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October 22, 2009

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:

Amzn_egm 

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:

Growth_rate

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.

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