Amazon Q2: Advertising Is Growing Faster Than Marketplace Sales
Amazon’s latest earnings report offers more than just a snapshot of quarterly performance—it provides insight into where the marketplace is headed. While Amazon continues investing heavily in AI, the numbers also show that advertising is becoming an increasingly important driver of its marketplace business, reinforcing the need for brands to plan for higher acquisition costs over time.
What Changed: Facts Only
Amazon reported $200.6 billion in Q2 net sales, up 20% year over year. Third-party seller services generated $46.78 billion (+16%), while Amazon’s advertising business reached $19.8 billion, growing 26%—10 percentage points faster than seller services.
CEO Andy Jassy also raised Amazon’s projected 2026 capital expenditures to approximately $220 billion, up from $200 billion, citing higher AI infrastructure and memory costs.
Amazon also shared performance data for Sponsored Prompts for the first time, reporting that shoppers who click them convert 48% more often and spend 21% more per order. Meanwhile, Amazon’s AI-powered Ads Agent is delivering an 8% lower cost per impression and a 6% lower cost per acquisition (CPA) and has expanded into 11 additional countries.
On the shopping side, more than 350 million customers used Alexa for Shopping over the past 12 months. New features like Price Alerts and Auto-Buy now allow Alexa to automatically purchase products when predefined conditions are met.
Why It Matters: Operator Lens
Amazon’s fastest-growing marketplace revenue stream isn’t seller services—it’s advertising. As Amazon continues investing billions in AI infrastructure and proving the effectiveness of new ad formats, brands should expect paid visibility to become increasingly competitive. AI-powered shopping experiences are also making complete product data and pricing consistency more important than ever.
What Is Not Changing
Third-party sellers remain the backbone of Amazon’s marketplace, accounting for 61% of paid units sold in Q2, up from 60% in Q1. Worldwide paid units grew 17%, slightly faster than third-party seller services revenue (16%), indicating sellers are moving more units without a significant increase in average revenue per unit.
What to Do Now
Model your 2027 TACoS assuming advertising costs continue growing faster than GMV rather than treating higher CPCs as a seasonal spike. If Sponsored Prompts are available in your account, begin testing before Prime Big Deal Days, and audit your top ASINs for complete attributes and stable pricing so they’re optimized for AI-powered shopping and Auto-Buy.
Bigger Picture Signal
Amazon is building a marketplace where AI influences both discovery and purchasing. As advertising becomes a larger contributor to Amazon’s revenue, brands that invest early in efficient ad strategies, strong catalog quality, and AI-ready listings will be better positioned for long-term growth.
Sources: Launch announcement – Amazon Q2 press release – https://www.cnbc.com/2026/07/30/amazon-amzn-q2-earnings-report-2026.html – https://www.ecommercebytes.com/2026/07/31/amazon-north-american-sales-grow-16-in-second-quarter-2026/ – https://www.aboutamazon.com/news/company-news/amazon-ceo-andy-jassy-amazon-ads-growth-q2-2026-earnings – https://www.aboutamazon.com/news/company-news/amazon-ceo-andy-jassy-stores-growth-ai-shopping-q2-2026-earnings – https://www.customerexperiencedive.com/news/amazon-customers-embracing-alexa-for-shopping/826734/
Nike and Lululemon Face Lawsuits Over Alleged “Phantom Discounts”
Two of the largest apparel brands in the U.S. are facing lawsuits over nearly identical pricing practices, putting renewed attention on how retailers advertise discounts. While the cases target Nike and Lululemon, the legal theory could have implications for marketplace sellers using list prices or perpetual sale pricing on Amazon and Walmart.
What Changed: Facts Only
Within days of each other, Nike and Lululemon were sued over alleged deceptive strikethrough pricing.
A class action filed against Nike in the U.S. District Court for the Southern District of California alleges that a pair of Air Max 2017 shoes displayed a $190 reference price while remaining continuously discounted for at least six months, from September 2025 through March 2026.
Lululemon faces a similar lawsuit in Los Angeles Superior Court, alleging its Wunder Train tights were advertised at $59 with a $98 strikethrough price, even though the product allegedly had not sold at $98 since October 2025.
Both lawsuits rely on California’s False Advertising Law (FAL), which generally requires a former reference price to reflect the prevailing market price within the previous 90 days unless the advertisement clearly discloses when the item was last offered at that price.
Why It Matters: Operator Lens
Although these cases involve major retailers, the legal theory applies well beyond branded ecommerce sites. Sellers using Amazon List Price, Walmart “Was” pricing, or long-running promotional discounts could face similar scrutiny if reference prices don’t accurately reflect recent selling history. The lawsuits also align with Amazon’s existing efforts to limit misleading list prices on its marketplace.
What Is Not Changing
Reference pricing remains a legitimate merchandising strategy when it’s supported by actual transaction history. Amazon already enforces eligibility requirements for List Price displays and may suppress strikethrough pricing that doesn’t meet its standards. These lawsuits don’t change those policies—they reinforce the importance of following them.
