Amazon Q3 2020 Earnings Report

Today, Amazon released their Q3 earnings report. Amazon’s net sales this quarter grew 37% year-over-year, down from 40% YoY growth in Q2 but still staggering, nonetheless. Other highlights from the earnings report include: 

Overview

  • Operating cash flow for the trailing 12 months increased by ~$20 billion compared to the same period last year, up 56% to $55.3 billion 
  • Operating income nearly doubled YoY, up from $3.2 billion to $6.2 billion 
  • Amazon’s net income tripled YoY, up from $2.1 billion to $6.3 billion 
  • Amazon reports that it has created over 400,000 jobs globally in 2020 
  • Amazon Sweden launched yesterday, October 28

Segments

  • Third-party seller services grew 55% YoY 
  • First-party sales grew 38% YoY 
  • The “Other” segment, which consists largely of advertising revenue, grew 51% YoY, demonstrating that advertising revenue continues to be one of the fast growing segments
  • AWS grew 29% YoY, on par with growth in Q2 (the last two quarters are the slowest growth rate in the last 3 years) 

Other 

  • Subscription services are up 33% YoY 
  • Shipping costs are up 57% YoY 
  • Amazon’s logistics and fulfillment square footage is expected to grow 50% YoY in 2020
  • Amazon expects net sales to grow between 28% and 38% YoY in Q4 

A Record Breaking Quarter

At $6.3 billion, Amazon’s Q3 earnings shattered records, the previous record being $5.2 billion in Q2 this year. To not appear to benefit too greatly from the pandemic, Amazon has pledged another $4 billion to COVID-19 costs for the fourth quarter. It’s also worth noting that on Prime Day, which occurred in October this year, that Amazon did not appear to struggle with fulfillment. Their logistics success on Prime Day is reassuring as sellers head into the holiday season.

Amazon’s earning report covers much more, delving into Amazon’s contributions to communities, job growth, climate change, Amazon products, Prime Video, AWS, and more. As an Amazon seller/agency/software provider (we do a lot), we’re going to focus this coverage on what the report suggests for brands selling on Amazon. 

Our biggest hot take: Amazon’s feeling the heat from the antitrust investigation, and is taking time in this earnings report to try to deflect or minimize some of the allegations laid against it. 

Amazon Tries to Deflect Antitrust Concerns 

On July 29, 2020, Amazon founder and CEO Jeff Bezos testified before a congressional antitrust committee. Amazon also supplied written answers to the committee’s questions on September 4. The committee published a 450-page report on October 6 with their findings from a 16-month antitrust investigation into Amazon, Google, Facebook, and Apple.  

For those who listened to Bezos’s testimony or read the aforementioned documents, it’s easy to see that Amazon is making a defense for itself within its Q3 earnings report. We’ve broken down some of the most notable references to the antitrust concerns.  

Does Amazon Hinder S&MB Growth? 

Amazon has been accused of stymieing the growth of small and medium-sized businesses. In this earnings report, as with previous reports, Amazon points to its efforts to support small and medium-sized businesses, including: 

  • Amazon Accelerate, a program that teaches business owners best practices for selling on Amazon 
  • Ignite Digital Festival, an event for delivery service partners offering best practices and updates for logistics 
  • Stand for Handmade, a program in India that waives selling fees for local, handmade products 
  • Amazon Launchpad Innovation Grants, a program in Australia to provide grants to start-ups and S&MBs 

Amazon Takes Majority of Prime Day Sales 

During the antitrust hearing, Amazon faced questions about unfair usage of third-party data and unfair competition against third-party sellers by Amazon’s first-party retail segment. 

In their earnings report, Amazon makes a point to state that on Prime Day, third-party sales grew 60% YoY, up to $3.5 billion, “growing even more than Amazon’s retail business.”  

This note seems to be a defensive move by Amazon, as others have noted that Amazon’s firstparty sales hit an estimated $7 billion and accounted for 60% of all Prime Day sales. In year’s past, first-party sales accounted for closer to 40% of all Prime Day sales. Third-party sellers may have grown at a greater rate than Amazon’s retail segment, but Amazon took a far larger slice of the Prime Day pie this year. 

Amazon’s Efforts to Protect Brands & Consumers 

Amazon also drew attention to Project Zero, announcing that the tool is available in 17 countries around the world. Project Zero allows brands to remove alleged counterfeit sellers from their listings themselves, without going through Amazon’s approval process. The program has been historically difficult to gain access to.  

Bezos referenced Project Zero during his testimony when asked about what Amazon is doing to protect brands and consumers from counterfeit products.  Mentioning it again in the earnings report helps send the message that Amazon is continuing to expand its anti-counterfeit efforts.

Marketplace Earnings Reviews

Read our breakdowns of Amazon’s Q2 Earnings Report, Walmart’s Q2 Earnings Report, and Target’s Q2 Earnings Report.

Bezos answers congressional antitrust questions for house subcommittee on the judiciary

On July 29, 2020, Jeff Bezos testified before the US House Committee on the Judiciary. After the testimony, the committee submitted a list of additional questions for Amazon to answer in writing. The questions and answers were published on September 4th. We’ve reviewed Amazon’s responses in the Questions for the Record and identified some key takeaways for brands and third-party sellers that operate on the Amazon marketplace.  

Does Amazon Steal Third-Party Data? 

One of the most persistent lines of questioning was around Amazon’s use, or rather, alleged misuse of third-party data, including third-party seller data from the Amazon marketplace and third-party data from AWS users. Amazon has been accused of using third-party data to create copycat products and undercut its users’ prices. 

In short, Amazon openly admits to drawing on its enormous wealth of third-party data to improve its first-party offerings. However, it denies targeting any single seller because it anonymizes and aggregates data. 

Amazon responded in multiple instances that Amazon uses anonymized, aggregated data to inform its decisions, including which private label brands and products it pursues. Amazon argued that this is an ability that any retailer has, ecommerce or brick and mortar. Amazon also stated that, like any other seller, its private label developers research public-facing content on listings, such as price, reviews, rank, and features. 

