Amazon’s Q4 performance in 2019 significantly exceeded predictions, with Amazon netting more than $1B over what Wall Street forecasted. There were some impressive growth drivers behind Amazon’s exceptional performance, including AWS, which grew 34% year-over-year (YOY), and advertising revenue, which grew 41% YOY.
Amazon also saw strong results in its one-day shipping program, which had lower than expected expenses, despite more than quadrupling one-day shipping product selection in Q4. Consumers seemed to appreciate Amazon’s continued efforts to maximize convenience, as Amazon also surpassed 150M Prime members globally. The platform’s success was shared by third-party sellers, who continued to increase their global market share of Amazon sales, reaching 53% for the first time.
To put it shortly, Amazon proved yet again that it’s an enduring leader in ecommerce. But what does Amazon’s Q4 performance mean for brands selling on Amazon?
TRANSLATING AMAZON’S Q4 RESULTS
Amazon is Setting Consumer Expectations
Amazon reaching over 150M Prime members globally reinforces a message Kaspien has been sharing for years: Brands need to have an Amazon presence.
Why? Two reasons:
- The number of shoppers reachable through Amazon is growing, providing greater sales potential for brands.
- Amazon is setting the bar for consumer expectations, and brands that cannot meet those expectations risk losing customers to competitors who can.
Two-day shipping was once a rare luxury. Now, it’s expected, leading other major marketplaces like Walmart to invest in comparable service through 3PL partnerships. As Amazon continues to scale one-day shipping, same-day shipping, and free two-hour grocery delivery for Prime members (which is now available in over 2,000 US cities), luxuries will continue to shift into expectations.
As the Q4 performance shows, Amazon is not going anywhere. In fact, Amazon is forecasting to grow about 20% YOY in Q1 2020.
If your brand is not on Amazon, it’s time to change that.
Amazon Will Continue to Improve its Ad Platform
Amazon’s advertising revenue grew by 41% YOY. That means that more sellers and agencies are advertising on Amazon, which has become a necessity to stand out on the saturated marketplace. As one of Amazon’s most profitable business segments, we expect that Amazon will continue to invest heavily in its ad platform. Amazon has a long history of investing in its most promising (and sometimes not promising) ventures. The greater investment will drive better tools, making the platform even more attractive.
Of course, when everyone wants a piece of the pie, every slice gets a little smaller. That’s why brands should also make investments in their advertising, leveraging the best software and services available so they can get the biggest slice possible.
Third-Party Sellers will Offer Better Services
Third-party market share is growing, as is the percentage of third-party sellers offering FBA. This is excellent news for brands: As competition among third-party sellers grow, they are forced to innovate to continue to attract brand partners. As the saying goes, iron sharpens iron, and services available to brands will improve overall.
ARE YOU EVOLVING WITH AMAZON?
Amazon has led a relentless march of innovation, literally reshaping how we seek, assess, and purchase products. And it’s proven incredibly successful for them. Now the question becomes, are you growing with Amazon? Are you staying current with advancements in technology and strategies?
If you want fresh eyes to evaluate your Amazon channel, you can request a free listing evaluation with an Kaspien specialist.
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