Amazon Strategies

Highlights of Amazon's Q4 blow out

Amazon reported Q4 results today and the e-commerce giant really made quite a showing.  By all means it was a blow-out quarter.  Amazon topped their guidance, Wall Street Consensus (WSC) and even surprised most on Wall St. with their Q1 guidance.

Here are the highlights from the quarter along with some color commentary.

• Revenue - $9.52b vs. WSC of $9b (a near $500m beat!)- Represents 42% y/y growth vs. WSC of 34.7% (a 7% beat!)
• Op income - $597 vs. WSC of $542 - a $55m beat (10%)

• EPS - $.85 vs. WSC of $.72 (a $.13 beat!)
• Media grew: 23%. US media grew: 20% , Intl media grew: 26% 
• EGM grew: 54% (Wow!)  EGM is now a $4.61 business.  US EGM grew: 54% (a material acceleration, benefits from Zappos addition) and Intl EGM grew: 56% 
• From a mix perspective the Media/EGM mix is now 49%/48% - the highest EGM in the history of Amazon the US/Intl mix is now 52% / 48% - also the highest Intl in the history of Amazon

One little Kindle tidbit - Amazon finally put a metric out there and said that there are now 'millions' of Kindle users.    That's a vague number, but analysts were pretty amazed that we could be looking at over 2m units out there.

Follow the share...

Well now we have the baseline of e-commerce growth which Comscore is reporting at 3% y/y for Q409.  We also have eBay coming in at 4% right at the baseline.  And now we have Amazon coming in at 42% (39% greater than ecommerce) and if you look at just EGM, it goes up to a whopping 54% or 50% greater than e-commerce (and 49% greater than eBay).  That's a truly amazing growth rate given the efforts of the big players to catch up.

How is Amazon doing it?

We have been getting a lot of questions from retailers, Wall St, and other general e-commerce participants wondering what Amazon's secret sauce is behind this incredible, sustained, and accelerating share gain.  Every year in Feb. after the Q4 results, we do a series comparing eBay and Amazon.  This year we'll go through that process again and in addition to pointing out some areas of improvement for eBay, we'll call out some of the major and minor things that Amazon is doing to delight customers and fuel growth.

SeekingAlpha Disclosure - I am long Amazon, Google and eBay is an investor in ChannelAdvisor where I am CEO.

Amazon's Q4 results - coming shortly.

Everyone in the world of e-commerce has been watching the eBay, Google, Y! and iPad/Apple news with interest, but to be honest, that is all a side show to the main event tonight - Amazon's Q4 earnings.

Here's what to watch for in a handy cheat sheet:

• Revenue - Consensus is $9.04 which is at the high end of the companies $8.125-$9.125b guidance
• Growth rates - the market is really interested in the North American and International growth rates.  Q3 was 24% for the US and some see it going as high as 29-35%.  Wall St is having the hardest time with this. I always look at this four ways:
• • US vs. International
  • Media vs. EGM
• Profit - guidance was $300-425m - it will be interesting to see if they blow this away.

Zappos being in the mix is going to make it a little bit confusing, but stay tuned for the news as it hits...

Seeking Alpha Disclosure- I am long Amazon and Google. eBay is an investor in ChanelAdvisor where I am CEO.

Survey says...Amazon continues to pull away from competition

Piper Jaffray's Internet analyst, Gene Munster, is out today with their quarterly survey of 300 online buyers.  The trends for Amazon are very impressive and over on eBay Strategies you'll see that eBay is going the opposite direction.

When asked about the site with the best shopping experience online, Amazon scored an amazing 65% with 'other site' at an all time low of 35%.  You can see the details in the table below and also the graph at the bottom.

In 2010, I'm going to go into some more detail of the literally hundreds of improvements Amazon has made over the last year to the buying experience.  Individually they are probably not too exciting, but when you add them together, they are clearly having an impact on consumer behavior and elevating Amazon in the consideration set as witnessed by this survey.