Rep. Pramila Jayapal’s questions pressed Amazon to define “aggregated data” through a hypothetical: If a category consisted of one seller who accounted for 99% of sales and another seller who accounted for 1% of sales, would Amazon deem the combined data “aggregate data”? Amazon’s response that aggregate data is “data that is aggregated across multiple third-party sellers and, where available, Amazon’s first party sales,” suggested that it would. 

First-Party Share of Listings by Category

First-Party Share of Sales by Category

Amazon First Party Share of Sales by Category

 This question and Amazon’s answer are important to note for brands that release innovative products. Even if Amazon reviews data at a category level (and Amazon did not specify how deep category levels go for their product development purposes)successful products in niche categories are particularly vulnerable to copycat products based on Amazon’s aggregated data and frontend research. 

Does Amazon Unfairly Favor First-Party Products & Services? 

The Buy Box 

Chairman David Cicilline asked if Amazon considers profitability to Amazon when determining which seller wins the Buy Box. Amazon responded that profitability to Amazon is not a factor. Instead, factors such as price, delivery speed and cost, Prime eligibility, and seller performance determine Buy Box ownership. These factors are all things prioritized by Amazon first-party products. 

FBA vs Non-FBA Offers 

Cicilline also asked if Amazon favors products fulfilled through Fulfillment by Amazon (FBA) are favored over non-FBA options. As with nearly every answer, Amazon responded in a roundabout way, stating that Amazon’s data shows that customers prefer orders with FBA over non-FBA orders by 9.46%. This answer suggests that, yes, Amazon does favor FBA orders over non-FBA orders, but justifies it by claiming it provides the superior customer experience. 

However, this may change in the coming fourth quarter, as Amazon has been forced to impose inventory constraints across its fulfillment centers due to being unable to meet the surge in ecommerce purchases caused by COVID-19Since inventory space is limited and in high demand, Amazon is focusing on higher-volume, faster turning ASINs, as well as higher-profit items, to ensure that products stored in Amazon fulfillment centers (FC) are worthwhile for Amazon. 

The Amazon FC capacity constraints has driven many third-party sellers to establish hybrid fulfillment strategies for Q4, combining FBA with Fulfillment by Merchant (FBM). 

Purchases Through Alexa 

Cicilline also submitted questions about what ratio of first-party products are sold through Alexa compared to third-party productsAmazon stated that third-party sales account for 45% of sales made through Alexa in 2020, despite accounting for 58% of sales of physical products on Amazon. Amazon stated this discrepancy is due to the fact that many sales on Alexa are for consumable household items, like paper towels and diapers, and Amazon has a larger first-party presence in this category. 

Amazon also stated that only a low, single-digit percentage of customers complete the purchase of a product suggested by Alexa on Alexa. The clause “on Alexa” is worth noting, as it implies that the conversion rate for Alexa-recommended products could be higher if one tracked sales made on other devicesWhen Alexa recommends a product, shoppers may look it up on their phone to view pictures and read reviews, then purchase from their phone. Such conversions would not be counted in the low, single-digit conversion rate provided by Amazon. 

Does Amazon Do Enough to Protect Brands & Consumers? 

Project Zero Allows Brands to Remove Counterfeits 

Representative Henry Johnson, Jr.’s line of inquiry focused on brand protection services available to sellers on Amazon, and by extension, consumers who shop on Amazon. His first line of questioning focused on Project Zero, an Amazon program that gives brands the power to take down counterfeit listings themselves. 

According to Amazon, to be eligible for Project Zero, a brand must have a registered trademark, an Amazon account with access to Brand Registry, and have maintained an accuracy rate of higher than 90% for all notices of infringement submitted to Amazon in the prior six months. Requiring a high rate of accuracy for notices of infringement is critical to protecting honest sellers from abusive removals. 

Amazon stated that currently, 10,000 brands are enrolled in Project Zero. When challenged why brands should have to police Amazon’s marketplace for it through Project Zero, Amazon stated that their automated brand protections proactively remove more than 100 items suspected of infringement for every 1 item that a brand owner manually removes.  

IP Accelerator Expedites Trademark Registration 

Responding to questions about protecting intellectual property rights (IPR), Amazon brought attention to its IP Accelerator program, which connects brands with a curated network of trusted IP-focused law firms to help with trademark registration. According to Amazon, this program has connected over 1,500 brands to the network, and over 500 brands have received “accelerated protection” on Amazon. 

Accuracy of Seller Contact Information 

As of September 1, 2020, Amazon requires all sellers to list their contact information on their public-facing Amazon seller profile page. Representative Johnson, Jr. asked Amazon how they plan to ensure that the seller information is accurate.  

Amazon responded that they combine computer and human resources to validate seller contact information. However, many of their efforts seem to occur when a new account is created, so it is unclear how effective Amazon’s systems will be at retroactively identifying inaccurate information in existing seller accounts. 

Does Amazon Knowingly Permit the Sale of Counterfeits? 

Despite a plethora of anecdotes from consumers and brands about a pervasive counterfeit problem existing on Amazon and the Department of Homeland Security’s report from January 2020, Amazon continues to deny that counterfeit products are prevalent on the Amazon marketplace.  

Amazon claims that 99.9% of all products viewed by customers on Amazon do not have a valid counterfeit complaint, although Amazon did not state how it determines which complaints are valid.  

CJ Rosenbaum, founding partner of Amazon Sellers Lawyer, also cast further doubt on the sincerity of Amazon’s claim that it proactively fights the sale of counterfeit product on its marketplace. In an interview with Kaspien’s CEO and Director of Compliance, Rosenbaum shared that his firm recently represented a vendor who knowingly sold counterfeit product to Amazon Retail (first-party or 1P), and that Amazon Retail: 

  • Knew the product was counterfeit and bought it anyways, then sold it to consumers 
  • Simultaneously had an existing partnership with the competing authentic brand 
  • Stopped paying the vendor when the vendor’s account was accused of counterfeit, while continuing to sell the counterfeit product to consumers, resulting in maximum profits  
  • Instructed the vendor to create a new vendor account so that Amazon Retail could place another purchase order, then repeated the whole process several times before the vendor took Amazon to court 

The below video starts at the segment where Rosenbaum shares the story.

The frankly shocking allegations can be listened to in full, here. 

