ChannelAdvisor Scot Wingo By Scot Wingo

KERCHOW! Amazon’s Q3 Results Setup for Strong Holiday 15 – Seller oriented deep dive

Amazon’s Q3 results were released Thursday, October 22nd after the market and they were nothing short of amazing.  Every metric that we track to measure the health of the 3P marketplace not only exceeded expectations, but also showed signs of material acceleration.  For this post, remember that e-commerce according to comScore is growing at 15% and that’s the ‘growth measuring stick’ for all e-commerce businesses.

First, here’s the dashboard that is greener than a Christmas tree:

amzn_q3_dashboard_final

Amazon’s growth ‘quadrants’

Amazon breaks down their business a couple of ways:

  • Category – EGM (Electronics and General Merchandise) vs. Media (books, movies, videogames, etc.)  Interesting note – in the US EGM is now 79% of the business and non-domestic is 70%. EGM has a lot of room to run.
  • Region – Amazon also reports by region (North America – aka domestic) and Intl (non-domestic).  For this blog, I focus on constant currency results or ex-fx.  Amazon is 59% NA and 41% non-domestic.
  • All the above – Amazon reports each of these in their components as well (for example, NA EGM, Intl EGM ,etc.)

Each Q, I like to look at the growth rates in this quadrant table that gives you a good view of where the growth is, which is clearly EGM which drove 32% growth in NA and 24% internationally.

amzn_growth_quadrants

The Amazingly Good

It’s hard to find much to be concerned about in Amazon’s Q3 results.  So we’ve tried to separate the results into Amazing good, really good and merely good.  The amazing good highlights:

  • Paid units – Increased to 26% y/y in Q3 up from 22% in Q2, largely driven by Prime Day, but still an impressive acceleration.  Amazon said that 200bps were from Prime Day.
  • Overall Growth – At 30%, Q3 was the fastest Amazon overall growth in 4 quarters.
  • NA EGM – At 32% total for NA and 35% for NA EGM, this was the fastest growth in 12 quarters for this segment – a very material re-acceleration.
  • 3P % units – Came in at 46%, a new high-water mark, beating out last Q’s new high which was 45%.
  • 3P GMV growth – By our estimates, 3P GMV came in at $31.6b and grew 42% y/y, which is closing in on 3X the rate of e-commerce growth.

The Really Good

In the ‘really good’ category (not quite amazingly good)

  • International – International growth (ex-fx) came in at 24% y/y.
  • International EGM – EGM definitely led the way for international, coming in at 32% y/y growth
  • 1P GMV – 1P GMV grew 21%, an acceleration from Q2’s 18%.

The Merely ‘good’

  • Media continues to be a drag on Amazon’s growth rates, but did accelerate this Q, perhaps suggesting that there is some stabilization there. Media grew 7% overall and 9% domesticaly and 6% internationally, all accelerations from Q1/Q2 trends.
  • User growth – The only metric we track that decelerated this Q is user growth, which came in at 294m active buyers representing a 13% y/y growth rate down from Q2’s 14% growth rate.  Taken on its own, that may qualify as a ‘not good’ metric from the Q – even though it’s pretty close to the e-commerce growth rate and much more robust than eBay’s 5% growth rate.  What offsets the slight negative in a user growth slowdown is the growth in units/customer which were up 11% y/y.  Some of this was probably driven by Prime day, but even then, it is the best metric that illustrates that Amazon’s strategy around Prime is driving user loyalty and increased purchase frequency which translates to massive LTV.

Amazon 1P vs. 3P

This section illustrates the absolute scale of 3P vs. 1P (next chart) and the second chart shows the relative growth rates.

ebay_q3_1p_3p_stacked_chart

 

I like the above chart as you can literally ‘see’ Amazon setting up for Q4.  If you forecast Q4 by projecting out the current growth rates, Amazon has a shot at a combined 1P+3P $75b quarter.  We’ll be watching that closely.

In this growth rate chart below, you can see the acceleration of both the 1P business and 3P.  3P continued to grow 20% faster than 1P which shows Amazon’s investment in 3P continued to bear fruit.

amzn_q3_1p_v3p_growthrates

Amazon 3P GMV vs. eBay GMV – the Battle of the USA’s largest Marketplaces

In Holiday 2012, Amazon’s 3P marketplace was larger than eBay for the first time and that was repeated in Holiday 2013.  Then in Q2 2014 the lines crossed for the first time outside of Q4 and  since that point, Amazon has been dramatically pulling away from eBay as you can see. For example, in Q3 2015, Amazon’s 3P GMV is 12b larger than eBay by our estimates (Amazon is $31.6b compared to eBay at $19.6b).  If Amazon’s growth continues into Q4, we could see another milestone – Amazon’s 3P GMV would be 2X the size of the eBay marketplace for the first time.

amzn_q3_vs_eBay_gmv

Other interesting tidbits

  • Amazon stated that they have 123 FCs globally and 23 sortation centers.  Our count is a little bit higher as we are tracking operational FCs as well as those under construction.  Our annual post on Amazon’s logistic infrastructure is here if you missed it.
  • Amazon has tripled the number of Kiva robots from 10k a year ago to 30k now.
  • North America was at 59% and non-domestic 33% (the other % is AWS)
  • Amazon had some interesting stats for India: customers grew 230%, sales were up 4X, they are adding 40k SKUs/day, sellers were up 250% y/y and 90% leverage FBA.  Amazon has increased FC capacity in India 3X and it seemed like there will be more investment there.

Conclusions

At a quarterly GMV that is now north of $50b (counting 1P and 3P) globally, based on Q3 it looks like Amazon is set to gobble considerable share of the market.  Each 1% of growth that Amazon has above 15% is $500m of GMV that they are absorbing which is not only material for the top 100 online retailers, but also the top 100 omnichannel retailers.  Will Amazon be delivering coal to the competition this year?

Scot Wingo, Co-Founder and Executive Chairman of ChannelAdvisor wrote this post.

 

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