 SeekingAlpha Disclosure - I am long Google and Amazon.  eBay is an investor in ChannelAdvisor where I am CEO.

Amazon Product Reviews - An unlikely comedy platform

There's a growing trend, which I believe started with the Three Wolf Moon shirt, of people using Amazon as a platform for humorous product reviews.  Today a great one making the rounds is the "Laptop Steering Wheel Desk".  Here's a snippet of the funniest (of many) comment:

Wow is this thing great! I use it as a "mini-bar" when the friends and I go out to the bars. I can quickly fix multiple shots of tequila for myself and the friends as we drive from one bar to the next.

Have you seen any other comedic reviews?  If so post them in comments and we'll highlight them.

P.S. Check out the product images - almost better than the reviews here.

Last minute Amazon Strategies for Q4

I'm hosting a webinar tomorrow where we'll go over the Q3 results for various companies (eBay, Amazon, Google, etc.) as well as look at the various Q4 forecasts and reveal ChannelAdvisor's October data.

We'll wrap with 10 last-minute strategies that you can implement BEFORE BLACK FRIDAY / CYBERMONDAY and get that last little bit of juice out of your holiday sales.

For you Amazon Strategies readers, we're going to update you on some new Amazon stats and a couple of last-minute tweaks you can make on Amazon to amp up your holiday sales.

I hope you are able to make it, registration is open here:  and if you aren't able to make it, the recording will be available on the same page about 24hrs after the webinar in the 'Webinar Library' section.  The webinar is at 2pm EDT.

Is CheckoutByAmazon (CBA) getting more momentum? 2 IR100 retailers soft launched this week.

Earlier today in the coverage about Amazon's new PayPhrase system, I noted that J&R had added CBA.  I received a tip just now that buy.com seems to have soft-launched CBA as well.

Back in April, I noted that it looked like CBA was making some progress with SMBs, but not larger retailers.  Buy.com and J&R are significant because they are definitely larger internet retailer wins.

In fact, according to Internet Retailer magazine: (2008 results)

• Buy.com - #33 retailer with $660m in sales
• J&R - #103 with $151m in sales

These are their largest wins to date and I'm starting to feel that I was wrong that CBA wouldn't get a lot of traction with top retailers due to competitive concerns.  The jury is still out, but this is definitely an material development.  

I think what's most interesting is the Buy.com implementation - it speaks volumes about what Buy was thinking.

The buy.com CBA implementation

First on every buy.com item page, CBA has 'parity' with the Buy.com add-to-cart button - that's premium placement - you don't see any other options here (PayPal/Google/etc.)

 

If you click 'add to cart', you are presented with this cart summary where again CBA has premium placement (PayPal with three flavors are the other options), but also noticed that it looks like Buy.com and Google checkout have parted ways.   I did find it in one payment flow, but it was hard to get to (required a cart edit/add) and could be more of  a bug than a feature.

Buy.com and Amazon relations thawing out?

Not only is the placement interesting because it's a) above PayPal and b) bumped Google all together, but also it seems things maybe thawing between Buy and Amazon.  Buy used to be one of Amazon's largest 3P merchants and then left as the two started to compete more head on. 

Buy's partnership with CBA is an interesting development and could signal things are getting better between the two companies.

In fact I did some searches for top buy.com items on Amazon and it does look like they are back selling on Amazon:

• There is a store setup here.
• You can see they are listed for products like this video game:

You can tell a couple of interesting things from this listing:

• Buy.com is listed as a normal, not featured merchant
• They are marked as 'just launched' (no feedback to-date) so they must have just done this

The timing with CBA is interesting - you start to wonder if there was some combined deal at play there.

eBay, Buy, Amazon - a tangled web we weave

The connections and web between Buy.com, eBay and Amazon is now very interesting and in several areas:

• Payments - Buy accepts both PayPal and CBA
• 3P seller - Buy sells on eBay and Amazon (new!).  Buy.com is eBay's largest seller.
• Marketplace Competition - Buy.com operates a rapidly growing 3P of it's own
• Internet Retail competitors - Amazon and Buy.com are direct competitors as they overlap a great deal in BMV and electronics

Conclusion

Amazon CBA just added two wins in the payment battles and things seem to be thawing between Buy.com and Amazon.  Google checkout is on the outs.  Do you have a theory?  Are eBay and Amazon going to look at acquiring Buy.com? Sound off in comments.