Other Notable Lines of Inquiry 

Because we are an ecommerce services provider with a large portion of our business and expertise focused on the Amazon marketplace, our review focused on key takeaways for brands and third-party sellers that operate on the Amazon marketplace. However, the committee’s questions delved into much more, including: 

  • Whether Amazon is seeking access to content rights for content available on HBO Max, Hulu, Disney+, or Netflix as part of its negotiations around Fire TV 
  • Whether Amazon’s initial and ongoing response to COVID-19 has been sufficient 
  • Allegations of wrongful terminations 
  • Amazon’s plans for the upcoming pilot commercial ecommerce program organized by the General Services Administration (GSA) (the program will essentially offer a marketplace specifically for federal employees) 

The Future of Amazon 

While Amazon is under fire from Congress for monopolizing the ecommerce space and stealing third-party data to usurp its customers, Amazon hasn’t broken its stride. Q3 is looking to be another strong quarter, with North American retail revenue forecasted to grow 30% year-over-year (YOY), compared to 21% YOY growth in Q3 2019. Likewise, Amazon’s advertising revenue is expected to grow 37% YOY in Q3, compared to 41% in the previous quarter.  

Predictions for the Amazon Marketplace, Near and Far 

  • Amazon will continue enhancing advertising services on and off its platform to further realize revenue from this rapidly growing segment. 
  • Amazon will continue expanding its brand protection services, including paid brand protection services, as pressure mounts from Congress and upcoming competitors, like Walmart and Target. 
  • Amazon will retain many of the inventory policies for its fulfillment centers that it put into place during the pandemic. Permitting only faster-turning products to be stored in Amazon fulfillment centers increases Amazon’s profits, and the baseline for consumer demand in ecommerce has been permanently raised as the result of COVID-19. As a result, Amazon can afford to impose stricter conditions. 
  • Amazon first-party sales share will continue to reduce, as Amazon enjoys better profits and less risk through seller fees and having third-party sellers carry inventory risk. Pointing to the shrinking share of first-party goods, even as total revenue grows, also helps Amazon argue against calls for trust busting. 
  • If other online marketplaces can rise to compete with Amazon, as Walmart has been making strides towards with the launch of Walmart Fulfillment Services and Walmart+, calls for trust busting may dissipate. As such, Amazon may limit competitive efforts to stymie their growth too much, so it can point to competition as antitrust pressure mounts.  
  • Though countries such as India have forbidden the marketplace owner from also being a seller, it is unlikely that the US will institute such a policy given that Amazon, Walmart, Target, and others all act as first-party sellers alongside third-party sellers on their marketplaces.  

On September 8th, Amazon announced updates to its communications policyThe update clarifies what buyer-selling communication is permitted by Amazon’s policies, something that was previously ambiguous at best. The update is intended to reduce the number and improve the quality of emails Amazon shoppers receive in the interest of improving the Amazon buying experience. 

Biggest Takeaways: 

  • Sellers can ask buyers for product reviews and/or seller feedback (although you still cannot ask for a positive review, only an honest review) 
  • Amazon clarified what message types, content, and formatting are not permitted 
  • The policy update applies to all Amazon marketplaces 
  • The updated policies go into effect on November 3, 2020 

Communications Updates 

Permitted Buyer-Seller Communications 

Sellers are permitted to communicate with buyers for the following three reasons: 

  1. If an order cannot be shipped or if it will be delayed. This must be communicated via Seller Central using the Manage Orders feature. 
  2. If additional information is needed to complete a return or if the seller is offering a partial refund. This must be communicated via Seller Central using the Manage Orders feature. 
  3. Communicate with buyers proactively (communication initiated by the seller instead of the buyer) to: 
    1. Resolve an order fulfillment issue  
    2. Request additional information required to complete the order 
    3. Ask a return-related question 
    4. Send an invoice 
    5. Request product review and/or seller feedback 
    6. Schedule the delivery of a heavy or bulky item 
    7. Schedule a Home Services appointment 
    8. Verify a custom design 
    9. Any other reason where the contact is required for the buyer to receive their purchase 

 

Proactive messages may be sent using email, Amazon’s templates in Seller Central, third-party applications, or via API. These messages must be sent within 30 days of order completion, include the 17-digit order ID, and be in the buyer’s preferred language. Amazon retains the authority to modify subject lines as it deems necessary.  

Learn more about how customer reviews impact Amazon sales or how to generate new customer reviews compliantly. 

Forbidden Message Types 

Amazon’s policy update states that sellers may not send the following message types to buyers: 

  1. Order or shipping confirmations 
  2. Messages that say only “Thank you” or that you are here to help if buyers have any problems  
  3. Marketing or promotional messaging, including coupons  
  4. Language that either incentivizes or persuades the buyer to submit positive product reviews or seller feedback, including by offering compensation, money, gift cards, free or discounted products, refunds, rebates or reimbursements, or future benefits  
  5. Language that requests removal or an update of an existing product review  
  6. Language that requests a product review only if they have had a positive experience with the product 
  7. A repeat request (per order) for a product review or seller feedback 

 

Forbidden Message Features 

Seller-buyer communications must not contain any of the following: 

  1. External links unless they are secure working links (https, not http) necessary for order completion or links to Amazon  
  2. Attachments except for product instructions, warranty information, or invoices  
  3. Logos, if they contain or display a link to your website  
  4. Link to opt-out of messaging  
  5. Sensitive content in images or text (e.g. bare skin, violence/gore, adult/offensive language)  
  6. Tracking pixels or images  
  7. Email addresses or telephone numbers  
  8. Images of purchased products as Amazon includes those on your behalf  
  9. Images that do not relate to your brand or company 

 

Forbidden Message Styling 

Likewise, the policy update also forbids seller communications from containing any of the following: 

  1. Accessibility issues as specified in the Web Content Accessibility Guidelines from the Web Accessibility Initiative  
  2. Emojis  
  3. GIFs  
  4. Message margins over 20% max width  
  5. Image or graphic sizes larger than 80% max width  
  6. Overrides of Amazon’s default line height, font family, or font color  
  7. Fonts in more than three sizes  
  8. Message bodies that are centered or that otherwise override default text alignment settings  
  9. More than two line-breaks (spacing between paragraphs) in a row  
  10. Unsecure images (http instead of https)  
  11. Spelling errors or grammar issues 

 

Compliance Required by November 3, 2020 

Sellers that fail to comply with Amazon’s updated guidelines by November 3rd may face temporary restrictions in proactive seller-buyer communication or a suspension of their seller account. 

etailz rebrands to Kaspien

Today, we’re thrilled to announce that we have rebranded from “etailz” to “Kaspien. Our parent company, Trans World Entertainment, has also rebranded to Kaspien Holdings, consolidating the two brands into Kaspien.  

