Last week, October 25, 2012, Amazon released their Q3 2012 results. The reaction from Wall St. was a repeat of what we’ve seen last Q – concerns about the growth rate, and simultaneous excitement about the improving margins and CSOI. CSOI means Consolidated Segment Operating Income – essentially you look at each business (segment) and measure that profitability which helps take out some areas of investment.
In our ‘how big is the Amazon marketplace analysis (here)’ we made the point that as more GMV flows through the 3P part of the business, it will increase margins, but because it’s only reported at a 10% rate, it will appear that Amazon’s revenue growth is slowing, which it is, but it’s GMV is growing faster than you would think behind the scenes. See the ‘how big was 3P GMV in Q3 section of this report to see some specifics.
Amazon results tracker
Here is our summary of the metrics that ‘matter’ to sellers:
As you can see revenue was a bit light compared to expectations. The percentage of units that are 3P hit a new high-point at 41% – see the implications in the ‘how big was 3P GMV in Q3?
Other Amazon highlights of interest to sellers
Here are some other highlights from the Q->
- Amazon plans to open a whopping 19 new fulfilment centres (FCs) in time for the holidays
- Sales are now 57% domestic and 43% non-domestic
- Overall units grew at 39%
- 1P units grew 33%
- 3P units grew 50%
- 3P-FBA units grew a whopping 78% – this shows the popularity of the FBA program with sellers, fueled by Prime buyers gobbling up products at a strong pace, justifying the FBA investment.
- Active users came in very strong at 188m – up 24% y/y
- Amazon said they plan on spending $900-$1b in capex in Q4 for FCs and DCs – that’s a lot of servers and warehouses!
- Employees grew 59% – Amazon added 30,000 employees going from 51k to 81k !
Here’s how each segment grew on a year over year basis in our handy segment growth cube:
Here you can see that EGM growth continues to be very robust. In fact, while they don’t discluse it I believe if you could look at 3P EGM growth it would be north of 65%.
How big was 3P GMV in Q3?
If we use the same methodology as we did in our previous ‘how big is amazon’s 3P’ post:
By our estimates, Amazon’s 3P GMV for the Q was $14.3b on top of the $12.3b in 1P for a total of $26.6b GMV in the Q – if you looked at that at a run rate, it would mean that Amazon is close to a $100b in overall GMV impact, with about $60b of it from 3P. With eBay at $65b as a marketplace, it looks like Amazon is closing in on them as the largest marketplace.
To look at how rapidly this is happening, we went back and analyzed Amazon’s 1P/3P GMV from Q1 2011 through estimates for Q4 to get this table:
Graphically, here’s what that looks like – you can realy see the impressive scale that Amazon’s 3P is achieving beneath the surface of what looks like slowing growth:
While Wall St. was a bit ‘blah’ on the Q, it was a big win for sellers. Amazon grew active users, 3P GMV is soaring and 3P growth rate is 3-4X that of e-commerce. Sellers may want to consider FBA which is the fastest growing segment – growing a whopping 78% y/y – 5-6 times e-commerce!
We’ll be reporting on a lot of holiday trends we see over on sister site eBay Strategies, so stay tuned.
This blog post was written by Scot Wingo, CEO, ChannelAdvisor. I am long Amazon and Google. eBay is an investor in ChannelAdvisor.