On Thursday, October 27, 2016, Amazon reported their Q3 2016 results. In this blog post, we analyze the results with an eye towards implications for online and offline retailers, as well as Amazon sellers. Compared with Q1/Q2, this quarter was a bit mixed with a slight deceleration in overall growth driven by EGM NA deceleration. Amazon also missed Wall St’s profitability estimates due to a step up in fulfillment center build-up and launches as well as investments in India and Prime video (in the form of expensive licensing deals around original and existing content). We have details in the report.
There was a lot in this quarter for sellers to consider, so let’s dive in:
Amazon Q3 Results Dashboard
First, here is the Q3 16 Results Tracker where we look at the most important metrics. Remember that comScore reports desktop growth at 10% and mobile at ~5% for a total of 15%, which is what we think of as the ‘e-commerce baseline.’ In other words, if you grow faster than 15%, you are gaining share and if you grow less than 15%, you are losing share.
Amazon Q3 16 Growth Cube
Another way to ‘visualize’ Amazon’s growth is to peel the onion on the category and geographical sides of the business. We do that in what I call the Amazon growth cube.
Highlights for Sellers from Amazon’s Q3
- For the first time ever, 3P’s share of units hit 50%, this metric has been ticking up 1% every Q for the last year+ and it will be interesting to see if that trend holds going into Q4.
- Amazon overall grew 29%, almost 2X the growth rate of e-commerce, quite impressive at their scale.
- EGM was again a standout and grew 32% all-in, 29% in the US and 36% non-domestically. That 29% in the US is 3% below Q2’s 32% and the only component of Amazon that decelerated Q/Q. Note that Q3 included Amazon Prime Day.
- Amazon missed Wall St. expectations on profitability because they are increasing FC capacity 30% y/y on a sq. ft. basis. That equates to 18 new FCs launching in Q3 and another 5 in Q4 for a total of 26 in 2016 compared to 14 last year. Amazon believes these are prudent long-term investments as they continue to get product closer to consumers and lower delivery times.
Amazon 1P vs. 3P
This picture shows the trends of Amazon’s 1P and 3P GMV over the last 5 years.
Amazon’s Q4 Projection (Holiday ’16)
Even with a small tick down in Q/Q growth of NA EGM, Amazon is the largest online retailer growing > twice the rate of growth of e-commerce. Amazon guided Wall St. to Q4 revenue of $42b-$45.5b, which is $43.75b. Those guides project to 17-27% y/y growth or 22% at the mid-point. We plugged this level into our proprietary model for 1P/3P and assumed that 3P stays at 50% of units and you can see the results here:
If Amazon comes in at the high range of their guidance, Q4 could be their first $100b (1P+3P) GMV quarter which would be an impressive milestone.
This blog was written by Scot Wingo, Executive Chairman, ChannelAdvisor
P.S. Happy HALLOWEEN!