Even more important than streamlining the corporate structure, this rebrand also reflects the next era of our journey. Our company has been evolving ever since our founding in 2008. We grew from a niche third-party seller of eco-friendly products into a top FBA retailer, created proprietary software for our internal teams that are now SaaS products, and launched an agency division to manage brands’ marketplace channelsWe were creating fantastic tools but realized that we were limiting their potential and efficacy by only leveraging them for internal needs.   

When Kunal Chopra joined the company as our new CEO in September 2019, he brought a new vision, one that harnessed all the different components we had built, expanded them, and brought them together in a unified, cohesive system. 

Guided by a strong executive team, we underwent a metamorphosis, evolving from a top Amazon third-party retailer to a robust platform of ecommerce services and software. Through the platform model, we now provide leading services, software, and strategy for all aspects of an online business, regardless of what, where, or how a brand chooses to sell.  

Why is etailz Rebranding?  

In short, we outgrew our old name. 

“Kaspien is in a different place in the market than we were 1 year ago, much less 10 years ago,” said CEO Kunal Chopra. Today, there are thousands of third-party sellers, agencies, and software providers offering brand services for online marketplaces. It’s a fragmented market. As etailz, we were one of those fragments. As Kaspien, we are defragmenting the market, pulling together all the services, tools, data, and integrations brands need to succeed on ecommerce under one roofWe’re a onestop shop. 

“By defragmenting the market, we enable brands to grow and evolve without having to change systems. Through Kaspienbrands can continue building upon the same strong foundation of insights, results, products, services, and committed relationships no matter how their ecommerce needs change, Chopra said. 

etailz’s name was synonymous with third-party retail, and after 12 years of experience, weve become exceptionally effective at it. Our success was built upon our software and strategies, and these tools have now become the core of our platform as we know it today. While we’re still a third-party retailer, it’s only one of many parts. As Kaspien, everything we’ve developed to drive our past success is now available in flexible models to suit your business’s needs.  

Listen to our CEO, VP of HR, and Creative Director discuss our rebrand to Kaspien on our podcast 

 

What does Kaspien Mean? 

The Name 

The name “Kaspien was inspired by the Caspian Sea, the largest inland sea in the world. Like many waterways, ita hub of commerce. There is also debate whether it’s a lake or a sea; it’s more than it appears to be, and so are we.  

Unlike a traditional retailer, we operate in three sectors – as a retailer, agency, and a software provider – and we wanted a name that can grow with us in the future. Kaspien does this. 

The Logo 

The logo utilizes an abstract ‘K’ as a graphic element. The negative space subtly incorporates a forward pointing arrowrepresenting forward thinking, innovation, and leadership – traits that etailz was founded upon and Kaspien will continue to embodyThe hexagon behind the ‘K’ is inspired by patterns prevalent in nature due to the hexagon’s efficiency, from bees’ honeycombs to the Giant’s Causeway. Our value proposition is rooted in maximizing efficiency, and Kaspien’s logo is an homage to this. 

The Future of Kaspien 

We’re as committed as ever to being “partner obsessed” and providing the best possible service for our partners. That mission and promise will never change. 

We’ll continue expanding our services and software through internal development, integrations, and partnerships, unlocking greater efficiencies and performance. It’s an exciting time at Kaspien, and our partners will reap the benefits. 

We’re thankful for all that we have learned over the last 12 years and to the etailz name for getting us here. Now, we’re excited for our bright future – together – as Kaspien. 

 

On August 4th, Amazon published a press release announcing the impending launch of Amazon Sweden. On August 11th, Amazon sent an email to sellers with more details about what to expect with the new marketplace.  

In this email to sellers, Amazon stated that Amazon Sweden will be available within EU Seller Central accounts as Seller Central Sweden. All Professional Selling fees and referrals fees will stay the same with this expansion.  

The email also outlined how products currently in Amazon’s European Seller Central will synchronize to Seller Central Sweden. Amazon has created the Build International Listings (BIL) tool to automate and accelerate this process. If a seller does not wish to have his or her listings synchronized, they must override it manually. Amazon notes that products subject to the Swedish Chemical Tax will be excluded. 

It is uncertain when Amazon Sweden will launch. In January of this year, Amazon sent a similar announcement for Amazon Netherlands, which was publicly launched in March. If Amazon maintains a similar timeline for Sweden, we could see the marketplace publicly launch in October, though an official date has not yet been released. In the meantime, Amazon asks sellers to go into their EU Seller Central account and check to ensure all of their product listings are synchronized accurately. 

If you’re interested in expanding your brand to Sweden, we can provide a full suite of Amazon services for marketing, brand protection, logistics, and more. 

Amazon’s Email Announcement to Sellers 

“Dear Selling Partner, 
 
We are pleased to announce that we have started the work to launch the Swedish Amazon.se Store, to delight local customers and give Selling Partners the opportunity to expand their European business even further.

Seller Central Sweden will soon be available to you as a seventh country option in your EU Seller account. With the same monthly Professional Selling fees and referral fees, you can access all seven European Amazon Stores.

To support you with the expansion of your business, we will synchronize your eligible product selection with your Seller Central account for Amazon.se. You will be notified via email once Seller Central Sweden is available and the synchronization is complete. You can then revise your synchronized selection.

