Jeff Bezos Confirms Amazon's Growth Is Slowing (bloomberg.com)

An anonymous reader quotes a report from Bloomberg: Jeff Bezos's latest shareholder letter, released on Thursday, opens with the first-ever disclosure of Amazon's total share of sales from the merchants that use the company's e-commerce sites as a sales conduit. The company has long said that those merchants sell about half of the individual items sold on Amazon, but it has never given their contribution to the total value of physical merchandise sold on the site. That number -- a common e-commerce metric known as gross merchandise volume -- has always been a secret at Amazon. Not anymore. Based on Bezos's letter and Amazon's previous disclosures, it's possible to roughly calculate Amazon's gross merchandise volume dating back to 2015. It's a remarkable number -- nearly $300 billion worth of goods sold on Amazon last year. Compare that with the $95 billion in total merchandise and ticket sales reported by eBay, the distant No. 2 player in U.S. e-commerce. (Walmart sells more than $500 billion in merchandise each year, and China's Alibaba sells more than $700 billion in goods.)

But there's a dark cloud in Amazon's figure. The growth of Amazon's total merchandise sales slowed considerably last year, according to Bloomberg Opinion calculations based on Bezos's disclosures. This figure is not the first sign than Amazon's retail juggernaut may have slipped a bit. In 2018, Amazon's nearly $300 billion in GMV was about a 19 percent jump from the prior year. That was notably slower than the rates of increase of 24 percent and 27 percent, respectively, in 2017 and 2016. It's hard to explain the slowdown in Amazon's merchandise sales growth. If anything, it seems as if Amazon is grabbing a larger share of e-commerce sales and that the internet is stealing more sales from physical stores, which have accounted for something like 90 percent of all U.S. retail sales. And yet Amazon's retail sales growth -- although still impressive -- is slowing noticeably.

Comments

Re:Expected return on investment

[Nidi62]

When people say "Wall Street" they are usually talking vague generalizations that rarely hold up to strong scrutiny. No different here. Wall Street isn't any sort of coherent entity. It's like saying "hipsters" and it doesn't really describe things in a way that is very useful except as a political punching bag. What really is happening is that investors expect a return on their investment for a given amount of risk.

"Investors" don't drive the market anymore. Investors are people who have been forced into relying on 401Ks for retirement since the eradication of pensions and gutting of Social Security surpluses. Most of the stock market is driven by the big investment houses who use computers, algorithms, and physical closeness to the trading floor to make hundreds our thousands of trades in the time it take an ordinary person to make 1 trade, leeching out money while providing no real benefit ("liquidity" is not a benefit if you are actually investing, only if you regularly have a large volume of turnover).

Stock prices in secondary markets are based on expectations of future returns. When the data reveals those expectations were incorrect then the stock price adjusts accordingly. For the most part this happens fairly rationally most of the time, despite all the sturm and drang you hear. If you expect a certain ROI for a given company then there is a price level for that. If the ROI turns out to be less then the price should be less too. It only becomes a problem when the company management starts thinking their job is the stock price instead of the products the company makes.

Correct, but my argument is that those expectations are never based on reality. The underlying assumption of growth is flawed. Just like a living organism, there is a point for every company where growth is no longer healthy for the company. If they keep growing they become bloated, get too inefficient, start buying up competitors or getting away from their core business, etc. Then, come a recession, market shift, or a new innovative competitor, they cannot react and start losing money, have to start spinning off or sell off products or divisions, massive layoffs, etc. If a company instead stabilizes growth once it hits a critical mass it can better weather recessions, still has the flexibilty to pivot with market shifts (if they can correctly identify the shift in time), and can focus on what makes it money and got it there in the first place, all while still generating healthy profits.

Re:I would assert it is retail as a whole

[Nidi62]

There aren't any signs of a recession.

Housing is becoming more and more unaffordable. More and more people have no job security (relying on "gig" jobs). The government is a partisan mess and is trying to put people who have no clue what they are doing (or even worse, know exactly what they are doing and why they are doing it) in charge of things that have a direct, negative impact on the country and economy. Healthcare and education is becoming more and more unaffordable, driving higher and higher debt. Fewer people are entering the middle class and at a later age than in previous generations. Plus recessions tend to happen every 5-10 years, so we are coming due anyway.