Amazon's Q3 2019 earnings revealed a strategic shift: while 1-day Prime accelerated revenue growth in the US and internationally, it significantly impacted profitability due to a 46% surge in shipping costs. Operators should note Amazon's focus on its rapidly growing ad business and its expansion into new verticals like healthcare and private label spirits, alongside changes in fulfillment policies indicating a drive towards efficiency and broader ecosystem control. These insights highlight Amazon's evolving monetization strategies beyond core retail.
Key takeaways
One-day Prime shipping, while boosting revenue and unit growth, comes at a substantial cost, severely impacting profit margins. Ecommerce businesses should carefully evaluate the fulfillment cost implications of expedited shipping promises.
Amazon is increasingly prioritizing its advertising business as a significant and high-growth revenue stream (45% YOY growth). Brands selling on Amazon should invest in sophisticated Amazon Ads strategies, as this channel is becoming crucial for visibility and sales.
Amazon is streamlining its product catalog and fulfillment policies (e.g., cutting CRaP items, offering free shipping on $1 items). This signals a focus on profitable SKUs and customer convenience, urging sellers to align with Amazon's evolving operational efficiencies.
Amazon's entry into new markets like digital health and premium spirits demonstrates its ongoing diversification strategy. Ecommerce businesses should observe these moves to identify potential new opportunities or competitive shifts in their own sectors.
Amazon's Q4 guidance being below Wall Street expectations highlights the challenges even dominant players face in balancing growth, profitability, and investor sentiment. Operators should temper growth expectations with realistic cost and margin analyses.
EP194 - Amazon Q3 2019Earnings and News Amazon Q3 Earnings Revenue accelerated in the US and intl due to 1-day prime juicing demand US - 24% (Q1 - 17%, Q2 - 20%, Q3 - 24%) Intl 21% (Q1 - 16%, Q2 - 17%, Q3 - 21%) Unit growth (items sold) accelerated to 22% - 4% acceleration (18%) - fastest in 2yrs. This came at a cost - profits were down 26% y/y and TODO wall st estimates because shipping costs grew 46% Specifically GAAP operating income of $3.16b came in 2% below street consensus of $3.22b EPS was $4.31 vs street $4.56. This caused the stock to soften by 7-9% in after-hours trading and articles are already out that bezos no longer richest man. Amazon's Q4 midpoint revenue was $4b below Wall St. estimates and they projected lower margins than wall st expected. Specifically, guidance is $80b-$86.5b with midpoint of $83.25b - implies 15% growth, 5% below Wall St. Amazon's Ads biz which grew 45% y/y and represented $3.6B in the Quarter. Brian T. Olsavsky - CFO: "So other revenue, which is principally advertising grew 45% this quarter, up from 37% last quarter. And the biggest thing in there is advertising and advertising grew at a rate higher than that 45%." Amazon News Amazon Ad Conference - 400 people "AdCon 2019" 10/2 & 3 Cutting back on apparel Brands Free shipping on $1 items, no more CRaP, No more Add-On Amazon Counter Expansion Amazon acquires digital health start-up Health Navigator Amazon Launches Premium Gin "Tovess" <a href="https://rg.tl/2W5UQVP" target="_blank" rel=
What does this episode say about amazon & marketplaces?
One-day Prime shipping, while boosting revenue and unit growth, comes at a substantial cost, severely impacting profit margins. Ecommerce businesses should carefully evaluate the fulfillment cost implications of expedited shipping promises.
What does this episode say about supply chain & operations?
Amazon is increasingly prioritizing its advertising business as a significant and high-growth revenue stream (45% YOY growth). Brands selling on Amazon should invest in sophisticated Amazon Ads strategies, as this channel is becoming crucial for visibility and sales.
What does this episode say about finance & fundraising?
Amazon is streamlining its product catalog and fulfillment policies (e.g., cutting CRaP items, offering free shipping on $1 items). This signals a focus on profitable SKUs and customer convenience, urging sellers to align with Amazon's evolving operational efficiencies.
What does this episode say about brand & content?
Amazon's entry into new markets like digital health and premium spirits demonstrates its ongoing diversification strategy. Ecommerce businesses should observe these moves to identify potential new opportunities or competitive shifts in their own sectors.
What does this episode say about amazon & marketplaces?
Amazon's Q4 guidance being below Wall Street expectations highlights the challenges even dominant players face in balancing growth, profitability, and investor sentiment. Operators should temper growth expectations with realistic cost and margin analyses.