How will we synchronize the existing product selection: 

  • We will enable the Build International Listings (BIL) tool in Seller Central, which allows us to list your eligible existing products from your Home Marketplace on Amazon.se on your behalf, to save you valuable time. You can edit the BIL connection between the Seller Central accounts of your choice afterwards at any time here by clicking “remove connection”. 
  • Please note: When the BIL tool is active, it will regularly synchronize your existing listings and prices for all linked Seller Central accounts. Please check your preferred tool settings here after the synchronization is complete.  
  • The product descriptions will automatically be translated to Swedish, using BIL’s Machine Translation functionality. 

Learn more about BIL and its functionalities here 

What product selection will be synchronized? 

  • We will synchronize your eligible selection which is currently exportable to Sweden and prices that are active on Amazon.co.uk and Amazon.de. For your self-fulfilled listings, we will synchronize your prices from your BIL source marketplace, adjusted for exchange rate* to Swedish Krona. 
  • For your Fulfilment by Amazon (FBA) Pan-European FBA (Pan-EU) listings, we will take into account:  
  • VAT differences between BIL source marketplace and Sweden. Example: If you are selling a product on Amazon.de for 10.00€, we will synchronize the product price on Amazon.se as SEK 114.5, taking the VAT differences in Germany (16%) and Sweden (25%) into account. 
  • Fulfilment fee differences between your BIL source marketplace and Sweden. 
  • You will be able to benefit from the Fulfilment by Amazon (FBA) and Pan-European FBA (Pan-EU) programs with domestic fees and offer your products to local customers. You can find the promotional fees that are valid until June 31st, 2021 here. 
     
    *The BIL tool adjusts prices periodically to reflect currency conversion fluctuations in the target marketplaces’ currencies. The frequency of these updates might vary from daily to weekly. These updates will not show changes of less than 1%.

Please note: If you are selling Consumer Electronics, we will not synchronize products that will become subject to the Swedish Chemical Tax that is expected to become effective in Sweden from 1st of October, 2020. We will provide you with more information in the upcoming weeks. Please reach out to your tax adviser for additional information.

What you need to do: 

  • In the next few weeks, we will notify you via email once the product synchronization is complete. Check here under Account Notifications, if your email address for important Technical Notifications and Business Updates is still up to date. 
  • Check your synchronized listings and prices under Manage Inventory in Seller Central.  
  • If you are already using the Build International Listings (BIL) tool, you can edit the connection between the Amazon Stores of your choice and prevent product listings from synchronizing here at any time. If you wish to opt-out from selling on Amazon.se, click here to “remove connection”. 
  • If you are not using the BIL tool yet, we will activate it on your behalf to synchronize your selection to Amazon.se. You can edit and remove the BIL connection here afterwards. 
  • Once Amazon.se launches, your listings will become available to our local customers from the start of the new Amazon Store.”

Target Earnings Q2 2020

Target released their earnings report today for the threemonth period ended August 1, 2020. Comparing Q2 2019 to Q2 2020, this quarter was a resounding success for Target. Notable highlights include:  

  • Second quarter sales grew 24.3% year-over-year (YoY), the highest Target has ever reported, with digital sales contributing 13.4 percentage points and store sales contributing 10.9 percentage points 
  • Digital sales grew 195% YoY  
  • 17.2% of total sales from the second quarter originated online 
  • Total revenue grew 24.7% YoY, from $18.4B to $23B 
  • Operating income grew 73.8% YoY 
  • Same-day services for Q2 grew 273% YoY 
  • Target gained $5B in market share in the first six months of 2020, exceeding gains made in all of 2019 

Target’s Q2 earnings snapshot also notes that more than 90% of second quarter sales involved stores in some manner, whether it be in-store shopping, pick-up, or delivery through Shipt. 

Key Takeaways for Online Sellers 

In February, eMarketer forecasted that Target would finally break into the top 10 US ecommerce retailers, capturing 1.2% of total retail ecommerce sales in the USEMarketer also predicted that Target’s ecommerce business will grow to $8.34 billion. Target’s second quarter earnings report supports this prediction.  

In the six months preceding August 1, 2020, digital accounted for 16.3% of Target’s sales. In that same period, Target reported $42 billion in sales, which indicates that they’re nearing $7 billion sales generated through ecommerce.  

This is impressive growth, but still trails Walmart, which generated roughly $5.5 billion from ecommerce in Q2 alone, and Amazon, which grew North American net sales to $55 billion in Q2. Brands interested in growing their online business should continue to focus on Amazon and Walmart’s online marketplace, but Target is clearly one to watch. 

Read our breakdowns of Amazon’s Q2 Earnings Report and Walmart’s Q2 Earnings Report. 

Walmart earnings report Q2 2020

Today, Walmart released their earnings report for the 13-week period ended July 31, 2020Notable highlights from the release include:  

  • Net sales in the US were up 9.3% year-over-year (YoY) to $93.3B 
  • Total revenue was up $7.4B YoY to $137.7B 
  • Walmart US ecommerce sales increased 97% YoY 
  • Walmart US ecommerce sales accounted for approximately 6% of Q2 net sales, around $5.5B
  • Sam’s Club ecommerce sales grew 39% YoY 
  • International net sales were down 6.8% YoY 
  • Ecommerce sales accounted for 12% of total international sales 
  • Walmart incurred $1.5B in COVID-related costs 

Global Ecommerce Growth 

As a company that operates in the ecommerce space, we took particular note of Walmart’s online sales performance. Just this year, Walmart has announced Walmart Fulfillment Services, an integration with Shopify, and Walmart Plus – all indicators of Walmart’s growing ambition for their ecommerce presence. As COVID-19 impacted shopping in physical stores, Walmart’s online sales growth boomed around the globe. 

Walmart Marketplace Ecommerce Net Sales: 

  • US: +97% 
  • Mexico & Central America: +217% 
  • China: +104% 
  • Canada: +215% 
  • United Kingdom: +98% 

Online grocery sales were a significant contributor to online sales growth in each of the below markets. Pickup and delivery services experienced record-high sales, with approximately 3,450 stores allowing pickup and approximately 2,730 stores offering same-day delivery. 

Key Takeaways for Sellers 

Walmart’s online marketplace has been building momentum since it launched, but it’s rapidly gaining speed in 2020. We saw with Amazon that brands who entered the marketplace early were positioned to seize and grow a greater market share. As Walmart’s online marketplace matures, a similar outcome is likely.  

