Dividends fade and the market slumps
The post-epidemic era e-commerce dividend faded, coupled with a series of chain effects brought about by the Russian-Ukrainian conflict, Amazon in recent quarters, revenue growth, operating profit margins and other key indicators have not performed as expected by the market, and its market value has evaporated by more than $200 billion after the first quarter financial report, which also makes many people wonder whether Amazon will walk down the altar.
According to CNBC, Amazon is planning to host a second shopping event for Prime members in the fourth quarter, the first time the company has held two such events in the same year since 2015.
According to the report, Amazon recently issued a notice to third-party merchants to prepare for the "Prime Fall" promotion, but did not disclose the specific date, but only required merchants to submit limited-time Lightning Deals (a limited-time promotion method promoted by Amazon, which is characterized by short activity time, large product discounts, and limited number of active products) before July 22.
According to reports, the "Prime Fall" promotion is specifically for members, the event will be held in the fourth quarter, for the event to submit recommended Lightning Deals can give merchants a chance to trade a chance to be selected.
In this way, this fall event is more like Prime Day 2.0, and the two sales in the summer and autumn are expected to focus on big promotions of TV, sneakers and other merchandise.
Amazon's Prime Day this year was held from July 12 to 13, and the number of sites covered by this membership day reached 24, the largest in history, and the Swedish, Polish and Egyptian sites were also participating in amazon prime membership days for the first time.
Although it is the largest in the past, industry analysts pointed out that the momentum of Prime Day may be weakening at present, because sales growth has slowed, order size has become smaller, and Amazon's promotions are not so hot.
Jefferies analysts expect Prime Day to contribute about $8.1 billion in transactions (GMV) this year, similar to last summer.
As of now, when asked about the "Prime Fall" campaign, Amazon's spokesperson still won't comment.
Traffic growth is slowing
According to a recent poll by CBS and polling agency YouGov, 75% of respondents believe that the current state of the US economy is terrible, setting a new high since president Biden's presidency.
Only 22 percent said the economy was in good shape, down further from 26 percent in May. Nearly seven percent of Americans have a negative view of the U.S. economic outlook, with more than 44 percent expecting the economy to fall into recession next year, with a majority of respondents saying inflation is miserable and they worry about being able to sustain day-to-day expenses.
Source: cbsnews
Under the epidemic, the pressure on the general environment has made the e-commerce platform miserable.
In the first quarter of this year, Amazon reported a 7% year-over-year increase in revenue and a slowdown in revenue growth, the company's slowest quarterly revenue growth since 2001.
For the slowdown in growth, Amazon said that it is attributed to inflation around the world, especially in North America and Europe, compared with before the epidemic, the cost of transportation of overseas containers has more than doubled, and the cost of fuel is about 1.5 times higher than a year ago, and these inflationary pressures have led to an increase in costs.
As inflation continues to squeeze shoppers and consumers shift spending to areas such as travel and entertainment, e-commerce sales will inevitably decline.
Therefore, this time Amazon held this Prime fall promotion, it is likely to help sellers empty some of the accumulated additional inventory, release Amazon's warehouse pressure to increase sales.
Previously, in order to attract consumers, Amazon has also turned its attention to promotions outside prime day and engaged in special activities for a certain category.
For example, in October last year, Amazon held its first special promotion of beauty products, and in May this year, it launched a "Pet Day" pet product promotion.
But then again, in the case of a bad economic background, Amazon's North American business still has 8% growth, still outperforming the total retail market in the United States, which also witnesses Amazon's strength.
Despite the poor economic background, according to the latest research from eMarketer, it is expected that by the end of this year, U.S. e-commerce sales will reach $1050 trillion, and total retail sales are expected to reach $6988 trillion, of which about $1050 trillion will come from e-commerce sales.
This shows that while inflation is rising, consumers are still able to keep up with rising costs of necessities such as food and household items.
Therefore, for the majority of sellers, such a big promotion as Prime day is still a good opportunity to impact sales and build a brand to achieve curve overtaking.
The monopoly position is no longer what it used to be
But the Crisis in the Amazon is by no means limited to the pressures of the external economic environment.
In 2014, Alibaba went public in the United States to gain a market capitalization of $230 billion, and according to a report provided by the United Nations Conference on Trade and Development, in 2018-2020, Alibaba topped the GMV ranking for three consecutive years, almost twice that of Amazon.
The rise of independent stations is a threat to Amazon, known as the "second pole" of North American e-commerce Shopify all the way to surpass eBay, Walmart and other established giants, listing 6 years of stock price soared 100 times.
Recently, Shopify has also launched more than 100 product tools, covering B2B, NFT, social e-commerce, as well as physical retail, local shopping and other fields. Allying with Google and Twitter has expanded the stakes against Amazon.
In the midst of internal and external troubles, the status of retail giants has also been shaken.
Looking closely at Amazon's business, it is mainly divided into retail-related businesses and AWS cloud services. From the perspective of revenue share, Amazon's retail-related business accounted for about 85%, and the proportion of cloud services gradually rose from about 10% in 2020 to 15.8% in the first quarter.
The overall development trend of its retail business is showing that the proportion of low-margin self-operated business is gradually declining, while the proportion of high-margin service-oriented businesses such as advertising, services, subscription services, cloud services and other service revenue is gradually rising, which also causes Amazon's operating cost ratio to continue to decline.
The game development department, which was established as early as 2012, is in an even more awkward position. Amazon Game Studios has spent hundreds of millions of dollars a year over the years, but has been unable to produce a popular game.
In 2016, Amazon announced that it was developing three new games for Breakaway, Crucible, and New World: Two years later, Breakaway took the lead in death. In the 7 days after the launch of "Crucible" steam, the highest number of simultaneous online players was only more than 10,000, and even its own Twitch department was unwilling to support too much.
In March, Mike Frazzini, a veteran employee of Amazon and founder of Amazon Game Studios, was also revealed to be leaving.
According to a report released by Market Pluse, Amazon's retail business would become increasingly unprofitable without high-margin advertising revenue, because the success of the advertising business is already on the basis of the retail business. In the context of wolves and the gradual departure of the epidemic dividend, how to solve the growth dilemma is a big challenge for Amazon.
Author | Hai Ge