Amazon have announced in their fourth quarter that sales are up 21% to $87.4 billion. Operating cash flow increased 25% to $38.5 billion for the trailing twelve months.
Third-party seller services have accelerated
Over the last year Third-party seller services have seen considerable growth. They have risen from 23% in Q1 to 31% in Q4, if you’re a third party seller and you’re not seeing the 21% sales rise then you’re losing market share to competitor sellers.
“What you’re seeing is more and more participation of third-party sellers in our one-day delivery program as we move through the year. That was particularly strong in Q4, and I think you’ll see that more as we move into 2020,”
– Brian Olsavsky, Chief Financial Officer, Amazon
One-day shipping is a driving force
The push on one-day delivery efforts are still costly for the company, but this is expected to advance its shipping and fulfilment capabilities for the future. Fulfilment by Amazon is likely to be the go-to option for third-party merchants as fulfilling one-day delivery by their own separate means can be costly.
“Prime membership continues to get better for customers year after year. And customers are responding — more people joined Prime this quarter than ever before, and we now have over 150 million paid Prime members around the world,”
“We’ve made Prime delivery faster — the number of items delivered to U.S. customers with Prime’s free one-day and same-day delivery more than quadrupled this quarter compared to last year.”
– Jeff Bezos, founder and CEO, Amazon
The push on one-day delivery efforts are still costly for the company, but this is expected to advance its shipping and fulfilment capabilities for the future. Fulfilment by Amazon is likely to be the go-to option for third-party merchants as fulfilling one-day delivery by their own separate means can be costly.
Amazon advertisement
Although it is only a teeny weeny amount of what Amazon brought in over the year, 5.0% of Amazon’s revenue came from advertising, a noticeable increase from 1.6% 4 years earlier. Amazons advertising platform is going to be a major player in their expected £50 billion 2020 growth and third-party sellers who make up a huge part of the company will be a big player in that.
Brands want to show customers who they are and stand out above competing sellers on the platform which is exactly what Amazon advertising lets brands do. We visited the state of Amazon advertisements in more detail during Q3. It is clear that this is still a major area of continued revenue growth.
One Response
It is a fly wheel for Amazon. Amazon creates super fast delivery of 1 day or same day delivery. Which attracts more buyers to Amazon which creates more paying Prime members which attracts more sellers to Amazons platform. Where those sellers have to advertise on Amazon to get noticed and procure sales. Which leads to more revenue for Amazon.
The super fast 1 day delivery will create a virtuous and very profitable fly wheel as margins on advertising can be as high as %70.
The super fast delivery will also help Amazon to gain market share of its b2b platform Amazon business. It will attract more businesses and local governments to procure their business purchases through Amazon.