In addition to general ecommerce growth, the current health crisis has also led to a surge in online grocery shopping. This is a fascinating space that’s likely to continue growing even after shopping in physical stores normalized again. You can learn more about the rapid rise of online grocery in our podcast episode with Chicory, a digital shopper marketing platform that specializes in the grocery industry. 

Read our breakdowns of Amazon’s Q2 Earnings Report and Target’s Q2 Earnings Report.

Amazon PPC Management Software

Today, we’re excited to announce the release of a new suite of features for our Amazon PPC management software, AdManager. The new features include: 

  • Automated search term optimization 
  • Automated budget optimization to maximize profitability 
  • An Out of Budget table that recommends ideal budgets 
  • A new “4 Campaign Build” option for campaign creation 

All these features are being added for free for existing users and will be included as standard features for all new subscribers.

This set of features joins the existing suite of features, which includes dynamic bid optimizations, a centralized keywords table for simplified campaign management, and detailed reporting. 

Automated Search Term Optimization 

AdManager can now automatically identify and add high-converting search terms as keywords to campaigns, promoting relevancy and driving more sales. Users set custom rulesets that will mine customer search terms from automatic campaigns and broad and phrase match types. If a search term meets your selected parameters, AdManager will automatically add it as a keyword to your manual campaigns.  

With this feature also comes keyword negation. AdManager will automatically identify and negate terms that don’t meet your custom performance thresholds. For example, a keyword that continuously generates clicks but never generates a conversion is wasting your budget. AdManager can now automatically negate such terms, minimizing wasted ad spend and increasing campaign relevancy. 

Search Term Optimization

Never Run out of Budget 

AdManager now lets you set custom rules that automatically increase daily budget for high-performing campaigns if they run low. This way, you ensure that your most profitable campaigns never turn off, maximizing your revenue. 

Budget Optimization

Campaign Budget Optimization Table 

AdManager now includes an Out-of-Budget table that shows at what time a campaign ran out of budget, how often they run out of budget, and uses Kaspien’s proprietary data to recommend an ideal budget for each campaign.  

It’s important that campaigns can run 24 hours per day because optimizing campaigns requires data. If your campaigns consistently run out before 10am, any optimizations you make are using incomplete data, and as a result, risk doing more harm than good. The Out of Budget Table provides both visibility and a solution for this problem.  

Out of Budget Table

Automated Campaign Build Strategy 

Maximize data insights and improve performance using our proven “4 Campaign Build” architecture. When creating a new campaign, you can select our “4 Campaign Build” to automatically create three manual campaigns (one per match type) and one automatic campaign. 

Since we began advertising on Amazon seven years ago, we’ve been experimenting with campaign architecture to find the most effective structure for strong results and ease of management. The 4 Campaign Build is what we’ve found to be the most effective.  

Manually creating this architecture is time consuming, which has led many marketers to regretfully turn away from it, even knowing the benefits to data insights and performance. AdManager solves this problem by automating its creation.  

4 Campaign Build Ad Architecture

For New and Experienced Marketers 

AdManager is designed to cater to both novice and experienced Amazon marketers. The easy-to-use interface and data visualization make it accessible for marketers not yet versed in Amazon advertising. For users who are experienced with Amazon advertising and want to get more in the weedsAdManager offers the depth and customization that you’re looking for.  

Take a self-guided demo to see the backend, or request a live demo with a specialist to see AdManager in action and ask more detailed questions.  

If you’re not ready to start using the software yourself, AdManager is also available as a managed service. Our experts can serve as an extension of your team and manage your Amazon ad campaigns on your behalf. 

Our Lowest Prices Ever 

To celebrate the launch of these new features, we’re offering AdManager at our lowest prices ever! Self-service AdManager is now available starting at $99/month and managed service AdManager is available starting at $1,300/month. Visit Kaspien.com/AdManager to learn more. 

Amazon's second quarter earnings soar in 2020

Amazon Revenue Soars in Second Quarter

Today, Amazon published their earnings report for the second quarter of 2020. Their earnings exceeded expectations, with Amazon reporting a revenue of $88.91B and a net sales increase of 40% compared to Q2 in 2019. Other notable results include: 

  • Net income increased to $5.2B, doubling their net income from the second quarter of 2019 
  • North American net sales were up 43% YoY, while international sales were up 38% YoY 
  • Amazon’s “Other” category (which consists mostly of Amazon advertising) grew revenue 41% 
  • AWS grew 29%, the lowest growth rate since Q1 2017 
  • Operating cash flow increased 42% YoY  
  • Free cash flow increased from $25B to $31.9B YoY 
  • Operating income increased from $3.1B in Q2 2019 to $5.8B in Q2 2020 
  • Third-party sales growth outpaced first-party sales growth 
  • Grocery delivery capacity grew by over 160% and online grocery sales tripled, YoY 

Amazon’s guidance for Q3 anticipates slightly more modest growth, with net sales expected to increase between 24% and 33% YoY. 

Amazon’s COVID-19 Efforts 

In Q1, Amazon promised to spend $4B on COVID-related costs during Q2. In Amazon’s earnings report, CEO Jeff Bezos stated, “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand.”  

Bezos added that since March, Amazon has created over 175,000 jobs, 125,000 of which are planned to transition to full-time positions. 

Amazon promised to invest an additional $2B in COVID-19 related costs during Q3. As noted by Venture BeatAmazon does not wish to appear to benefit too much from the pandemic, even as their $5.2B quarterly profit marks the highest on record in their 26year history. 

Key Takeaways from Q2 for Sellers 

By looking at where Amazon is experiencing the most consistent, strongest growth rates, we can see where Amazon is likely to continue investing in the future. This report marks yet another strong quarter for third-party seller growth and Amazon advertising.  

Third-party seller sales yet again grew faster than Amazon’s first-party sales, indicating that Amazon is continuing to embrace the third-party approach to the marketplace. This makes sense, as holding inventory carries greater risks. By expanding the third-party network, Amazon reduces its inventory risk while still generating more revenue in the form of fees.  