SeekingAlpha Disclosure - I am long Amazon and Google.  eBay is an investor in ChannelAdvisor.  Buy.com is a ChannelAdvisor partner (our software supports their 3P marketplace)

What's your PayPhrase? Feisty Mango?

Today, Amazon announced an interesting development/feature with their payments offering (and of course it works on Amazon.com) called PayPhrase.  You can read the details here.

Essentially an Amazon customer creates a PayPhrase which is a combination of a PIN and a > 2 word phrase to bypass the Amazon sign-in process (usually your email and password).  For sites that take Amazon Payments (or Checkout By Amazon - CBA as we say in the biz), your PayPhrase/PIN can get you to an express checkout also without logging in.

One interesting side feature of PayPhrase is that you can create sub-PayPhrases that you dish out to your teens with budgets attached so you can give the give kids the ability to use your Amazon account without seeing your CC information AND you get to monitor/manage their spending.  Here's the blurb on that part of the program: (click to enlarge).

It's important to note that PayPal just weeks ago announced their Student Account program - more on that later.

Finally you can setup different PayPhrases for different situations. Let's say you want to pay with your Amex and have thing shipped to work - you could use PhraseX. You can create PhraseY that is a Visa to home, etc.  This seems pretty cumbersome to me personally - I can barely remember my password let alone 4+ payphrase/PIN combos and what each meant when I set it up.

Let's look at the workflow and then think about the effectiveness of this new program.

PayPhrase Workflow

There are two parts to the workflow: 1) setup and 2) consumer facing -amazon.com/network partner.  Note that in each of these screen shots the blacked-out areas are to protect personal information.  Large red arrows have been added for emphasis in some places.

In the setup phase, you enter your desired PayPhrase and Amazon tells you if it is taken or not.  It also makes recommendations.

Once you have chosen your PayPhrase, you enter a 4 digit PIN that is married to that PayPhrase and the combination of the two is how you will now buy on Amazon.  Also there are payment/ship to/bill to and other settings associated with each PayPhrase/PIN combo.

Once configured now when we are Amazon we are given two choices - the Standard buy box Add to cart and the new "Express Checkout with PayPhrase" button. that you see highlighted below (click to enlarge)

When you hit the "Express Checkout with PayPhrase" button, a pop-up is presented which asks you for your pin and also reminds you of some of your settings (ship to, the card this is associated with, etc.).  Once you enter your PIN, you are essentially done with your order.

Here we are on jr.com with a camera in the cart.  The Amazon Payment system knows I am PayPhrase enabled (cookie?) and then gives me two options that you can see below - Continue Checkout or "PayPhrase Express Checkout". From there the experience is as if you were on Amazon.

PayPhrase effectiveness

I signed up for PayPhrase and have used it a couple of times and have to be honest that I'll probably turn it off.  It doesn't seem to really replace that many steps and to me (login, bill to/ship to/payment choices) and feels like it actually is adding a step in there (phrase THEN PIN).  Also, my browser is well trained with my Amazon information and thus pre-fills that for me, even when I buy on other sites using Amazon Payments.  So PayPhrase makes me type more, AND adds a step.  I get that it's more secure than allowing my browser to store the pwd and more secure because the phrase isn't as guessable as email/pwd combos, but the increased security probably isn't worth the new 

All that being said the teen empowerment thing is kind of interesting and a clever way for Amazon to tackle the sub-account challenge.  For teens, I think the Paypal option is better at this stage of the game (the debit card is a huge win), but it's interesting to see Amazon come out with a counter offering so fast - it points out to me they are pretty darn serious about this Payments war and aren't going to get left in the dust (unlike some of the other players that had some momentum and then took their foot off the pedal - say a search company we all know and love.)