What to Do Now
Audit your catalog’s List Prices and “Was” prices against actual transaction data from the past 90 days. If you can’t substantiate a reference price, remove or update it. Also review products that have been on continuous promotion for extended periods, as perpetual discounts may create unnecessary legal and compliance risk.
Bigger Picture Signal
Pricing transparency is receiving increased attention from both regulators and plaintiff attorneys. As marketplaces continue tightening pricing policies, sellers should expect greater scrutiny of promotional claims and ensure that every advertised discount can be backed by documented pricing history.
Sources: https://www.modernretail.co/marketing/nike-lululemon-hit-with-lawsuits-alleging-deceptive-phantom-discounts/ – https://courthousenews.com/lululemon-sued-over-phantom-discounts/ – https://www.classaction.org/news/nike-facing-class-action-over-alleged-use-of-deceptive-sale-prices
FedEx Publishes the Q4 Shipping Costs Sellers Need to Model Now
FedEx released its 2026 holiday demand surcharges, with fees beginning September 28 for certain oversized and difficult-to-handle shipments.
Broader package demand fees begin October 26, with the highest charges applying during the core holiday period from November 23 through December 27. (FedEx)
What Changed: Facts Only
Demand surcharges for Additional Handling begin September 28 at $8.80 per package and rise to $11.85 during the November 23 through December 27 peak.
Oversize demand charges begin at $95.75 per package and rise to $117.25 during the peak period.
From October 26, overnight services face a $1.30 per-package demand surcharge, increasing to $2.55 during the peak.
FedEx 2Day and Express Saver services begin at $1.20 and increase to $2.35 during the peak.
Ground Residential and Home Delivery Residential shipments face $0.50 per package, rising to $0.80 during the peak.
FedEx Ground Economy begins at $2.55 per package and rises to $4.05 during the peak. (FedEx)
Why It Matters: Operator Lens
Holiday shipping costs are not limited to a single peak surcharge.
Sellers may face multiple overlapping charges based on service level, package size, residential delivery, and weekly shipping volume.
A product that appears profitable under normal parcel rates can become unprofitable once holiday promotions, fulfillment labor, expedited service, and demand surcharges are included.
What This Means for Ecommerce Sellers
Brands fulfilling DTC or merchant-fulfilled orders should update Q4 contribution-margin models now.
Review:
- Package dimensions
- Service selection
- Free-shipping thresholds
- Delivery promises
- Zone distribution
- Residential exposure
- Oversize products
- Carrier agreements
Brands using FBA or WFS should still evaluate these costs because parcel inflation affects backup fulfillment, DTC orders, and replenishment logistics.
What Is Not Changing
The surcharge structure will not affect every shipment equally.
Contract terms, service mix, shipping volume, package characteristics, and negotiated discounts determine the actual impact.
What to Do Now
Immediate operational check
Add the published surcharge periods to Q4 forecasts.
Identify products that become unprofitable during the November 23 through December 27 peak and decide whether pricing, shipping thresholds, packaging, or service levels need to change.
Bigger Picture Signal
Peak season profitability is increasingly determined by fulfillment economics rather than gross demand alone.
Brands need to plan holiday shipping with the same discipline they apply to advertising and promotional discounts.
Supporting Source: FedEx Unveils 2026 Peak Season Fees, Supply Chain Dive, July 22, 2026
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In this episode:
- Amazon’s updated Business Solutions Agreement and what sellers should review before August 24
- Why the Nike and Lululemon lawsuits could change promotional pricing across ecommerce
- How Walmart Connect’s new negative keywords can improve ad efficiency
- Walmart Virtual Packs and how to sell multipacks without additional inventory
- Why Walmart sellers should review their Late Shipment Rate and lag-time settings
- What the Federal Reserve’s latest interest rate decision could mean for inventory planning and financing ahead of Q4
Shein’s Financials Show That the Low-Cost Cross-Border Model Is Losing Its Structural Advantage
Shein reported a $99 million first-quarter loss after earning $395 million during the same period last year.
Part of the loss came from a $328 million accounting charge, but the company also reported declining U.S. revenue and higher expenses after the United States ended duty-free treatment for low-value packages. (Reuters)
What Changed: Facts Only
Shein’s U.S. first-quarter revenue declined 14.3% to $2.04 billion.
The company said removal of the U.S. de minimis exemption had negatively affected sales, growth, and expenses.
Shein stated that Chinese-origin products shipped into the United States now face tax rates ranging from 10% to 87.5%, depending on the product.
The company said it is considering price increases to offset part of the additional cost.
For 2025, revenue increased 8% to $41.85 billion while net income declined 38.7% to $2.06 billion.
Shein is preparing for a Hong Kong listing but has not disclosed the offering size, price, timing, or expected proceeds. (Reuters)
Why It Matters: Operator Lens
Shein’s model depended on a combination of low manufacturing costs, direct-to-consumer parcel shipping, rapid assortment turnover, and favorable import treatment.
That cost advantage is narrowing.
This does not remove Shein as a competitor, but it may reduce its ability to combine extremely low prices with aggressive advertising and fast assortment expansion.