Those fees include advertising. Amazon’s “other” category by and large consists of their advertising business. Revenue grew 41%, making it yet again one of their fastest growing segments. It’s likely that Amazon will continue expanding their offerings and capabilities for their ad platform, making it an even more appealing tool for brands selling on its platform. 

Read our breakdowns of Walmart’s Q2 Earnings Report and Target’s Q2 Earnings Report.

Jeff Bezos Testified Before Congress 

Amazon’s Q2 earnings report comes one day after Jeff Bezos testified before the US House Committee on the Judiciary. Amazon, along with Facebook, Google, and Apple, were brought before the Subcommittee on Antitrust, Commercial, and Administrative Law to answer questions for an antitrust case.  

It did not appear to go well. Members of congress grilled Bezos about Amazon’s alleged practice of using third-party data to create copycat products, then undercut the brands selling on its platform. The same accusation was made regarding AWS, with members asking about allegations that Amazon stole third-party data to create competitor products, as well as identify and then target competitors’ customers.  

Congress members also pressed Bezos to explain why sellers bear the burden and costs of combating counterfeiters instead of Amazon, implying that Amazon has taken too passive a role because Amazon still profits from sales even if the products are counterfeits.  

Bezos’s answers seemed unsatisfactory for committee members. In many cases, he stated he could not remember the details or was unaware of the alleged events.  

Mr. Cicilline shared the following story from an apparel company that compared Amazon’s first-party division, Amazon Retail, to a drug dealer: 

“Amazon strings you along for a while because it feels so good to get that paycheck every week. And in the past, for a lack of a better term, we called it, ‘Amazon heroine’ because you just kept going, you had to get your next fix, your next check. And at the end of the day, you find out that this person, who was seemingly benefiting you, making you feel good, was just ultimately going to be your downfall.” 

Bezos responded by saying that he “completely disagrees with that characterization.” However, the anecdote rang true for third-party retailers. It is not a rare occurrence for a brand to seek out partnering with trusted third-party retailers after having a similar adverse experience selling through Amazon Retail.  

What the Antitrust Hearing Means for Brands on Amazon 

The antitrust hearing could be a huge win for brands selling online. If Amazon is indeed exploiting brands selling on its platform through copycat tactics, actions taken as a result of this hearing could put a stop to it. Likewise, if the burden of combating counterfeiters is placed on Amazon, brands may not have to bear the costs.  

Unfortunately, both of the above are big “ifs” and will take months or years to be acted upon. As Amazon’s Q2 earnings report shows, Amazon is and will remain the dominant marketplace in US ecommerce for the foreseeable future 

Start Selling on Amazon

Brands that wish to sell online will need an Amazon strategy if they wish to grow their online sales. If you’re wary of doing that, work with an experienced Amazon retailer like Kaspien who already has the infrastructure and safeguards in place to protect your brand.  

If your business is not selling on Amazon yet, read this article on why your brand should probably be selling on Amazon, even if you don’t want to be on Amazon

etailz diversity and teamwork

Like many successful companies, Kaspien has a set of guiding principles that we use to inform our strategy across the organizationestablished six “leadership principles for us when I joined the company: 

  • We are Partner-Obsessed  
  • We are Insights Driven  
  • We Deliver Results for our Partners 
  • We Innovate on Behalf of our Partners  
  • We are Simple in our Approach  
  • We are Owners 

I review them in every company-wide meeting. They are displayed on posters in our corporate office. Wreference them when serving our partners. We reference them when determining internal strategy and resource allocation. We reference them when interviewing job candidates. We use them to assess our company, team, and individual performance. They permeate our company through and through.  

But the heightened national awareness of the violence and racism that still haunts our country made me realize that we’ve been lacking an important factor in this set of guiding principles: Diversity. While we have welcomed diversity in the past, it was done too passively. It’s time to change that. I worked with my leadership team, and, in late June, we announced the addition of a seventh leadership principle: 

  • We Believe in the Power of Diversity and Teamwork 
    We value diversity in every way, and we collaborate as a team to drive the best results for our business and our partners. 

With the addition of this leadership principle, we make attention to diversity part of our company DNA. It will shift from a passive welcome to a conscious consideration that permeates our culture and work.  

Combining diversity and teamwork in a single leadership principle may strike some as odd, but I believe they go hand in hand. Cultivating diversity is step one, but it’s only when we act upon on it and build something together as a team that we can fully realize its power.  

We value diversity in every way: Race, gender, origin, religion, creed, orientation – all these factors and more shape our experiences and perspectivesBy bringing different perspectives together and empowering collaboration, we inspire and ignite innovation, creating a stronger and more agile team that can better serve our business and our partners.  

I’m excited by this addition to our company’s core guiding principles. Please do not hesitate to reach out if you have any questions, thoughts, or just want to chat. I’m always available. 

  

Kunal Chopra, CEO,Kaspien & TWE 

| 425-281-3566 

Walmart announces Walmart Plus to Compete with Amazon Prime

Updated 9/1/2020: Walmart officially announced that Walmart Plus will become available to all members on September 15th.

What is Walmart+ (Walmart Plus)? 

Walmart will be launching a new service in July called Walmart+, according to Recode. Walmart+ is a subscription-based service that will provide members access to unlimited same-day delivery for eligible items, discounts at Walmart gas stations, and early access to Walmart deals.  

Walmart+ is set to launch in July for $98/year, roughly $20 less than Amazon PrimeThe service is meant to rival Amazon Prime as Walmart continues expanding its ecommerce operations. Walmart has yet to clarify whether the service will launch nationally or in select regions to start. According to Recode, a Walmart+-branded credit card will also be introduced after launch. 

Walmart Plus vs Amazon Prime

What Does Walmart+ Signify? 

Walmart+ is the latest move in Walmart’s efforts to challenge Amazon for market share in online retail. Earlier this year, Walmart announced Walmart Fulfillment Services (WFS), a Walmart owned and operated fulfillment network for goods sold on Walmart.com. Walmart Fulfillment Services offers many of the same benefits as Fulfillment by Amazon (FBA). 

Walmart Fulfillment Service Benefits 

  • 100% nationwide coverage 
  • Increased product visibility  
  • Significant sales lift  
  • Fast & affordable fulfillment 
  • Free & easy returns, including in-store returns 
  • Consistent storage rates 

Download our free eBook all about Walmart Fulfillment Services. 

