Jeff Bezos Does It Again – Amazon’s Q4 2018 Earnings Report

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  • Summary of Amazon’s Q4 2018 conference call and earnings report (full report link provided at the end)
  • The good, the bad, the ugly
  • Jeff Bezos shares a super stealth golden nugget
  • Key takeaways from the earnings call as they relate to Amazon FBA sellers
  • Excerpts from the earnings report as they relate to Amazon FBA sellers

Amazon’s Q4 2018 Earnings Report

Listening in on Amazon’s fourth-quarter earnings conference call can be a bit like watching paint dry but fortunately for you, I will spare you the boredom and cut right to the chase.

The earnings conference call in and of itself lacked anything substantive as it relates to us as Amazon FBA sellers, however, the earnings report issued shortly before the call on January 31st, 2018 is riddled with golden nuggets.

The Good

Amazon killed it in the 4th Quarter, beating Wall Street estimates. This was necessary as Amazon had seen sales slumps in the 2nd and 3rd quarters of 2018.

Furthermore, they have a very optimistic outlook on the Amazon FBA business model as more than half their sales come from 3rd party vendors (that’s us) and they are going to make significant investments in improving 3rd party toolkits. This is fantastic news!

The Bad

Not everything was rosy in its Q4 earnings report as it’s Q1 2019 earnings forecasts came in lower than Wall Street projections.

The Ugly

It’s not easy to maintain a brick and mortar business (that is, after all, why we’ve opted to be Amazon FBA sellers) and Amazon is finding this out the hard way. The only negative that came out of the 2018 Q4 financials was related to “lower gross margins” on the retail side of their business. Translation: even Amazon has a hard time selling in physical stores, a trend they created and that we will continue to see moving forward. Brick and mortar businesses are on the decline.

Amazon is on a mission to make inroads within the physical product space as is evident with the acquisition of Whole Foods and the launch of cashless stores such as Amazon Go, Amazon bookstores, and Amazon 4-star stores. Unfortunately, even with these ventures, Amazon reported a 3% year-over-year decline in physical stores sales.

That’s not to say they can’t turn this around as their rockstar team has proven time and time again. For now, this has been the biggest drag on the company.

Jeff Bezos shares a super stealth golden nugget

Here’s something to be on the lookout as you gear up for your next product launch: How can you align your product to tie in with the functionalities of Alexa? Check out this golden nugget Jeff Bezos dropped in the earnings report.

“Alexa was very busy during her holiday season. Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year,” said Jeff Bezos, Amazon founder and CEO. “The number of research scientists working on Alexa has more than doubled in the past year, and the results of the team’s hard work are clear. In 2018, we improved Alexa’s ability to understand requests and answer questions by more than 20% through advances in machine learning, we added billions of facts making Alexa more knowledgeable than ever, developers doubled the number of Alexa skills to over 80,000, and customers spoke to Alexa tens of billions more times in 2018 compared to 2017. We’re energized by and grateful for the response, and you can count on us to keep working hard to bring even more invention to customers.”

Start selling on Amazon today

Your Amazon success starts with Jungle Scout.

Key takeaways from the earnings conference call

  • Customers took advantage of free shipping in the holiday season
  • Record-breaking Alexa sales
    • Not priced to make money
    • Monetized after purchase through its slew of product offerings (Amazon.com, Prime, etc.)
  • Continued engagement of Prime members
    • Most ever
  • Amazon FBA remains strong
  • More than half of the sellers on Amazon.com are 3rd party sellers
  • Working on better toolkits for 3rd party sellers
    • Constant experimentation

Excerpts from the earnings report as they relate to Amazon FBA sellers

  • “Amazon continued to invest in helping selling partners increase their sales in our stores, including introducing a USPS Priority Mail Cubic ship method for Seller Fulfilled Prime and merchant fulfilled sellers, which offers a lower cost, volume-based pricing ship option; launching a new FedEx One Rate, a weight agnostic ship method that enables sellers to fulfill Prime orders nationwide; and reducing Fulfillment by Amazon storage fees in the U.S., EU, and Japan.”
  • “During the holiday season alone, tens of millions of customers worldwide started Prime free trials or began paid memberships. More customers signed up for Prime worldwide in 2018 than ever before.”
  • “Small and medium-sized businesses had their best holiday season ever in Amazon’s stores. More than 50% of units sold in Amazon’s stores this holiday season came from small and medium-sized businesses. Third-party sales are growing faster than first-party sales, and nearly 200,000 small and medium-sized businesses surpassed $100,000 in sales in Amazon’s stores in 2018.”
  • “During the holiday season alone, tens of millions of customers worldwide started Prime free trials or began paid memberships. More customers signed up for Prime worldwide in 2018 than ever before.”
  • “Amazon announced further expansion in Brazil, with fast and free delivery on hundreds of thousands of in-stock items sold and shipped by Amazon. Customers can now shop from 12 categories, with products shipped across Brazil from a new Amazon fulfillment center located in the Greater São Paulo area, the first fulfillment center in South America. With this launch, Amazon.com.br now offers consumers 15 categories with a total selection of more than 20 million products from Amazon and its selling partners.”
  • “Amazon Fashion launched Prime Wardrobe in Japan and the U.K., allowing Prime members to order clothing, shoes, and accessories and only pay for what they keep.”
  • “Prime FREE Same-Day Delivery and Prime FREE One-Day Shipping expanded this year to more than 10,000 cities and towns in the U.S. Now a majority of Prime members in the U.S. have access to free one-day shipping or faster.”

You can read the full report here!

Conclusion

The bottom line is Amazon is taking over the world… lol! You made the right choice to partner with a very forward-thinking organization and by the looks of it, more investment will be made for 3rd party sellers in the days to come. So here’s to a bright future! Keep crushing it!

Start selling on Amazon today

Your Amazon success starts with Jungle Scout.

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