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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.
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.
Percentage growth will tend to slow as a company like this gets very large. I don't see the detailed numbers on the chart in the article, but it seems like total sales is still growing but a decent amount.
Of course growth slows. How could it not? They grew fast and they are giant.
What, do they need to take over 150% of ecommerce or something? Nothing can grow forever.
Part of it is Amazon's forcing customers into Amazon Prime. I order items off of Amazon maybe 2 or 3 times a year. I do not order items off of Amazon often enough to justify paying a monthly fee for Prime. Yet the last time I ordered something from Amazon they automatically opened a Prime account for me. I do not want Prime, it is not worth it for me. I do not care if streaming TV or music is bundled with it...I do not want it; do not force it upon me. I had to cancel, which is a pain because they do not make it easy to find. Then once I found where I could cancel they asked me to confirm 2 or 3 times before they processed the cancellation request. Evidently they think their customers are stupid!!! Because of this I will not buy from them again.
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If it isn't obvious, we are starting to see signs of a recession coming our way. Amazon is a retailer, and just like any other, they are subject to how well-off people are doing financially. Come crappy times, retail sales are going to suffer.
This isn't to say Amazon will go the way of Sears. AWS will ensure that they are not going anywhere, because businesses always outsource/offshore when a recession hits, even if it costs them more, so more businesses will be doing lift-and-shifts to the cloud in order to save on CapEx costs, even though their monthly burn rate will spike.
Of course, if Amazon really starts hurting, they can always raise rates on AWS services, and with so many companies shackled to the cloud with no way to leave (good luck getting away from Lambda), they will pony up the higher rates, and pray the deal doesn't get altered further.
The news I found more intersting from this letter was this part:
"Today I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage. Do it! "
Of course he's going to call for his competitors to do the same. AMZN just raised their expenses, giving competitors an advantage. By calling for them to do the same, he calls for them to raise their own expenses.... it brings the playing field back to where it was, removing any advantage that may have come from the difference. Not so altruistic as Bezos would like it to sound!
Because Wall Street needs (and assumes) companies to have constant and continuous growth to keep the financial markets afloat.
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. If an investor is seeking a 10% return on their investment in a company and that company gets so big (or does so badly) that a 10% ROI isn't realistic anymore, then the investor will take their money to some other company growing faster. You do it, I do it, and so does every other investor. It's not some vague Other called Wall Street. It's perfectly rational expectations by every sane investor on the planet. I'm not arguing that there isn't a fair bit of fraudulent nonsense surrounding all this (there is) but it's not entirely irrational.
All these valuations assume companies will keep growing at 10, 15, 20% and, if they miss a target by even 1% (oh no, a company only made $990 million profit instead of $1 billion, the horror!) they all scream the company is failing and the stock price tanks.
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.
Growth leveling off? If Amazon Retail was a Google product, they would discontinue it and boot off all the users 12 months from now.
I do love Amazon (Canada) and order at least a few things every week. They've been the most reliable online vendor for me.
But, I will say .. in the past couple years they have been pulling some sketchy things, at least up here - shipping "prime" items with their own in-house shipper (that's usually late, with no real tracking), shipping straight from China with no real return option (the return label is a postcard, postage required, back to China, making return of items under $50 not economically feasible). Been getting quite a number of knockoffs when I ordered the real thing, lately, too.
Their review system is under attack from clickfarms, and people know it. To be honest, I feel like this might be their #1 existential threat; if people lose trust in Amazon reviews, there goes one of the major reasons for shopping there in the first place.
For the mostpart I'm still happy, but they do seem to be sacrificing some amount of quality in exchange for short-term profit, at least up here. That always leads to a decline in revenue (or revenue growth) in the long-term.
A government is a body of people notably ungoverned - AC
Consider that the cost of prime has increased, delivery delays have increased, time before actual shipping has increased, the number of items subject to prime shipping has decreased, some "prime" shipping is now not two-day, their search turns up more and more items that are not reasonable results for the search terms you enter, which significantly inconveniences shoppers. They now spam searches with paid insertions. You can't specify things like "heaters -electric" to get a listing of heaters but not electric heaters (nor does searching for "gas heaters" eliminate listings of electric heaters), which increases non-win search results... their search really is pretty terrible; that, at least, is an area they could do something about, but generally, they're reducing functionality, not improving it, so I wouldn't hold my breath for a quality search engine.
One of the problems with stock-price-driven "we must grow so our stock can be traded up" as opposed to dividend-producing-driven "we must continue to make a profit so our stockholders earn from holding and buying more" is that there is little incentive to avoid trimming anything that can save costs in order to fluff the bottom line.
Eventually this kind of thing reaches a tipping point. EBay, in fact, is a good example. Auction posting difficulty is way, way up, the original reputation system has been nerfed beyond all recognition (and into near-zero functionality), auction and related auction feedback records have been lost/tossed, payment systems less and less dependable and timely... this kind of attempt-to-profit degradation will always eventually give the golden goose a nasty case of bird flu.
I think that's exactly what we're seeing with Amazon. They're trimming back the very things that made them attractive to their customer base, while not addressing functional shortcomings like the search tools, all in a quest to report "earnings growth" in order to fluff their stock value. Eventually, those policies will reveal themselves as a cancer that is eating the company from the inside. You can only cut costs and features and service so long before you aren't at all what you used to be.
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