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April 26, 2013

Amazon Q1 2013 Results - Seller Highlights - Third Party Marketplace Deep Dive

Yesterday, Thursday April 25, after the close, Amazon announced their Q1 2013 results.

Every Q we go over the highlights from the Q that we believe online retailers/sellers should takeaway from Amazon's results.  This quarter had a lot of interesting tidbits about 3P marketplaces, so let's dig in.

Amazon Q1 2013 Key Performance Indicator (for sellers) Dashboard

 Each Q we look at the ky metrics sellers and they are collected in this handy dashboard that has columns for the results, Wall St's consensus estimates and Amazon's guidance.  This Q we have added two new Key Performance Indicators: 

Amazon_q1_13_dashboard_complete


Highlights from the Q:

  • Revenue and profits - As it has been for the last year, Amazon's top-line revenue rate has been slowing (due to the rise of 3P).
  • Growth rates  - In our regular feature, the quarterly Amazon growth rate cube in the next section we detail these.
  • Active users - Amazon grew active users to 209m - a 21% y/y increase (Q4 was 200m).
  • Paid unit growth - Paid units grew 30% which was a material step down from last year's Q1 49% and even Q4's 32% - this single number has wall-st pretty spooked.  It's important to put this 30% y/y unit growth in perspective and remind everyone that this is still 2X the rate of e-commerce.
  • % paid items from 3P - Amazon reported that 40% of paid items were from 3P sellers.  

The conference call had some interesting datapoints:

  • 58% of revenue is NA and 42% is international
  • 31% of sales were from Media and 64% were from EGM
  • On the call, I found it interesting that the CFO said (paraphasing) - If you back out digital units, 3P would be an additional 3% of sales (43% vs. 40% is what I believe he was saying).

 

Q1 2013 Amazon growth rate cube

Note: EGM stands for Electronics and General Merchandise - Amazon-speak for anything that isn't a (e)book, movie, dvd, cd, mp3, videogame. Also, the industry 'watermark' we use is ComScore who forecasts e-commerce growth (ex travel and grocery) at 14% y/y.

In the following cube we summarize all of the different Y/Y growth rates that Amazon reports (ex-FX).  We find this helpful as you can quickly see where the growth is (Intl EGM) and where things are slowing (intl media).

Amazon_q1_13_cube

Looking at the categories of media/egm - Amazon's media business is now growing slower than e-commece (10% vs. 14%), and Amazon's EGM business is growing 2X. From a geographical standpoint, North America really started growing substantially faster than International.

If you think of another dimension to this cube which would overlay the 1P and 3P growth rates, you can see that the fastest growing segment at Amazon would be: 3P international 3P followed by North America 3P EGM.  Amazon doesn't disclose that detailed segmentation, but given that 3P units grew over 35%, each of these segments are growing at least that fast and probably 2-5%  higher - giving the non-media Amazon 3P business a growth rate 3X that of e-commerce (14% as per ComScore).

 

How big was 3P in Q1 2013?

Amazon provides a couple of datapoints that we use to triangulate the 3P GMV.  For our analysis, we choose to use the % of items that are 3P as the 'anchor' and use some educated (and conservative) guesses around take rate, and 1P/3P average prices.  

Here's our analysis for Q1 2013

Amazon_q1_marketplace_gmv

For Q1 2013, our analysis indicates:

  • $14.5b in 1P GMV
  • $16.1b in 3P GMV
  • Total GMV: $30.6b

Here's what that looks like historically:

Amazon_q1_13_1p_3p

In Q4 2012, we noted that for the first time Amazon's 3P GMV exceeded eBay's GMV.  Our thesis was that this was a seasonal factor that was not a full-year trend.  The following chart illustrates eBay's GMV vs. Amazon's 3P GMV to compare the two marketplaces:

Amazon_q1_13_ebay_v_amazon

 

Conclusion and looking towards Q2

Amazon's Q1 results were best described as mixed.  The marketplace remains very healthy and domestically the business did very well.  Unfortunately, international growth rates (especially media) were light as was the overall unit growth rate coming in at 30%.

Amazon gave guidance to Wall St. that implies a before FX growth rate of 16-29% (22.5% at the midpoint).  

If you're coming to Catalyst this year, we look forward to hearing what Sebastian Gunningham, VP of Services, has to say about many of these broad topics.

 

Written by Scot Wingo, CEO, ChannelAdvisor.  eBay is an investor in ChannelAdvisor.

 

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