Conclusion

Overall PayPhrase is a feature we'll keep an eye on, and heck maybe I'm missing something (if you love PayPhrase, let me know why in comments), but for now it feels like it adds complexity vs. eliminating it.  One macro positive not to be lost in this small feature discussion is that Amazon Payments seems to have added J+R which is one of the top electronics retailers (full disclosure they are a ChannelAdvisor customer).  If you look at the implementation the Amazon option sits above PayPal and then Google Checkout is now at the bottom of the payments ladder there.

SeekingAlpha Disclosure - I am long Amazon and Google.  eBay is an investor in ChannelAdvisor where I am CEO.  J+R is a ChannelAdvisor customer.

Amazon crushes Q3 and yes, there will be a Holiday '09!

Today Amazon announced Q3 results that exceeded expectations and then they put out Q4 guidance that was well above analyst consensus.  Shares were up over 12% in after-hours trade.  There were some really interesting tidbits in the results and the conference call that I wanted to highlight and also now that we have eBay/Amazon out we can do a comparison to see how the two giants of e-commerce compared in Q3.

Amazon metrics of note

• Amazon's sales were up 28% y/y, some of the interior components of that are VERY interesting:
• • North America was up 23%
  • ROW was up 33%
  • Media was up 17% and 
  • EGM (electronics and general merchandise) were up 44%
  • The fastest growing segment: EGM intl grew an amazing 54% y/y (vs 36% in North America)
• Active (buyers) customers were over 98m - up 17% y/y
• Seller units (third-party units) came in at 31% of total units
• Seller accounts hit 1.8m up 24%
• Fulfillment by Amazon (FBA) was up 3X y/y

Drilling in on Amazon EGM

This slide was part of the presentation on the conference call:

 

As of Q309, Amazon is 54% media and 43% EGM.  EGM is growing at 44% vs. media's 17% and what you see is Amazon rapidly transitioning from a media store to a very rapidly 'everything else store'.  Once the Zappos deal closes in Q4, this is sure to accelerate both from a y/y perspective and a mix perspective.

There is a lot going on with Amazon - developer services, Kindle, FBA, seller business, book wars with Wal-mart, etc.  To me all that is a side show to the EGM story.  As of Q3, that story tells us that Amazon is taking share at a very rapid pace.  If e-commerce is flat to 5% in 2009 and Amazon is growing at 24% all-in, but EGM is growing at a global rate of 44%, that is a massive share gain.

Amazon vs. eBay

While Q3 marked the first positive GMV growth Q for eBay in over a year at 7% (ex-autos), compared to amazon's 28% growth mark, Amazon is growing at a rate of 21% faster.  If you look at Amazon's EGM business clocking along at 44%, you have a 37% growth delta there.

In February, when analyzing the eBay/Amazon Q408 results, I had a chart (reproduced here) that to k the delta of the eBay/amazon growth rates and straight lined them to find when the Amazon 3P business is as big as eBay's marketplace business:

Here we are about a year later and what I got wrong is that eBay's GMV is flat/slightly up, BUT amazingly Amazon has actually accelerated the growth rate difference so the lines are definitely closing in on each other at the same, if not faster pace than I posited a year ago.  What does this mean for eBay?  eBay needs to close that growth gap as rapidly as possible or face being unseated as the leading marketplace by Q312, or sooner given the Amazon acceleration.

Conclusion

Based on Q3's performance and Q4's outlook, Amazon is an unstoppable juggernaut set to own a significant chunk of the e-commerce World.  Every quarter this growth goes unabated the competition (eBay, Walmart.com, and even Google IMHO, etc.) falls further and further behind the competitive moats that Amazon is building with innovations like Prime, 3P, FBA, etc.

