Deep dive into Amazon’s Q1 results from a seller’s perspective.

April 28, 2014

ChannelAdvisor Scot Wingo By Scot Wingo

Last Thursday, April 24, 2014 Amazon announced their Q1 2014 results.  The results can best be characterized as mixed with some rays of sunshine and some clouds. We have long advocated that sellers on the Amazon 3P platform analyze the Amazon quarterly results to help inform their strategies and plans.  Before jumping in, you may want to review our Q1 preview that is here.

 Q1’s mixed results – Highlights

There was a lot to process in the Q1 results, here are the key points that we think sellers should focus on:

  • Acceleration – EGM accelerated in NA from 24% to 27% which was good news because that’s where most of the 3P action is with our clients.
  • Paid item growth -Wall St. was particularly disapointed that paid item growth came in below expectations at 23% (vs. 25% last Q and expectations of 28%).  As we mentioned in the preview, this is NOT a metric we believe sellers should look at.  I’ve received a lot of questions about that view and will work on a separate post detailing our thoughts on this one.
  • Active users – Our biggest concern was the active user number of 244m.  This was a 17% y/y increase compared to the 19%+ y/y growth we’ve enjoyed for the last year. There are two factors in customer growth – adds and de-activations.  Amazon is very strong at keeping customers, so most likely the slow down is on the adds side.  To grow 19% Amazon would have had to get to 249m for a 5m difference.  That’s a lot of users given the maturity of most of Amazon’s markets.  Perhaps the law of large numbers is catching up to the active user metric.  The silver lining here is that units per user and revenue per user were both up 5% (thanks to Justin@BofA/ML for that metric).  With Amazon’s keen focus on adding features and functionality to Prime (increased video library, Prime Pantry and the rumored Prime Data) it seems that Amazon is trying to build a cross-internet/device/media mega loyalty/membership program unlike anthing that exists today.
  • Media share – Media hit a low-water mark of 28% with EGM at a high-water mark of 66% (the missing 6% is other -ads and AWS).

Those are the highlights from the Q and here is an updated dashboard with all the key metrics.

Amazon Q1 2014 Key Performance Indicators (for sellers) Dashboard

Amzn_q1_gmv_dashboard

 

Q1 2014 Amazon growth rate cube

Here is our regular matrix of the different Amazon growth rates.  The category most 3P sellers focus on is EGM (Electronics and General Merchandise) and you can see that it grew at a rate of ~2X e-commerce both domestically and internationally.

Amzn_q1_growth_cube

How big was 3P in Q1 2014?

Q1 2014 was Amazon’s largest non-holiday quarter and total GMV (1P+3P) came in at $37.5b which is a ~$160b run-rate.

Amzn_q1_gmv_calculator

Here is a stack chart with the 1P and 3P GMV trends since 2011.  We usually compare Amazon’s GMV for the Q to eBay’s but due to the switched timing, we’ll be moving that to the eBay post after their results.

Amzn_q1_gmv_chart

Conclusion

From a seller’s perspective, this was a strong Q with EGM in NA accelerating and solid international EGM results, both of which about twice the size of the 15% e-commerce growth rate as reported by ComScore.   The slow-down in paid unit growth is merely a distraction as this measure is polluted by changes in the Media category.  The active user number points to some storm clouds on the horizon, but it’s only one quarter and one dimension of future spend (average GMV/user being the other).

 

Amazon’s guidance for Q2 points to a mid-point of 21% y/y which suggests a slow-down, but could be due to conservatism and some of the pressure in media.  We’ll report back in ~90 days and be watching these metrics closely – stay tuned.

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