2021 Amazon earnings analysis: Steady growth

2022-05-07 0 By

Amazon announced its financial results for the fourth quarter ended December 31, 2021 in early February 2022.Amazon reported total revenue of $137.4 billion in the quarter, up 9% from a year earlier, with the performance of its retail-related segments as follows:Self-operated business grew the slowest (YOY+1%), third-party seller services (YOY+12%) and advertising business performed well (YOY+31%), service revenue continued to increase, and Amazon gradually transformed from a retail company into a retail-based, information and technology-centered comprehensive high-tech company.Although the growth rate of third-party seller business declines, considering the high base from Q3 2020 to Q1 2021 (abnormal stimulated by the epidemic), the compound growth rate of third-party seller business is still more than 30% from the two-year compound growth rate, which belongs to a steady growth state.The past two years have been an investment cycle for Amazon, which has been increasing its investment in capacity and employee recruitment (140,000 new employees in Q4 2021 and 270,000 in the second half of 2021), of which about 40% is invested in equipment procurement (most of which is used for AWS business) and 30% in the construction of warehouse centers.25% for transportation and distribution;The company will also increase the investment in equipment, but the investment in warehousing will be slightly slower, and the investment in transportation will be increased to match the company’s daily and hourly business needs.The biggest bottleneck in Amazon’s retail business is capacity and manpower shortage (recruitment is still the biggest problem). Combined with the pressure of inflation in the United States, Amazon has also taken measures to shift the cost pressure:At the end of 2021, Amazon announced that it would increase parcel freight by 2%-7.5% starting from January 22, and in January 202, it again announced that it would increase storage charges by 10% starting from February in off-peak season (January-September).Amazon’s physical store business (mainly Whole Foods supermarket) received 4.7 billion US dollars in revenue in this quarter, up 17% year on year. The year-on-year growth rate increased for three consecutive quarters, which also verified the trend of consumption flowing from online to offline.Advertising performance is still outstanding, revenue, $9.7 billion, up 33% from a year earlier, amazon advertising revenue separately presented in the results for the first time, it is no longer included in the income items, also shows that the proportion of public advertising in the amazon improve 05 consumption still faces greater downward pressure, in January 2022 new jobs to reduce 300000 people in the United States,It was the worst month except for the 2008 financial crisis and April 2020;In 2021, the recovery of production and employment in the United States is not ideal. Under the continuous inflationary pressure, the downward pressure of the American macro economy and consumer spending cannot be ignored.062021 black Friday to cyber Monday promotion, clothing, beauty, home furnishing and toys ranked TOP4 in the best-selling categories, among which more than 130,000 third-party sellers worldwide sold more than $100,000 on amazon;Between Black Friday and Christmas, third-party sellers in the United States sold an average of 11,500 products per minute.In addition, amazon India’s month-long Festival of India sales campaign generated more than $100,000 in sales from nearly 30,000 third-party sellers.Amazon continues to invest in fulfillment delivery by offering same-day shipping options to Prime members worldwide, including free same-day shipping;Free same-day shipping is now available in more than 90 metropolitan areas in the United States, 58 in Europe, and Tokyo, Japan, in addition to Fort Collins, Colo., and Provo, Utah.Number of Sellers in Europe: More than 13,000 third-party sellers in France, more than 18,000 third-party sellers in Italy, and more than 12,000 third-party sellers in Spain;There are more than 65, 000 third-party sellers in the UK.Conclusion 1. 2022H1: Influenced by the US macro economy and combined with the relaxation of offline control, the growth of online retail revenue in the whole US will maintain a medium-low speed growth, which is also reflected in Amazon’s performance guidance for 2022Q1, which is expected to be 15%-20%;Amazon has been slowing down the investment in warehousing to avoid insufficient utilization of storage capacity under the decline in growth rate. In 2020 and the first half of 2021, Amazon’s capacity was basically 100%, but it is not 100% at present.2. Affected by the triple impact of increased labor costs, increased transportation capacity and increased inflation pressure in the United States, it is expected that Amazon’s FBA will still rise in 2022H1 to ensure profits, especially long-term storage costs (storage capacity expansion slows down and high inventory turnover is turned to);3. Orders of third-party sellers on Amazon accounted for 56%, which did not increase in the past three quarters, reflecting a significant decline in orders of sellers under the wave of Amazon store closures. Without the impact of store closures, the proportion of Q4 in 2021 will exceed 60%;4. In 2021, Amazon’s advertising revenue was 31.16 billion US dollars, with a year-on-year growth of 57%, the highest growth rate among all income items;Under the background that advertising revenue growth is higher than order growth and GMV growth, the proportion of AD Acos of Amazon sellers will continue to grow in 2022.Note: The data above are from Amazon’s earnings call and earnings call, with some references from Dolphin Research and Marketplace Pulse.