EP172 - Amazon Shareholder Letter and Q1 Results
Amazon Annual Shareholder Letter
Jeff Bezos released the Amazon 2018 Annual Shareholder Letter, which this year was focused the the phenomenal success and growth of the Amazon Marketplace. In the process, Amazon disclosed the breakdown of it's 1P and 3P revenue from 1999 - 2018, as well as giving us the "physical gross merchandise volume (physical GMV)" for the first time. In 2018 1p = $117B, and 3P = $160B. For a total GMV of $277B (which means US GMV is approx $161B). Prior to this disclosure we've all had to guess as the the actual size of Amazon's retail business. This makes Amazon the second largest retailer in the US, behind Walmarts $318B (excluding Sam's Club), and ahead of Krogers $116B.
The letter also talks about the importance of companies being allowed to experiment (wondering as Jeff calls it), even if many of those experiments ultimately fail. No customer ever asked for AWS, but a few success like AWS can fun many failures. Even failures can be valuable, such as the Fire phone, which ultimately led to the Amazon Alexa. Jeff argues, that as the scale of a company grows, so much the scope of these failures.
The letter takes a victory lap for some of the improvements in employee pay and benefits that Amazon has put in place and a challenge to other retailers. A challenge that other retailers like Walmart did not particular appreciate.
As always, the letter closes with a reminder that the 1997 shareholder letter still accurately reflects the guiding principals of the company.
It's very likely that this years letter, is in response to an increasing call from thought leaders and politicians to regulate and even break up large tech companies like Amazon.
Revenue came in at $59.7B, 19% y/y growth ex-F) which was in-line with Wall Street consensus. Overall operating margin was 7.4% compared to a 5.2% consensus, so that was a clear beat. There is some concern about unit sales decelerating (a risk as Amazon saturates the market, and Prime membership plateau).
Surprisingly, ad sales growth also plateaued but that was explained as mostly an accounting change.
The big news from the Q1 earnings was that Amazon would be investing over $800M to move from free 2-day shipping for Prime members, to free 1-day shipping for Prime members. With most retailers already struggling to match Amazon's 2-day delivery promise, this is a meaningful moving of the goalposts by Amazon.
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Episode 172 of the Jason & Scot show was recorded on Monday, April 29th, 2019.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.