citing a Prime Day Early Access-like sale. That’s down from the 38.0% of 79 retailers that ran promotions during Amazon’s July 11 and 12 Prime Days. 

17.5% of retailers tied promotions directly to a holiday, such as Christmas, Thanksgiving weekend or Halloween. That’s down from 44.3% of retailers that tied promotions to a holiday (including Prime Days) in July. Retailers that linked promotions to the holidays included mentions of Black Friday (28.6%), Christmas (35.7%), Halloween (21.4%) and Thanksgiving (7.1%).

And 5.0% of retailers used specific Prime-related language and timed promotions on their homepages during the Prime Early Access event or around these days. That’s down from 15.2% of retailers during July’s sale days.

Retailers varied the language used to promote sales. 15.0% of promoting retailers included one of the following keywords: holiday, Prime, early access, gifting and X-day sale. 

In July, 85.7% of retailers with holiday promotions cited Prime Day directly, while also noting Back to School (14.3%), Black Friday (8.6%) and 4th of July (2.9%). 

Fifteen retailers emphasized competition with Amazon’s Prime Early Access Days, including Macys.com, which tied both Prime and holiday language for its two-days-only “Holiday Early Access” sale. Costco Wholesale Corp. highlighted member savings days, while Dick’s Sporting Goods noted three-day-only deals.

Macy’s.com cited “early access” as part of its 2-day holiday promotional strategy on Oct. 11.

Gen Z apparel retailer PacSun took it one step further with a blazing banner displaying up to 40% off and popups of its PacFridayPreview noting two days left.

PacSun promoted its limited-time PacFridayPreview on its home page on Oct. 11.

Consumers are making careful purchases

The decline in retailers’ competing sales in October compared to July might have to do with the current economic environment, fraught with inflation and higher prices for necessities like gas and groceries, says Alexander Winston, consultant at Propeller, a business consulting agency. Today, inflation is reducing buying power. Winston cautions against retailers promoting too early and too often. As holiday selling seasons are landing earlier and earlier, there will be a limit to the “juice to be squeezed” from consumers, he says.

“Consumers are expected to spend an average of 6% more versus last year, with inflation climbing above 8%, indicating softer sales this year,” Winston says.

And because consumers will be more wary of spending this year, there is likely to be more demand around essential purchases than nice-to-haves, said Thomas Kasemir, chief product officer at Productsup, a product-to-consumer software vendor. 

“By running a sales event in October, businesses can get a better understanding of what the essential purchases are this year,” Kasemir said. “Brands can’t afford to lose out on sales this Black Friday and Cyber Monday. So, an early sales event acts as a trial run to work out any kinks in their system.”

Target and Walmart mirror Prime Days and Early Access strategies

Once again, Amazon’s direct competitors held sales, albeit a different approach from Amazon. Target Corp. (No. 5) launched its own deal days to compete with Amazon. The three-day sale occurred before Amazon Prime Early Access, held from Oct. 6 through Oct. 8. Deals ranged to up to 50% off, similar to its July 3-day deals, which ranged from 5% to 60% off. On Oct. 11, Target launched Black Friday deals on its homepage.

Meanwhile, Walmart Inc. (No. 2) displayed a more muted homepage on Oct. 11, highlighting a “flash deal” item at the top. The retailer promoted some Halloween deals rather than Black Friday. It also included the usual promotion of its 30-day free trial for its membership program. 

Gift cards, Amazon photo projects among top sought items

By 9 a.m. ET, Oct. 12, Chicago-based market research firm Numerator captured 13,215 orders with an average order value of $45.50. That totals just over $606,000 in sales. Given that Digital Commerce 360 estimated that Amazon’s sales on the Prime Day event earlier this year exceeded $12 billion, it is important to note that Numerator is only capturing a small subset of Amazon orders.   

The top items include Amazon photo projects, Amazon gift cards and Amazon essentials women’s apparel. Most items (59%) have sold for under $20, while 4% sold for more than $100. According to Numerator, the top categories consumers say they’ve purchased are household essentials, health & beauty, and apparel and shoes. 14% of shoppers purchased expensive items they waited for a sale in order to buy. 

