Amazon Q1 2015 results preview (from a seller’s point of view)

April 22, 2015

ChannelAdvisor Scot Wingo By Scot Wingo

Amazon is set to release their Q1 2015 results on Thursday April 23 after the market closes.  The Amazon results tracker below shows the key metrics we’ll be reporting on after the results are out along with Wall St. expectations and what Amazon has guided to.

After the tracker is a list of other strategic seller-oriented topics we’ll be watching in the results and on the conference call.

q1_15_amzn_preview

 

AWS Split out

The big news for Q1 seems like it wouldn’t impact sellers, but it will.  In Q4, Amazon promised Wall St. that they would split out detail on the cloud computing business, called AWS (Amazon Web Services).  Here’s how it impacts sellers – Amazon’s total business (retail+AWS) isn’t very profitable, but nobody knows which of these two scenarios causes that:

  1. AWS is very profitable and retail/3P is not, so retail brings the overall business down.
  2. AWS is not profitable and retail/3P IS, so AWS brings the overall business down.

I’ve been in the camp of 2 for a long time as I believe the 3P business is bigger and more profitable than Wall St. and other retailers realize.  This can only mean that AWS (which is growing at a tremendous ~50% y/y growth rate) is losing a good bit of $.  This also makes sense because cloud computing is like a SaaS business where you incur a lot of costs up front for revenues in the future and to drive growth, these businesses tend to lose $ in the early years to ramp up the subscription revenue that comes in the future.

GMV Growth

ChannelAdvisor’s Amazon Q1 2015 SSS came in at 24.8% and in Q4, Amazon reported EGM global growth of 24.8%.  With e-commerce at 15%, it will be interesting to see if Amazon can keep the EGM growth rate at this ~24% level which is quite impressive.  We’ll be watching metrics like Units/customer and Revenue/customer closely for any signs of an acceleration or speedup.

Active Buyers

In Q4, active buyers grew only 13.9% y/y which was a pretty substantial slowdown from past periods.  If we apply that growth rate, then we approximate that Amazon should have 278m active buyers in Q1.  Anything below that will increase concern that Amazon has slowed customer acquisition and anything above will be positive.

International

Since Amazon provided guidance for 2015, the US dollar has strengthened materially vs. EU and GBP as well as other currencies.  It will be interesting to see if this impacts Amazon’s international results as well as cross-border-trade into/out of the US.

3PM datapoints

In Q4, 3PM accelerated to 43% of units and grew much faster than the 1P business.  1P came in at 12% and 3P at 33%.  It will be interesting to see if this trend continues as Amazon continues to make 2015 the year of efficiencies.  We believe that Amazon’s 3P business is a big driver of margin inside the retail business, so a continued movement of GMV from 1P->3P makes sense.

Misc

Some of the other items we’ll be watching for:

  • Prime Now – Amazon recently launched their 1hr delivery service in NY and now have expanded it to include Baltimore, Austin, Atlanta, Dallas and Miami.
  • FCs – Amazon hasn’t announced many new FCS this year or sortation centers.  Some of the latest ones announce (San Antonio, TX for example) are coming on line now, so we’ll be listening for any news here.  At ~25% growth, it seems like Amazon would need to build 10 US and 15 intl FCs this year, unless here is some optimization going on that would make existing FCs more efficient and not require as big a historical build-out of FC space.
  • Home services – Amazon launched Home Services in Q1, it will be interesting to hear how this is going and any indication if it is an experiment or long-term strategy.
  • China -Amazon started selling on Tmall in China.  Is this an experiment or a signal that Amazon is giving up in the region with their current direct-to-consumer strategy and will instead operate as a Tmall seller focused on the back-end services.
  • India – Amazon has said they will invest upwards of $2b in India.  Any news on how this is going against the local players Flipkart and Snapdeal?

 

For you fellow fulfillment center geeks – one interesting tidbit you may have missed.  At the launch of their San Antonio facility (which they said is the 10th gen8 facility), they showed off a new technology called “Robo Stow” – a robot arm that replaces the need for a forklift.  There seems to be two of these a fixed type version and one that rides on a forklift.  Pretty interesting and have never seen mentioned before.

amzn_fc_robo_stow2 amzn_fc_robo_stow

 

This blog post was written by Scot Wingo, CEO, ChannelAdvisor.