For retailers reading, this all begs the question: Amazon - Friend or Foe and what should your Amazon strategy be.  Something we've been talking to a lot of retailers about and have some future blog posts in the works.  Until then, let us know what you think in comments.

SeekingAlpha Disclosure - I am long Amazon and Google.  eBay is an investor in ChannelAdvisor where I am CEO.

More on Sears Marketplace

Last month's post about Sears and their upcoming marketplace offering was a very popular one here at Amazon Strategies. Over at sister blog, CSE Strategies, a new post outlines more about the CPC side of the offering and specifically the testing of an integration with Shop.com.

Amazon / Walmart smackdown! ...and how to get a hard cover for $9

Starting yesterday (10/15/09) there was some interesting back and forth between Wal-mart and Amazon that I wanted to give Amazon Strategies readers a blow by blow of:

• First blow: (10/14 - in the am)  -  Wal-mart announces they will offer 10 pre-release hard covers for $10.  Walmart.com CEO Raul Vazquez is quoted as saying: "If there's going to be a 'Wal-Mart of the Web', it is going to be Walmart.com. Our goal is to be the biggest and most visited retail Web site." in this WSJ piece.
• Second blow: (10/14 pm) - Amazon counters Wal-mart with $10 on each books and of course free shipping for Prime/$25 super saver.
• Third blow: (10/15 in the am) - Wal-mart lowers prices again to $9
• Fourth blow: (10/15 hours later) - Amazon matches the $9 price target.

So far that's where we are, I'll keep you updated if anything else happens in this particular battle of the larger war between these behemoths. 

How much ground does walmart.com need to make up?

Wal-mart doesn't release figures that tell how big walmart.com, and of course Amazon reveals their revenues as they are  public company and online-only.  So to get an apples to apples comparison we have to look at a couple of sources.

First, there's the Internet Retailer's top 500 list (08 results).  They have Amazon as the top retailer with $20b in sales and Walmart.com as number 13 with $1.7b in sales.  Thus this datapoint suggests that Amazon has a 10X lead on Walmart.com.

Second, there are traffic sources like comscore and compete.com that can give us a view of the relative traffic going to each site.  If you assume similar metrics like ASP, conversion rate (which Amazon admittedly is probably a good bit higher on, but hold those constant for now).  Below is a compete.com traffic analysis for both: (click to expand)

Here you can see based on unique visitors alone, Amazon has a 2X lead over walmart.com. If we add in Amazon's selection advantage and other areas they are currently ahead of the pack on, that 2X traffic lead could be a 4X sales lead.  10X is a little hard to believe.

While that feels like an insurmountable lead, this is Wal-mart we're talking about.  They are a $400b+ retailer with buying power that's easily 20X that of anyone else.  As a software guy, I'm always reminded of case studies in history when everyone would laugh at Microsoft whenever they were behind (spreadsheets, OS, browser, video game consoles) and then decide to throw their weight into something.  Usually they were able to close the gap very quickly and quiet the pundits.  In the world of retail, scale matters and nobody has the scale of Wal-mart, so don't count them out of the race just yet. 

While we're talking books here, I take this as a signal that Wal-mart has decided it's time to cut deeply into that 4x lead and they are clearly putting their money where there mouth is.

$8 anyone? Anyone? going, going...watching the war in action  - what do you think?

I'm looking forward to the new Stephen King book so thought that would be a good one to watch, you can see the prices for each here - do you think that Amazon/Walmart.com will go lower?  

• Amazon's pre-order page 
• Walmart.com's pre-order page.

Sound off on your thoughts on this interesting first fisticuffs between the two retail giants in comments.

SeekingAlpha Disclosure - I am long Google and Amazon.  eBay is a shareholder in ChannelAdvisor where I am CEO.