Walmart+ and Walmart Fulfillment Services make it clear that Walmart is taking advantage of Amazon’s successes and failures. They can see which services have proved most useful for online sellers and shoppers, and they are actively working to create comparable services for their own platform.  

How Will This Affect Shoppers and Sellers? 

Shoppers and sellers alike will benefit from the competition between Amazon and Walmart. Amazon Prime was largely unchallenged in the online marketplace space. With the introduction of Walmart+, the two services will vie for sellers’ and customers’ patronage, resulting in better features and deals. 

How does Walmart.com Compare to Amazon? 

Walmart has made excellent progress this year on their ecommerce platform. Along with Walmart Fulfillment Services and Walmart+, Walmart also offers brands better protection from counterfeiters and unauthorized sellers than Amazon.  

Walmart is a gated marketplace, meaning that sellers must be approved before they can sell on the platform. Amazon, on the other hand, is an ungated marketplace, so anyone can create a seller account and begin selling. Amazon’s approach contributed to its staggering growth, but it also made it vulnerable to exploitation. Counterfeiters and rogue sellers have long plagued brands on the Amazon platform, and the problem has even received attention from the Department of Homeland Security 

Walmart also has the upper hand in the online grocery business. Walmart+ will offer benefits for grocery purchases as well, helping defend Walmart’s position as Amazon works to take control of the grocery sector. 

Despite their progress, Walmart still has a lot of catching up to do. Walmart’s paid marketing services do not yet offer the same control as Amazon’s, resulting in lower ROI, nor do they offer the same breadth of services. 

Sell on Walmart Sooner Rather Than Later 

As Walmart continues building out its ecommerce platform, they are improving their ability to pull market share from Amazon. In their earnings report, Walmart shared that their ecommerce sales are up 37% year over year (partly due to the coronavirus). 

 Walmart is learning from Amazon’s history; brands should too. Establishing an early foothold on the ecommerce platform will position brands for long-term success. 

Kaspien is a preferred solutions provider for the Walmart marketplace. If you’d like to discuss expanding your brand onto Walmart, reach out through our contact form 

Amazon Upgrades US Seller Profiles

On July 8th, Amazon Services notified sellers in the US that, effective September 1st, 2020, Amazon will display a seller’s business name and address on their Amazon.com “Seller Profile page. For individuals, Amazon will display the individual name and address.  

This change will help eliminate seller anonymity on Amazon’s US marketplace, bringing it into alignment with their European, Japan, and Mexico marketplaces.  

Amazon US and UK Seller profile comparison

In their notice, Amazon Services states, “[…] We are making this change to ensure that there is a consistent baseline of seller information to help customers make informed shopping decisions.” You can read the full notice from Amazon at the bottom of this post. 

Why Does This Amazon Update Matter? 

This update will increase transparency on the Amazon platform. Though Amazon has not stated as much, they may be making this change as a result of the Department of Homeland Security’s counterfeit report, which was published in January 2020. The report exposed the full scale of the counterfeit problem on Amazon, stating, “global employment losses due to counterfeit goods were between 2 million and 2.6 million jobs in 2013, with job displacement expected to double by 2022.”  

Among the many recommendations in the report was a call to publicly display seller identities, which would make it easier for consumers and businesses to file legal action in the event of a counterfeit, IPR infringement, or other violation. 

Kaspien’s Compliance Manager, Jed Nelsen, commented, “Amazon is making a big step forward in transparency. This update will make it easier for brands to track down the 3rd party sellers who are selling their products.” 

How Will This Affect Shoppers and Sellers? 

The anonymity update is unlikely to significantly impact online shoppers, as few take the time to research the seller they’re patronizing.  

Sellers, on the other hand, are much more likely to take advantage of the update. As mentioned above, access to more business information will make it easier for brands and sellers to take action against counterfeits and cases of IPR infringement.  

As Marketplace Pulse notessellers can fake business details to circumnavigate Amazon’s enforcement, so the update will not eliminate Amazon’s issues. But it’s a step in the right direction to protect consumers and businesses in the US. 

What Steps Do Amazon Sellers Need to Take? 

Sellers do not need to take any action, unless they’d like to update view and update their contact information. Amazon Services provided directions on how to do so in their notice: 

  1. Log into your Amazon seller account. 
  2. In the “Settings” menu at the top right corner of Seller Central, click “Account Info” to view your “Seller Account Information” page. 
  3. In the “Business Information” section, click the links for the information you want to view. 
  4. To change your business name, click “Display Name” and to change the address, click “Business Address”. Enter the new information or edit the current information. 
  5. Once completed, click “Submit” to save. 

 

Read the Full Notice from Amazon 

Dear Seller 

Beginning on September 1, 2020, we will display a seller’s business name and address on their Amazon.com “Seller Profile” page. For individuals, we will display the individual name and address. This is consistent with “Seller Profile” pages across the Amazon stores in Europe, Japan, and Mexico. 

Why are we making this change? 

Over the years, we have developed many ways for sellers to share more about their business, including through features like the “Seller Profile” page, “Store” pages for brand owners, and Handmade “Maker Profile” pages. These features help customers learn more about the businesses of a seller and the products they are selling. We are making this change to ensure that there is a consistent baseline of seller information to help customers make informed shopping decisions. 

Can I share more information to help customers beyond my business name and address? 

Yes, you are welcome to add additional information about your business and products that you think would be helpful to customers. However, remember that you should not include an email address in order to prevent spam and abuse. We ask customers and sellers to use our Buyer-Seller Messaging system to communicate electronically. 

How do I ensure that my information is up to date? 

You can view and update your contact information by following the steps below: 

  1. Log into your Amazon seller account. 
  2. In the “Settings” menu at the top right corner of Seller Central, click “Account Info” to view your “Seller Account Information” page. 
  3. In the “Business Information” section, click the links for the information you want to view. 
  4. To change your business name, click “Display Name” and to change the address, click “Business Address”. Enter the new information or edit the current information. 
  5. Once completed, click “Submit” to save. 

 

Regards, 
Amazon Services