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Prime Pantry Program Is Driving Amazon’s EGM Business Growth

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Amazon’s EGM business growing at 20%+ rate

Amazon (AMZN) reports three main business segments: Electronics and Other General Merchandise (or EGM), Media, and Amazon Web Services (or AWS). In this part of the series, we’ll discuss the driving factors behind Amazon’s EGM segment growth. As the chart below shows, Amazon has managed to maintain the revenue growth of its EGM segment between 20% and 30%.

During the conference call to announce 2Q15 earnings, Amazon’s management mentioned that programs such as Prime Pantry are helping the company garner a lot of repeat business, which is what is driving the EGM segment’s revenue growth.

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Amazon looking to leverage the huge grocery retail market

Prime Pantry is a program from Amazon under which customers can order up to 45 pounds or four cubic feet of household products for a flat fee of $6. Prime Pantry and AmazonFresh are some of the initiatives taken by Amazon to leverage the huge food retail market in the United States.

According to a report from Euromonitor International, Walmart (WMT) and Kroger (KR) lead the US grocery retail market, with shares of 20% and 8%, respectively. Whole Foods Market (WFM) is another smaller player in this market.

For diversified exposure to Walmart, you could invest in the Consumer Staples Select Sector SPDR (XLP), which invests about 6% of its holdings in Walmart.

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