Amazon released its 2011 Q4 financials yesterday, reporting an overall 35% net sales increase to $17.43 billion. For the full year 2011, net sales increased 41% to $48 billion. Impressive growth all around—something we’ve come to expect from Amazon (even if Wall Street expected a little more).
Here’s what really caught our eye and seems most relevant to our merchant customers:
“Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.”
That’s up from 32% of units sold last year. The fact that third-party merchant sales now represent over a third of Amazon’s total units sold is incredible and certainly demonstrates how crucial this segment has become to Amazon’s growth. Third-party sales, much of which leverage products such as Monsoon Edge and Monsoon Pro, tapped into the power of the Amazon Marketplace and FBA (Fulfillment by Amazon) to grow faster than Amazon’s retail business. It represents how much opportunity exists in marketplace selling, and how it is becoming a key component of a winning e-commerce strategy. To further reinforce the point, in December Amazon reported the 2011 holiday season was record-breaking for its third-party merchants, and that:
“For the year, businesses on Amazon sold hundreds of millions of units worth billions of dollars worldwide.”
Amazon—and other marketplaces such as eBay, Buy.com, and Sears—is a growing segment of online retail with proven service and delivery. It seems merchants that don’t take advantage of marketplace selling as part of a comprehensive e-commerce strategy are potentially missing out on substantial growth opportunities. Take this tweet from Barry Judge, CMO of Best Buy:
@BestBuyCMO: “Costco sells more Kirkland SKUs on AMZN marketplace than they do in Costco store. Not surprising but reaffirmation of need to rethink models.”
Costco is a prime example of a merchant—a big box store, to boot—realizing the market share opportunity that exists on Amazon, and claiming their cut.
Q4 Category Perspective
Amazon reported some impressive numbers in major categories as well, particularly in the Electronics and General Merchandise (EGM) category. The highlights for Q4 follow (note that these figures do not account for adjustments due to currency fluctuations):
- Worldwide Electronics and General Merchandise sales increased 48%
- North America sales of Electronics and General Merchandise were up 51%
- Worldwide Media sales came in up 15%
- North America Media net sales increased 8%
- North America overall sales surged 37% over fourth quarter 2010
In comparison, Monsoon Commerce customers posted a 56% increase in GMV (Gross Merchandise Value) dollars through Amazon North America in Q4 2011. These customers outpaced the overall growth of third-party sellers on Amazon, leveraging Monsoon product capabilities such as accurate listings, synchronized inventory, dynamic pricing, and streamlined order management and fulfillment. Year on year, Monsoon Commerce customers saw:
- North America Media sales increase 16% vs. 8% average
- North America Electronics and General Merchandise up 57% vs. 51% average
Monsoon Commerce customers trended higher in 2011 overall year on year sales growth on the Amazon North America marketplaces, posting a 48% increase in GMV.
Amazon projected that Q1 2012 net sales are expected to grow between 22% to 36% over Q1 2011, or $12.0 billion and $13.4 billion. While Amazon doesn’t provide predictions for third-party seller sales, it’s easy to anticipate that these merchant sales will continue to post significant increases. The growth opportunities represented by the Marketplace and Fulfillment by Amazon (FBA) are big and getting bigger. As competition increases, sellers will need to find a way to gain a competitive advantage while ensuring profitability. Implementing strategies and tools to automate marketplace listings and robust pricing engines will be even more critical for long-term success and profitability.