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Takeaways for Merchants from Amazon Q4 Earnings

Amazon
Takeaways for Merchants from Amazon Q4 Earnings

Amazon released earnings on Thursday, and there were some takeaways about third-party merchant sales, changes in seller fees, Amazon delivery, advertising, and upcoming investment in fulfillment center capacity.

Amazon grew 2018 fourth quarter sales 20% to $72.4 billion. Sales for North America in the 4th quarter of 2018 were up 18% year-over-year; sales for International were up 19% FX-neutral; and sales for its AWS cloud web-hosting business was up 46% FX-neutral.

Here’s some context from CNBC: “The better-than-expected fourth-quarter results, backed by strong holiday sales, comes as investors fret about decelerating growth following two straight quarters of disappointing revenue. Sales climbed 19.7 percent in the latest quarter, which was faster than the 18.8 percent expected, but still the slowest since the first quarter of 2015.”

Amazon held a conference call to answer questions from Wall Street analysts. When asked about unit growth, Amazon said, “in general, we feel good about the growth in the quarter, we think Q4 in particular was a great quarter for customers.”

Amazon said third-party sales grew faster than first-party sales. It also called out the fact in its earnings press release, where it stated that nearly 200,000 small and medium-sized businesses surpassed $100,000 in sales in Amazon’s stores in 2018.

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One analyst asked about changes to third-party selling fees last year. Amazon said third-party sellers are an important part of its value proposition – “they’ve had great success on our site, more than half of our units sold are from third-party sellers.” Amazon said it would always be evolving that business, including adding new fees or subtracting existing fees. “We generally work to change the fees to make sure that the incentives are strong on both sides and we continue to have a healthy growth in third party.”

There remains much speculation about Amazon competing with shipping carriers. Asked about Amazon delivery and Amazon logistics, the company said it has great partners in place, and said it would continue to build out its programs such as Amazon DSP (Delivery Service Partner), Amazon Flex, and Ship with Amazon programs.

During the quarter, Amazon self-delivery was a much bigger presence year-over-year, “so we’re happy with that both from a performance standpoint. The delivery estimate accuracy, as we call it, was very strong on our self-delivered products, and also the cost profile is very good as well.”

Amazon explained that it adds capacity where it feels is needed to speed up service or ensure demand, particularly at peak. (Geekwire has more info on Amazon fourth-quarter shipping costs in this piece.)

The company continues to expand its Amazon logistics and delivery capability and it also matches up with the faster ship speed for Prime members. “We have over 100 million items that customers could get within two days, but there’s now over 3 million that will be delivered within one day or faster in 10,000 cities and town.”

Amazon deliveries are a big part of that. Often it costs the same or less as using its outside shipping partners. Amazon invests selectively because it has more perfect information about where demand is and how it’s moving items – “by not involving third parties all the time, we can find that we can extend our order cut offs.”

Asked about advertising revenue, Amazon said it was focused on evolving tools and services for agencies and advertisers to make it easier for companies to grow – “we’re continually excited about the opportunity there.” It said it was working on making smarter recommendations as well as addressing the needs of brands.

An analyst asked about the more modest hiring and growth in fulfillment center capacity in 2018, and whether that trend would continue in 2019.

Amazon said in 2016 and 2017, it grew square footage tied to fulfillment and shipping by over 30%, and in 2018, by 15%. In a lot of ways, 2018 was about banking the efficiencies of investments in people, warehouses, infrastructure that it had put in place in 2016 and 2017, it said.

While it takes costs seriously and would continue to work on operational efficiencies, Amazon expects investments to increase relative to 2018.

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Ina Steiner
Ina Steiner
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.

One thought on “Takeaways for Merchants from Amazon Q4 Earnings”

  1. We love Amazon with Prime. As a family of 10 with 4 people either over 65 or handicapped it is especially important that they get what they ordered. We don’t like it when our 87 year old mother gets garbage instead of what she ordered as that is what happens more often than not on Ebay. All they want is what they order. None of the four can just jump into a car and drive down to the shopping center. Wheelchairs and air tanks are a bit cumbersome. Its important that they get their things in a timly manner and tracking so that they know exactly where the things are at any given time. Ebay consistently fails at both so they no longer bother with them. As mom says ” My time on earth is getting short and I don’t want to be buried with a package of garbage”

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