What This Means for Ecommerce Sellers
Brands competing against Shein and similar cross-border sellers should monitor:
Price changes
Advertising intensity
Shipping promises
Assortment depth
Promotional frequency
Marketplace expansion
Domestic brands may gain breathing room in price-sensitive categories, but the opportunity will not appear equally across every product.
What Is Not Changing
Shein remains a large global retailer with substantial revenue, supplier relationships, technology, and customer awareness.
A quarterly loss does not mean the company or its business model is disappearing.
The $99 million loss also includes a significant noncash accounting charge, so it should not be interpreted entirely as an operating loss caused by tariffs.
What to Do Now
No action required, monitor only
Track competitor pricing and paid-media activity in categories where Shein has historically applied the most pressure.
Do not raise prices or change strategy based only on one quarter of financial reporting.
Bigger Picture Signal
Governments are reducing the regulatory advantages that allowed ultra-low-cost marketplaces to scale rapidly across borders.
Competition is shifting from who can exploit the cheapest import pathway to who can build a durable and compliant operating model.
Source: Shein Flags Tariff Hits After Posting Quarterly Loss Ahead of Hong Kong IPO
Walmart Launches Virtual Packs for U.S. API Sellers
Walmart has introduced a new way for eligible marketplace sellers to offer multipacks without maintaining separate inventory. The feature gives brands additional merchandising flexibility ahead of the holiday shopping season.
What Changed: Facts Only
As of July 30, Walmart made Virtual Packs available to eligible U.S. API sellers through its existing Item Management endpoints. Virtual Packs allow sellers to create purchasable bundles of 2 to 6 units of the same item, each with its own bundle SKU, price, content, and item ID, while inventory and fulfillment continue to rely on the original component SKU.
Access requires MLMQ onboarding and a support request to enable the feature.
Why It Matters: Operator Lens
Virtual Packs allow sellers to introduce higher-value purchase options without creating physical multipack inventory, new UPCs, or separate inventory pools. Inventory automatically updates across all pack configurations, reducing operational complexity while creating opportunities to increase average order value (AOV).
Sellers fulfilling through Walmart Fulfillment Services (WFS) may also benefit from lower fulfillment fees when qualifying pack sizes offer at least a 5% discount.
What Is Not Changing
Virtual Packs do not replace your existing inventory model. Orders still pull inventory from the underlying component item, so inventory management and lag time remain tied to the original SKU.
What to Do Now
Evaluate your best-selling products for 2-pack and 3-pack opportunities ahead of Q4. With Walmart’s October 1 WFS holiday inbound deadline approaching, sellers have time to test pricing, conversion, and fulfillment economics before peak season.
Bigger Picture Signal
Walmart continues investing in tools that help sellers grow basket size while simplifying catalog management. Features like Virtual Packs give brands more flexibility to optimize profitability without increasing operational complexity.
Source: https://developer.walmart.com/us-marketplace/page/new-virtual-packs
Walmart’s Late Shipment Rate Standard Is Now Enforceable
Walmart has officially added Late Shipment Rate (LSR) to its seller performance standards, making on-time shipping more critical than ever for self-fulfilled sellers.
What Changed: Facts Only
Announced on July 9 and implemented at the end of July, Late Shipment Rate is now Walmart’s eighth accountable seller performance metric. The standard requires sellers to maintain an LSR of 5% or less, measuring orders shipped after the Expected Ship Date.
Failure to meet the standard can result in listing suppression, suspension of both seller-fulfilled and WFS listings, and ultimately account termination.
The policy follows another operational change Walmart introduced on July 2, when it updated how the Expected Ship Date (ESD) is calculated. For sellers using lag times greater than zero, ESD is now calculated from the order date regardless of daily order cutoff times, effectively shortening the shipping window for many after-cutoff orders.
Why It Matters: Operator Lens
These two policy changes compound each other. Sellers who didn’t update their lag time settings after the July 2 ESD calculation change may now be held to a tighter shipping window under a performance standard that can lead to suspension. The greatest risk falls on self-fulfilled sellers, while WFS orders are largely insulated.
What Is Not Changing
Walmart continues to evaluate shipment performance using operational execution, including shipment confirmation timing, carrier handoff, and valid tracking scans. Strong fulfillment processes remain the best defense against performance issues.
What to Do Now
Review your current Late Shipment Rate and audit your shipping workflows. Verify that lag time settings accurately reflect your fulfillment capabilities, ensure shipments are confirmed promptly, and validate that carrier scans are consistently captured. If you’re consistently operating close to the 5% threshold, consider whether WFS could reduce operational risk.
Bigger Picture Signal
Walmart is steadily raising operational standards as its marketplace matures. Performance metrics are becoming stricter, and sellers who proactively optimize fulfillment processes will be better positioned to protect account health and scale successfully.
Sources: https://marketplacelearn.walmart.com/releasenotes – https://marketplacelearn.walmart.com/guides/Policies%20&%20standards/Performance/Seller-performance-standards
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