3Q21 Performance & Market Update

Amazon's retail business slowed during the quarter, in-line with the broader digital market. It's commentary suggests labor issues are the primary challenge it faced this quarter and will continue to battle in 4Q as it looks to meet holiday demand.

Should Amazon National Account Managers be worried?
Not necessarily. We've seen a deceleration in digital growth trends across the industry. Perhaps more concerning is the heightened level of costs Amazon is incurring, as that will ultimately trickle down into difficult annual negotiations.

Implications for rest of retail? Amazon has been the leader in raising wages and has moved as aggressively as any rival in terms of securing labor. Its commentary that labor productivity issues contributed $2 billion in incremental costs this quarter and expects $4 billion more in 4Q suggests its big box peers will face similar profit challenges.


Topics covered:

  1. TL/DR: 3 Charts in 60 Seconds
  2. Business Segment Performance
  3. Fulfillment Commentary
  4. 1P compared to 3P growth
  5. Geographic Performance
  6. GMV growth vs. Shopify
  7. Advertising Performance Relative to Peers
  8. Amazon Management’s Outlook

 

Decelerating Growth & Weaker Margins

 

Demand ($155 billion in GMV): Amazon gross merchandise value decelerated for the second straight quarter. The slowdown appears largely in-line with the broader market for eCommerce, attributed mostly to consumers returning to stores at a higher rate than the prior quarter.

 

 

Advertising Business ($8 billion): Amazon’s advertising business decelerated as well, a result of more difficult comps and advertisers pulling back to some degree on spending due to supply chain issues resulting in out of stocks.

 

 

Profitability Trend (Operating income $4.9 billion):  Operating margins declined to 4.4% vs. 6.8% in the prior quarter as the company is having to pay up for labor, freight, supply chain capacity and has incurred additional costs related to doubling its fulfilment center footprint since the beginning of the pandemic.

 

 

Business Segment Results

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