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EcommerceBytes-NewsFlash, Number 3766 - January 29, 2016 - ISSN 1539-5065    1 of 4

Amazon Warehouses Burst at the Seams in Q4 2015

By Ina Steiner
EcommerceBytes.com
January 29, 2016




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Amazon reported strong sales in the fourth quarter of 2015, growing 26% year over year, and revealed it's shouldering the fulfillment tasks of half of the units sold by third-party merchants. "It was a huge FBA quarter," its Chief Financial Officer told analysts on Thursday after releasing earnings.

Amazon reported an increase of 22% in net sales to $35.7 billion in the fourth quarter year-over-year - or 26% ex-FX (foreign exchange). Net income rose from $214 million in Q4 2014 to $482 million in the fourth quarter of 2015.

The company also reported that net sales increased 20% to $107 billion for the full year of 2015, compared with $89 billion in 2014. As the Wall Street Journal noted, that made 2015 its first year to top $100 billion in sales.

Some factoids about the quarter of interest to online merchants:

  • Amazon grew worldwide paid unit growth 26%.

  • Worldwide seller units represented 47% of paid units.

  • FBA units represented nearly 50% of total third-party units.

  • The number of active sellers using FBA grew more than 50%.

  • Worldwide paid Prime members increased 51% year over year.

  • Worldwide active customer accounts were 304 million, or 280 million excluding customers who had only free orders in the preceding 12 months.

Amazon CFO Brian Olsavsky said it was a strong quarter for FBA sellers. "It did put a lot of demand on our warehouses, and we were full," and he said it exceeded Amazon's expectations. Amazon noted that for the full year 2015, Fulfillment by Amazon (FBA) shipped over one billion units on behalf of sellers.

The signs had all pointed to a busy fulfillment season for Amazon - in one case, one of its fulfillment centers clogged up local traffic to the point the mayor threatened to close down the warehouse unless the company figured out a way to alleviate traffic. (It did, and the warehouse remained open.)

In other cases, sellers complained that goods they sent to FBA warehouses were stuck in limbo, unable to be checked in by Amazon's receiving department.

Amazon is hiking FBA fees in February, citing rising labor and transportations costs - see the breakdown in this December EcommerceBytes article.

To help shed slow-moving inventory from its warehouses, Amazon also charges merchants a Long Term Storage fee twice a year (see, How to Avoid Paying Amazon FBA Long-Term Storage Fees in this week's Newsflash newsletter).

Amazon Logistics
There has been much speculation about whether Amazon is looking to compete against shipping carriers such as UPS and FedEx given its investments in logistics including the purchase of trucks trailers and possible plans to lease cargo jets.

When an analyst asked Olsavsky if Amazon was looking to create a new business with its new logistics assets, the CFO said, "In order to properly serve our customers at peak, we've needed to add more of our own logistics." It's not meant to replace Amazon's logistics partners, he said. "Those carriers are just not able to handle all of our capacity that we need at peak," calling them good partners.

He said Amazon uses its new trucks primarily for movement between its warehouses and its sort centers.

Pay with Amazon
Amazon also revealed that payment volume from Pay with Amazon grew more than 150% year-over-year in 2015, "giving Amazon shoppers a secure way to pay on thousands of websites using information already stored in their Amazon accounts."

You can find Amazon's full press release and disclosures on the Amazon Investor Relations website.

Comment on the EcommerceBytes Blog.


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About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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