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Amazon’s first-party online sales dipped below 50 percent of the company’s overall net sales in the first quarter, reflecting the growth of the tech giant’s other businesses. (GeekWire Chart)

For the first time in Amazon’s history, the company’s first-party online retail sales represented less than half of its overall net sales last quarter, even as both measures continued to grow, according to a GeekWire analysis.

The milestone doesn’t take into account sales by other retailers on Amazon.com, but it’s nonetheless a testament to the tech giant’s growing diversification. It’s especially notable in light of the company’s history. Amazon rose to prominence as a pioneer of the e-commerce industry, becoming the online “Everything Store” by expanding beyond its original mission of selling books.

In recent years, the company has expanded beyond that heritage to become a major player in a wider variety of industries. Amazon today sits at the top of the competitive and lucrative cloud computing market through its Amazon Web Services business. It’s an emerging force in brick-and-mortar retail with Whole Foods and its own Amazon stores. It’s also an entertainment heavyweight, a trend-setter in shipping and a potential giant of the advertising world.

These growing divisions have steadily become bigger contributors to Amazon’s overall business in recent years.

First-party online sales are still Amazon’s biggest business, larger than any other individual segment. But the first quarter was the first time that those other segments collectively surpassed Amazon’s own online sales. Amazon posted $29.5 billion in first-party online sales, up 9.5 percent year-over-year, and representing 49.5 percent of Amazon’s $59.7 billion in quarterly net sales.

(GeekWire Chart)

Here’s a look at Amazon’s other core businesses and how they’ve grown.

  • Third Party Seller Services make up the second-largest piece of Amazon’s business at 19 percent. This area, which includes sales commissions from third-party sellers as well as fees Amazon collects for packing and shipping orders, reported $11.1 billion in revenue in the first quarter, up 20 percent over a year ago.
  • Amazon Web Services has changed the makeup of the company, contributing huge swaths of its revenue and profits. The cloud leader made up 13 percent of Amazon’s business in the first quarter. AWS posted $7.7 billion in revenue in the quarter, up roughly 41 percent over a year ago.
  • Physical Stores, led by the company’s new portfolio of Whole Foods stores, has gone from 0 percent of Amazon’s business less than two years ago to 7 percent in the first quarter. Physical Stores revenue rose 1 percent year-over-year to $4.3 billion. There is one caveat on those figures: Revenue from online grocery orders goes into the online stores bucket, so the actual contribution from physical stores is a little higher than the numbers indicate.
  • Subscription Services, headlined by Amazon Prime, represents 7 percent of the overall business. Amazon dropped a bombshell last week when it announced plans to plow $800 million in the second quarter alone into evolving the standard two-day shipping option into a one-day offering. Subscription Services posted $4.3 billion in revenue in the first quarter, up a whopping 40 percent over a year ago.
  • Other: And then there is everything else. This group is largely made up of the advertising business that is quickly becoming a threat to incumbent digital powers in Google and Facebook. The Other group makes up 5 percent of Amazon’s overall business, posting $2.7 billion in revenue in the first quarter, up 34 percent year-over-year.
Amazon packages at an Amazon Fulfillment Center. (GeekWire Photo / Kevin Lisota)

Though online retail is losing market share within Amazon itself, the company continues to dominate the broader e-commerce landscape. Last year eMarketer projected Amazon would hit 49 percent of all e-commerce sales in 2018, up from 44 percent in 2017.

In response to Amazon’s continued dominance of the market, its retail rivals have ratcheted up the challenge. Competitors have beefed up their e-commerce offerings and better integrated digital and in-store operations.

One of the biggest drivers of Amazon’s retail dominance is Prime and its core benefit of free, two-day shipping. Many competitors have caught up and are offering their own two-day shipping options.

That’s part of why Amazon is putting its resources behind making one-day shipping the new standard for Prime. Though the initiative will surely cut into the company’s record profits, one-day shipping could juice online sales and once again make it the majority of Amazon’s business.

“Although we have many items that are available in one to two hours and also same-day, the vast majority of our selection is available to you in two days,” Amazon CFO Brian Olsavsky said on a call with investors last week. “If we get that to one-day, we literally cut it in half … and we think that will open up a lot of potential purchases and will open up convenience to those customers.”

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