Discount types 

Fewer retailers, 71.3%, offered percent-off discounts as part of the October promotion, according to Digital Commerce 360’s site checks. That compares with 77.2% of retailers that offered the same discount type for Amazon Prime Days in July. Percentage discounts ranged from 5.0% to 80.0% off, with the median retailers’ maximum percentage off at 40% and median minimum at 10.0%.

In October, more retailers offered dollar-figure discounts (25.0%) and free shipping (28.8%) as promotions. Fewer offered gifts with purchase (6.3%), and fewer retailers offered multiple types of discounts during day one of Amazon Prime Early Access (36.6%). That compares with 40.5% in July.

Other types of discounts included Chewy.com Inc.’s promotion for a $30 e-gift card when spending $100. Overstock.com Inc. flashed a “free shipping on everything” promotion, and Lands’ End promoted its Warm Coat Drive in place through Nov. 20, where a customer receives 50% off a new Lands’ End coat in exchange for gently worn coats given in stores.

No-discount retailers

While the majority of retailers in the Digital Commerce 360 panel offered sales, 20.0% offered no discounts at all. This is similar to July, except the majority not offering deals was more evenly distributed among consumer brand manufacturers and retail chains.

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Anthony Alcazar says he thought the health-conscious product would be a hit. But stores were skeptical, and the Alcazar brothers could not get their product on many store shelves.

Alcazar says that part of the problem with getting distribution came down to what he calls “business bullying.” Alcazar says this is when established brands make arrangements with retailers to guarantee shelf space make it difficult for newcomers to compete. But rather than give up, Ronald Alcazar suggested setting up online — with an ecommerce website of their own and a presence on Amazon.com.

The brothers saw the Amazon marketplace as their best chance to get their products in front of consumers because they would not have to compete for shelf space with other brands.

“On Amazon, the customers decide who is No. 1,” Anthony Alcazar said.

Sales growth on Amazon

Mr. Tortilla started selling on Amazon.com in 2020, and the decision paid off, Alcazar said. Sales in 2021 were 3,000% higher than in 2020, when the brand started selling on Amazon. As of  Oct. 10, Mr. Tortilla had two products listed among the top-selling tortilla flatbreads on Amazon.com. Alcazar said the brand is profitable and projects sales above $15 million this year. He expects the retailer to almost double that in 2023, partly due to new products introduced in 2022. The brand’s new products include salsa, tortilla chips, cookies and pancake mix. Its latest product is a bacon seasoning called Crunchy Vegan Bake’n.

Deciding to sell online was “the pivot of a lifetime,” Alcazar said. But he and his brother learned as much as they could about digital marketing, including social media “on the fly.” Alcazar said working with Amazon was a great experience for Mr. Tortilla. Without providing details, Alcazar said the Amazon team “went above and beyond” at each step of the process to help the brand succeed.

He said 90% of Mr. Tortilla’s sales are made online, including the one-third generated on Amazon. But the brand also sells to distributors, wholesalers and restaurants in the United States, Canada and the United Kingdom.

“The goal is to have a variety of SKUs available across all major retailers” over the next three to five years,  Alcazar said.

Mr. Tortilla also will participate in Amazon’s Prime Early Access Sale on Oct. 11 and 12, Alcazar said. During the sale, the retailer will offer up to 30% off on tortillas, chips, salsas and baking mixes.

Seeking investors

Alcazar said numerous Amazon aggregators — firms that acquire successful Amazon sellers with the idea of making them more profitable — have approached Mr. Tortilla to buy the brand. But Alcazar says this is not a good time in the company’s development to sell it outright. He wants an investor willing to help fund expansion at “a fair valuation” but has not yet found the right partners.

“The fantastic customer feedback to our growing selection of products speaks volumes,” Alcazar said. “It’s now time to take Mr. Tortilla to the next level with the support of financial growth partners.”

Data shows the tortilla market in the U.S. and worldwide is growing. The U.S. tortilla market, measured by the revenue of tortilla producers, will be $5.7 billion in 2022, says market research firm IBISWorld. The firm also says the U.S. tortilla market size grew by an average of 5% per year between 2017 and 2022. Meanwhile, market research firm Grand View Research expects the overall U.S. grocery market to grow at a compound annual growth rate (CAGR) of 3% from 2022 to 2030.

Brandessence, another market research firm, says global tortilla sales were $43.7 billion in 2021 and expects the market to reach $64.50 billion by 2028. That would represent a 5.72% compound annual growth rate.

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