Client Letters: Amazon Q2 Earnings
Amazon released Q2 earnings this evening. A couple of takeaways:
Product sales have recovered slightly - Product sales were +4% to last year’s quarter. This is an increase from +1% last quarter.
Services continue to be the bright spot - Top growing categories were Third-party Seller Services and Advertising. Two categories Amazon will continue to use to grow the top line with weakness in product sales. Online sales account for <40% of the overall revenue.
Inventory was in-line - Amazon controlled inventory this quarter and is relatively lite versus prior quarter growth.
Guidance was stronger than expected - Q2 2023 grew 11% this quarter and is projecting to grow 9%-13% next quarter. This guidance implies no further acceleration in product sales from the +4% posted this quarter.
Bottom line for Vendor Central Brands - Amazon has clearly “right sized” their inventories and are running lite compared to previous years. We believe this to be the “new norm” for Amazon seeking to never own more than 1-3 months of supply.
Bottom line for Seller Central Brands - Anticipate further cost increases in FBA fees or further segmentation in fees to obfuscate the increases. This has become the most effective way of growing revenues and profit as AWS and Advertising slow.
Other interesting points to note on the slowing Gross Merchandise Volume (GMV) themes we are seeing elsewhere:
Shopify GMV was up 17% for the quarter.
eBay GMV was down 2% for the quarter.
Thank you for the read,
Ryan Craver
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