The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased 25% in the third quarter.

Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide, today posted a third quarter revenue gain of 20.4%. The e-retailer’s net loss widened due to increased spending on fulfillment, marketing and other areas.

The big news for North American retailers that compete with Amazon is that the leading web retailer continues to take market share. And that’s particularly true in general merchandise and consumer electronics, as North American sales in that category increased 30.6% in the third quarter, following 29.1% growth in the second quarter. Wells Fargo analyst Matt Nemer says the Q3 growth in this category marked the fourth consecutive quarter of acceleration, and “shows massive market share gains continue in U.S. retail.” Online retail sales in the United States increased 15.7% in the second quarter compared with the prior-year quarter, far slower than Amazon’s growth.

Sales of media products—books, videos and music—increased only 4.8% in North America in the third quarter, which Amazon attributed to more college students renting instead of buying textbooks, and heavy discounting of other books.

International sales were much weaker, growing only 13.6%. Analysts say that reflects weak economic growth in Europe and Japan.

The Q3 report highlighted Amazon’s big stumble on its Fire smartphone, which has failed to catch on since its introduction in June. Amazon wrote off $170 million worth of Fire phone inventory in the third quarter, contributing to its net loss of $437 million in the quarter. Heavy investments in new fulfillment centers and to license TV shows and movies for its streaming video service also factored into the loss.

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As it normally does, Amazon’s press release announcing its Q3 results included an upbeat comment from the company’s founder.

“As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever,” said Jeff Bezos, founder and CEO of Amazon.com. “In addition to our already low prices, we will offer more than 15,000 lightning deals with early access to select deals for Prime members, hundreds of millions of products across dozens of categories, curated gift lists like Holiday Toy List and Electronics Holiday Gift Guide, new features like #AmazonWishList, and a great new lineup of products like Kindle Voyage and Fire HD Kids Edition.”

Amazon in October launched limited-time deals for members of its Prime two-day shipping program. That followed the September announcement by Amazon that it would let customers craft wish lists on Twitter. A research report this week pegged the number of Prime-eligible items at more than 30 million, an 11% increase from the second quarter. Amazon.com accounted for 23% of U.S. online retail sales in the second quarter of 2014, according to an Internet Retailer estimate.

For the third quarter ended Sept. 30, Amazon reported:

• Net sales of $20.58 billion, a 20.4% increase from $17.09 billion in the same quarter in 2013. Of that revenue, about $16.02 billion stemmed from Amazon selling products itself to consumers, what the e-retailer terms “net product sales”—up 16.0% year over year. The rest, nearly $4.56 billion, came from commissions from outside merchants that sell on Amazon marketplaces, the Amazon Web Services cloud computing service and other smaller revenue sources. Those “net service sales,” as Amazon calls them, were up 38.8% from last year.

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• North American net sales of nearly $12.87 billion, up 25.0% from $10.30 billion for the third quarter of 2013. North America accounted for about 62.5% of sales in the third quarter of 2014, compared with 60.3% in the same period in 2013.

• International net sales totaling $7.71 billion, up 13.4% from $6.80 billion in 2013. International accounted for about 37.5% of sales in the third quarter, compared with 39.8% in 2013.

• Worldwide sales of books, music and videos increased 4.2% to $5.24 billion from $5.03 billion, while electronics and other general merchandise increased 26.2% to $13.95 billion from $11.05 billion in the same period in 2013.

• Net loss of $437 million compared with net loss of $41 million in the same period in 2013.

• Spending on marketing increased 43.1% to about $993 million from $694 million in the third quarter of 2013.

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• Spending on technology and content increased 39.9% to $2.42 billion from $1.73 billion.

• Spending on fulfillment increased 30.0% to $2.64 billion from $2.03 billion in 2013.

• General and administrative spending increased 46.0% year over year to $406 million from $278 million.

For the first nine months of the year, Amazon reported:

• Net sales of $59.66 billion, a 22.1% increase from nearly $48.87 billion in the same nine-month period in 2013. Of that revenue, $46.98 billion stemmed from Amazon selling products itself to consumers, up 17.9% year over year. The rest, $12.68 billion, came from commissions from outside merchants that sell on Amazon marketplaces, the Amazon Web Services cloud computing service and other smaller revenue sources. Those “net service sales,” as Amazon calls them, were up 40.4% from last year.

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• North American net sales of $36.72 billion, up 25.9% from $29.17 billion for the same period of 2013. North America accounted for 61.5% of sales in the first nine months of 2014, compared with 59.7% in the same period in 2013.

• International net sales totaling $22.94 billion, up 16.6% from $19.68 billion in 2013. International accounted for 38.5% of sales during this period, compared with 40.3% in 2013.

• Worldwide sales of books, music and videos increased 7.4% to $15.56 billion from $14.49 billion, while electronics and other general merchandise increased 27.0% to nearly $40.25 billion from $31.68 billion in the same period in 2013.

• Net loss of $455 million compared with net income of $34 million in the same period in 2013.

• Spending on marketing increased 40.5% to about $2.81 billion from $2.00 billion in the first nine months of 2013.

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• Spending on technology and content increased 41.3% to $6.64 billion from $4.70 billion.

• Spending on fulfillment increased 29.5% to $7.34 billion from $5.67 billion in 2013.

• General and administrative spending increased 37.0% year over year to $1.11 billion from $810 million.

 

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