Amazon Data 2020/21 Release date: March 3rd, 2021 (50 pages) PDF/Powerpoint format. Price: GBP1,184.00 PDF brochure Buy

Abstract

• Jeff Bezos’ change in job title has obscured Amazon’s phenomenal success throughout the pandemic. The business has added more than 100bn on the revenue reported in 2020, much of this has been due to shoppers flocking to the site during the various lockdowns. That said, the $386bn in net sales does not capture the full impact of Amazon’s crisis winnings. Due to the way Amazon reports its results, the marketplace performance of its third party sellers is somewhat concealed, but the magnitude can be gleaned from the accounts.

• We believe that Amazon’s total sales have now reached half a trillion in GMV (Gross Merchandise Volume) or the aggregated end prices consumers pay to Amazon or its third party (3P) sellers. Third party marketplace sellers now account for 62% of GMV and, if Amazon could, it would shift a lot more transactions into this business unit, as it is more profitable than 1P (or when Amazon is the seller of record). In 2020 sellers fees paid to Amazon accounted for slightly more than 26% of their sales on average - which compared with the often minuscule margins Amazon achieves on 1P - is massive. Of course Amazon is offering FBA (storage, transport, payment processing etc) in return for this contribution.

• Sales at the US marketplace almost doubled over the course of two years from $80bn in 2018 to $154bn in 2020. Granted there was and remains a huge pandemic impact driving this performance, but still purely viewed from a business perspective this growth is outstanding, especially on the massive billion Dollar sums involved. Amazon’s other marketplaces showed similar dynamics, if not quite as stellar as the US performance.

• Over the last couple of years third party sales have outpaced first party sales by around 10 percentage points, year on year notwithstanding the dynamic performance of Amazon 1P. There is currently little to suggest that 3P performance will slow down significantly going forward. Another major success factor driving Amazon ahead is on the other side of its two sided marketplace (on the one the marketplace sellers, on the other the shoppers). Amazon manages to attract shoppers due to its vast selection, free and fast delivery options and price competitiveness, in itself achieved through marketplace sellers competing against each other on the site.

• Looking ahead, it seems obvious that marketplaces will take over more and more, and Amazon offers full FBA integration, AWS and also the advertising infrastructure so is set to dominate for the foreseeable future. The boom on Amazon sites resulted in 14bn units sold and shipped across both 1P and 3P, much of it transported through FBA. More volume means better capacity utilisation and synergy effects of Amazon logistic footprint and network. As a result international has become profitable for the first time despite the heavy investment into new marketplaces and regions throughout the year, a couple of years ahead of schedule.

• While growth will probably slow down, once lockdowns end or become less frequent, it should not take too long now for Amazon to leapfrog Walmart, especially in GMV. This could come much sooner than many expect, and even in net sales / revenue terms the gap is closing rapidly. Alibaba with its $1 trillion in GMV though will remain out of reach for now.

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