Amazon.com Inc. reported today a relatively modest 18.4% increase in North American sales for 2021, a rare below-20% increase. Sales gains of only 9.3% in the fourth quarter—when online holiday sales in general fell short of expectations—dragged down the full-year total. But there was still plenty of good news for the leading e-retailer, which once again took market share in U.S. online retail, according to Digital Commerce 360 estimates.
The company’s net income for the year soared 56.4% to $33.36 billion, in good measure because of a gain of $11.8 billion in Amazon’s stake in electric vehicle manufacturer Rivian, which went public in November. Amazon also announced that it would raise the annual subscription price for its Prime loyalty program to $139 from $119, the first increase since 2018, and the monthly fee to $14.99 from $12.99.
Were it not for the Rivian gain, Amazon’s profit would have been essentially flat for the year, as expenses rose significantly in several areas. Amazon’s fulfillment expenses increased 28.4% year over year to $75.11 billion in 2021, spending on technology and content rose 31.1% to $56.05 billion and marketing expenses increased 47.9% to $32.55 billion.
“As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron,” Amazon CEO Andy Jassy said in a press release that accompanied the earnings report. “Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”
The revenue increase for North America—which includes Amazon’s sales of merchandise it owns, fees from marketplace sellers and advertising income—increased by less than 20% for the first time in years.
Nonetheless, Amazon took market share in U.S. online retailing in 2021, Digital Commerce 360 estimates. The total value of goods Amazon sold to U.S. consumers, often referred to as gross merchandise value or GMV, increased 17.3% in 2021 to $364.4 billion, while U.S. online retail sales only grew 14.2%, Digital Commerce 360 estimates.
As a result of that above-market growth, Amazon’s share of U.S. retail ecommerce grew to 41.8% in 2021 from 40.7% in 2020, and Amazon accounted for 49.7% of U.S. online retail growth in 2021, according to Digital Commerce 360.
Among the bright spots for Amazon was the continued growth in the revenue it receives from third-party sellers on its web marketplaces. Those services—which include commissions on sales and fees from Fulfillment by Amazon—increased 33.9% to $107.69 billion in 2021.
Amazon Web Services and third-party sellers contribute to higher Amazon profits
The Amazon Web Services cloud computing unit also turned in another stellar year, increasing its revenue by 37.1% to $62.20 billion and its operating income 37.0% to $18.53 billion. With Amazon booking a $924 million loss for the year in its international operations and relatively slow growth in North America, AWS accounted for 74.5% of Amazon’s operating income in 2021 versus 59.1% in 2020.
AWS played a big part in helping Amazon exceed expectations in both revenue and profit, says eMarketer principal analyst Andrew Lipsman. “Amazon managed to beat on the top and bottom lines despite softer growth trends for ecommerce this holiday quarter, which also weighed on growth in the high-margin ads business,” Lipsman says. “The one clear bright spot for the core business was the continued acceleration in AWS to help bolster a bottom line that was otherwise squeezed, if not for the boost it got from the Rivian investment.”
Amazon spent slightly more than the additional $4 billion it expected to spend on labor in the fourth quarter, chief financial officer Brian Olsavsky told investment analysts on a conference call following the release of earnings. He said Amazon only hired 140,000 additional workers, fewer than the 150,000 it projected, and he said that led to inefficiencies in fulfillment centers and additional overtime spending.
For the fourth quarter ended Dec. 31, 2021, Amazon reported:
- North America net sales of $82.36 billion, an increase of 9.3% from $75.35 billion in the fourth quarter of 2020.
- International sales of $37.27 billion, a decrease of 0.5% from $37.48 billion a year ago.
- Worldwide revenue of $137.41 billion, up 9.4% from $125.56 billion a year earlier.
- Net product sales, the value of goods Amazon sells on its own behalf, increased 0.5% to $71.42 billion from $71.06 billion. Net service sales reached $66.00 billion, a 21.1% increase from $54.50 billion. Net service sales include revenue from Amazon Web Services, Prime subscriptions and Amazon’s commission on sales by marketplace merchants and fulfillment fees charged to those merchants. Third-party seller fees alone increased 11.0% to $30.32 billion from $27.33 billion.
- Amazon Web Services revenue of $17.78 billion, up 39.5% from $12.74 billion. AWS operating income was $5.29 billion, up 48.5% from $3.56 billion.
- Advertising revenue, which Amazon broke out for the first time increased 32.2% to $9.72 billion from $7.35 billion.
- Operating income of $3.46 billion, a decrease of 49.7% from $6.87 billion. Because of the loss in other areas, AWS represented 153.0% of total operating income, compared to 51.9% during the same period in 2020.
- Net income of $14.32 billion, up 98.3% from $7.22 billion, boosted by the $11.8 million gain in Amazon’s stake in electric vehicle maker Rivian.
For the full year of 2021, Amazon reported:
- North American sales of $279.83 billion, an increase of 18.4% from $236.28 billion in 2020.
- International sales of $127.79 billion, up 22.4% from $104.41 billion.
- Worldwide revenue of $469.82 billion, up 21.7% from $386.06 billion a year earlier. Net product sales increased 12.0% to $241.79 billion from $215.92 billion. Net service sales reached $228.04 billion, a 34.0% increase from $170.15 billion.
- AWS sales of $62.20 billion, a 37.1% increase from $45.37 billion. AWS operating income was $18.53 billion, up 37.0% from $13.53 billion.
- Advertising revenue totaled $31,16 billion. Amazon did not report advertising as a separate item last year.
- Operating income of $24.88 billion, up 8.6% from $22.90 billion. AWS represented 74.5% of total operating income, compared to 59.1% during the same period in 2020.
- Net income of $33.36 billion, an increase of 56.4% from $21.33 billion in 2020.
Amazon, which now employs 1.6 million people worldwide, projected net sales of between $112.0 billion and $117.0 billion in the first quarter of 2022, which would represent year-over-year growth of 3% to 8%.
Amazon is No. 1 in the 2021 Digital Commerce 360 Top 1000.
Percentage changes may not align exactly with dollar figures due to rounding.