Amazon Stores says speed is fueling its growth

Amazon CEO Andy Jassy used the third quarter earnings call to make a Stores case that he said investors are sleeping on. He argued no other retailer near Amazon's scale, hundreds of billions in revenue, is growing this fast with double digit operating margins inclusive of ads. Year to date units have grown nearly 15% year over year on a base of more than 30 billion items sold last year, the company said.

The mechanism Jassy described is a flywheel that converts logistics efficiency into category expansion. Faster delivery, a fulfillment network that lowers cost to serve per unit, and a push into groceries and pharmacy that brings AI shopping, which is an assistant that helps customers find and reorder products, are treated as force multipliers rather than separate bets. Each makes the others cheaper and more frequent.

Speed is the visible lever. Jassy said Amazon delivered its fastest Q3 ever globally and moved more than 1.5 billion items to Prime customers same day or overnight in the quarter. That rests on a Same Day network, which is a set of smaller, densely stocked fulfillment sites near cities, plus Amazon Now, an ultra fast storefront for everyday items, and Amazon Prime Air, its drone delivery service. Amazon Now is now in more than 450 towns and cities and orders through it are up 10x year over year, per Amazon.

Cost to serve is the quiet lever. Amazon said it is on track to reduce cost to serve per unit for the fourth consecutive year, which lets it meet or beat rival prices while carrying low margin fresh groceries and everyday essentials. Grocery is where the loop closes. Gross sales for grocery including perishables and essentials reached nearly $250 billion in the trailing 12 months. In Q3 fresh groceries and essentials grew about 3x faster than the rest of Stores and made up about half of all units sold. Customers who buy perishables with Same-Day Delivery buy nearly 7x more everyday essential units than those who do not, and active grocery customers shop nearly 4x more non grocery categories and spend over 2x more on them.

The Stores pitch landed alongside a strong consolidated result not detailed in the Stores post. Operating income was $28.1 billion and operating margin was 13.9%, Amazon's highest ever, and AWS net sales grew 39.3% to a $184 billion annualized run rate, according to the earnings release. That context matters because Jassy tied Stores margin expansion, nearly 10 percentage points in both North America and International over the past few years, to reinvestment capacity, a theme echoed in our earlier dispatch on AWS growth from the same quarter.

The limiter is explicit in Jassy's own framing. Nearly 80% of retail still happens in physical stores, so the promised flip to ecommerce is a long runway, not a near term conversion. What to watch is whether speed keeps lowering cost to serve in practice, and whether grocery frequency continues to pull non grocery spend without eroding margin.