Amazon managed to improve its International segment revenue growth rate
The year-over-year (or YoY) revenue growth trend for Amazon’s (AMZN) International segment was falling until last quarter. As the chart below shows, the YoY revenue growth rate was negative in 1Q15 but became positive in 2Q15 at 3%.
During the conference call to announce 2Q15 earnings, Amazon’s management mentioned that this revenue growth rate could have been around 8% had it not been for the strong US dollar (UUP). We discussed this aspect of currency headwinds in the previous part of the series.
The company credited the 2Q15 improvement to easy growth compared to 2Q14, when the Japanese consumption tax increase introduced last year on April 1 impacted Amazon’s International segment. The tax increase affected business in Japan (EWJ) in 2Q14, and this had a negative impact on Amazon.
Increasing Prime program popularity also benefited Amazon
According to Amazon, another factor that had a positive impact on its International segment was the rise in popularity of the Amazon Prime program in international countries. Prime is a $99-per-year membership program. As members, Amazon customers get free delivery of the goods they order from Amazon. Plus, customers get free access to select videos via a video streaming service. This strategy gives Amazon an edge over eBay (EBAY), which doesn’t offer this kind of program.
Amazon will launch its Prime Instant Video service in Japan in September, and it is likely to give stiff competition to Netflix (NFLX), which has also recently launched its service there.