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Feb. 17, 2023
Supply Chain Digest Flagship Newsletter

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This Week in SCDigest

bullet Amazon Results and the State of eCommerce bullet SCDigest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet New Stock Index
bullet

New Chain Cartoon Caption Contest!

bullet Trivia      bullet Feedback
bullet New Expert Column bullet On Demand Videocasts

 

This Week's Sponsor

 

 

New Faculty!

Updated Content for 2023!

 

Session 2 -Building the WMS Businss Case

Thursday Feb. 16, 2023

Expert Faculty: Dan Gilmore (Softeon) and Kevin Hume (ThruPut Partners)

Register for this one, some, or All Five Sessions!


Future sessions include  Keys to WMS Vendor Selection, A Blueprint for WMS Implementation Success and more

 

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first thought

SUPPLY CHAIN NEWS BITES

Supply Chain Graphic
of the Week

 

The Incredible Rise and Collapse of Ocean Container Shipping Rates


This Week's Supply Chain Numbers


Retail Sales Jump in January
Supply Chain Robots Sales Set Record in 2022
Cargo Theft Rose Sharply Last Year
Amazon Taking Huge Share of Marketplace Seller Revenue

NEW CARTOON
CAPTION CONTEST



Show Us Your Supply Chain Wit! See Full Size Cartoon/Enter


Expert Insight

The Importance of Pre-Shipment Inspections for Supply Chain Diversification

 

 

Pre-shipment Inspections can Mean the Difference Between Success and Failure in Today's Competitive Global Market

 

Viktor Haggstrom
Marketing Content Specialist
HQTS

 

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ONTARGET e-MAGAZINE
 This Week's SCDigest OnTarget Newsletter

Cartoon, Top SCDigest Stories of the Week




TRIVIA QUESTION
What were Amazon.com's Annual Sales in 2004?
Answer Found at the
Bottom of the Page



 

Amazon Results and the State of eCommerce

Between year end reviews of supply chain 2022 and predictions from analysts such as Gartner and IDC, I managed to get to the middle of February with this weekly column.

This week I am going to take a look at Amazon's Q4 2022 results, released earlier this month - and use that to make some observations on the state of ecommerce generally.

GILMORE SAYS:

WHAT DO YOU SAY?'

Is it just Amazon? Data from the Commerce Dept. shows that in Q1 2021 and Q 2022, regular retail sales grew faster than ecommerce.

Send us your
Feedback here

Total Amazon sales were $149.2 billion in Q4, up 8.5% versus 2021. That is obviously way down from the 20%+ growth rates regularly turned in fairly recently, and 40+% not long before that (a big bump during the first year of the pandemic being an exception, as Amazon sales for a while soared again.)

The question for years was when Amazon would finally succumb to "the law of large numbers" (one of my favorite economic concepts, which means in this case that companies seeing outsized growth for a stretch, usually in their early years, must inevitably slow down). The question has been answered.

So delivering 8.5% growth when you are a $513.9 billion company (which is what Amazon's full year full year 2022 revenue came in at) is pretty good.

But that doesn't mean Amazon is continuing to take over the ecommerce world. In fact, somewhat buried in its Q4 earnings release is the fact the on-line sales actually fell 2%. More on that in just a little bit). So that 8.5% growth came in spite of a fall in ecommerce, not as a result of it continuing to take share in on-line shopping.

In fact, just 43.5% of that $149.2 billion in total Q4 sales came from ecommerce. Meanwhile, Amazon's AWS web services unit saw 20.3% growth to $21.3 billion, while fees/commissions from Amazon's third-party Marketplace sellers also rose 20% to $36.3 billion.

Advertising revenue was up 19% to $11.5 billion.


So the place where Amazon is gaining share is with its Marketplace service, which also drives fees from advertising, and its Fulfilled by Amazon (FBA) service (which is included in the overall Marketplace number.)


Profits are also back to being hard to find at Amazon. Net income in the quarter was just $278 million, for all intents and purposes in break even when you have $149.2 million in sales - and compares with a strong $14.3 billion in 2021.

In its many years of low or negative profits, Amazon usually pointed to its cash flow numbers as being the better measure than net income. That was true again in Q4, with cash flow of $19 billion, versus just $6.3 in Q1 2021.
Other numbers of interest in Amazon's Q4 result:

Operating income decreased to $2.7 billion in the fourth quarter, compared with $3.5 billion in fourth quarter 2021.

The North America segment actually had an operating loss of $0.2 billion, the same as 2021.


Fulfillment costs, primarily the cost of building and operating its fulfillment and sortation centers plus some inbound logistics costs - but not shipping - rose 3% to $23.1 billion. That is far below the usual growth rates, which could be explained by declining on-line sales and/or a great slowdown in additions to FC capacity.

Similarly, shipping costs rose just 4% - far below recent years - to $24.7 billion. So it adds up to $47.8 billion in costs when combining fulfillment and shipping, on $64.5 billion in on-line sales. I will note some of that shipping cost is recouped by Amazon Prime membership fees and whatever percent of customers actually pay something for shipping.

 

So switching gears, in 2020 I wrote a column titled "eCommerce Eats the World," which reflected on the transformative impact on society, business and supply chains, from what I assumed would remain high growth rates for ecommerce.

But post-pandemic, the picture is changing. Amazon has seen very low or negative growth in on-line sales in 5 of the last 6 quarters, the exception being Q3 2022 (up 13%).

Is it just Amazon? Data from the Commerce Dept. shows that in Q1 2021 and Q 2022, regular retail sales grew faster than ecommerce, reducing the percent of ecommerce in in total retail sales.

There was something of a turnaround in Q2 and Q3 last year, with ecommerce outpacing overall retail - but not by much.

I believe ecommerce will continue to outpace brick and mortar retail - but not by much.

So eCommerce will continue to eat the world - but one bite at a time from here on out.

What is your reaction to these Amazon results? What numbers would you add? Let us know your thought at the Feedback section below.

 

See as Web page/Printable Version
   

On Demand Videocast:

Understanding Distributed Order Management

Highlights from the New "Little Book of Distributed Order Management"

In this outstanding Videocast, we'll discuss DOM, based on the new Little Book of Distributed Order Management, written by our two Videocast presenters.


Featuring Dan Gilmore, Editor along with Satish Kumar, VP Client Services, Softeon

Now Available On Demand

On Demand Videocast:

The Grain Drain: Large-Scale Grain Port Terminal Optimization

The Constraints and Challenges of Planning and Implementing Port Operations

This videocast will provide a walkthrough of two ways to formulate a MIP, present an example port, and discuss port operations.


Featuring Dan Gilmore, Editor along with Dr. Evan Shellshear, Head of Analytics, Biarri.

Now Available On Demand

On Demand Videocast:

A Blueprint for WMS Implementation Success
 


If You Want a Successful WMS Project, You will Find the Blueprint in this Excellent Broadcast


This videocast lays out the keys to ensuring your WMS implementation goes smoothly, involves minimal pain, and accelerates time to value.



Featuring Dan Gilmore, Editor along with Todd Kovi of Radix Consulting and Dinesh Dongre of Softeon.


Now Available On Demand

YOUR FEEDBACK

Feedback will return next week.

What were Amazon.com's Annual Sales in 2004?

A: $6.9 billion, vs $513 billion last year.

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